$/ FOR FCC RECORD ONLY /$ $// MO&O, Cable Act of 1992, DA 95-188//$ $/ 300.623 Regulation of Rates /$ $/ 1.106 Petitions for Reconsideration /$ $/ 76.906 Presumption of no effective competition /$ $/ 76.910 Franchising authority certification /$ $/ 76.911 Petition for reconsideration of certification /$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA 95-188 ) CECILTON CATV, INC. ) ) Petition for Reconsideration ) of Certification of ) Cecil County, Maryland (MD0334) ) to Regulate Basic Cable Service Rates ) MEMORANDUM OPINION AND ORDER Adopted: February 8, 1995 Released: February 9, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On March 15, 1994, Cecilton CATV, Inc. ("Cecilton") filed a letter challenging the certification of Cecil County, Maryland ("The County") to regulate rates for basic cable service and associated equipment. On March 31, 1994, the County filed an opposition to the letter. On May 4, 1994, Cecilton filed a pleading styled as a "petition for reconsideration." On May 18, 1994, the County filed an opposition to the "petition" to which Cecilton filed a reply. In addition, both parties submitted supplemental pleadings pursuant 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 as defined by the Communications Act. 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 such 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 as defined by the Communications Act. II. DISCUSSION Procedural Issues 3. In its opposition to the petition for reconsideration, the County argues that Cecilton's petition was untimely and should, therefore, be dismissed on procedural grounds. Specifically, the County argues that its certification became effective on April 2, 1994; Cecilton's petition was filed on May 4, 1994, exactly thirty-two (32) days after the effective date of the County's certification. The County argues that, as Cecilton's petition was filed two days late, it should be dismissed as untimely. 4. Cecilton responds by stating that the Commission's rules are ambiguous with regard to the filing of petitions for reconsideration challenging certification. As such, Cecilton claims that the filing period commences after an event or action akin to a Commission "public notice" or release announcing the effective date of certification by franchising authorities. Despite receiving no such "notice" Cecilton argues that the filing deadline could not have occurred prior to the first business day after the expiration of 30 days following the date of the County's certification. Specifically, Cecilton claims that because the County's certification became effective on Saturday, April 2, 1994, commencement of the filing period rolls over onto the next business day or April 4, 1994. Therefore, as the filing period began on April 4, 1994, Cecilton concludes that its May 4, 1994 petition was timely. In the alternative, Cecilton argues that its March 9, 1994 letter (filed with the Commission on March 15, 1994) should constitute a petition for reconsideration while the May 4, 1994 petition should be regarded as a supplement thereto. 5. We will treat Cecilton's March 9, 1994 letter as a timely petition for reconsideration of the County's certification in this case. In so doing, we note that Cecilton's March 9, 1994 letter was clearly a challenge to the County's certification and was taken as such by the County, which filed an opposition. In light of this, we will treat the March 9, 1994 letter as a petition for reconsideration and Cecilton's May 4, 1994 filing as a supplement thereto. As such, we need not address the timeliness issues raised by the parties. Effective Competition Claim 6. Cecilton states that its system serving Cecil County is subject to effective competition as defined by the Communications Act because the system serves fewer than 30% of the households within the unincorporated areas of Cecil County, its franchise area. Specifically, Cecilton claims that it serves 1,239 of the 18,142 households (i.e., occupied housing units) in its franchise area, or 6.83 percent of the total number of households. As supporting documentation, Cecilton provides 1990 Census data which shows that there are 24,725 households in all of Cecil County. To calculate the number of households in the unincorporated areas of the County, Cecilton takes the total number of households in Cecil County (24,725) and from that number subtracts the number of households within the incorporated areas of Cecilton (195), Chesapeake City (290), Elkton Town (3,333), Charlestown Town (228), Northeast Town (812), Rising Sun (504), Perryville (980), and Port Deposit (241). This calculation yields a total of 18,142 households in the unincorporated areas of Cecil County. In addition, Cecilton submits a copy of its Churn Report, dated January 31, 1994, which demonstrates that Cecilton has 1,239 subscribers. Further, Cecilton acknowledges that it does not serve its entire franchise area, the unincorporated areas of Cecil County, although its franchise provides the right to do so. Cecilton, however, claims that it has not expanded service outside of its current franchise area because of the presence of three other cable operators in its franchise area, each of which has a non-exclusive, county-wide franchise to serve the unincorporated areas of Cecil County. This, Cecilton argues, has imposed restrictions on Cecilton's expansion. 7. In its opposition, Cecil County claims that Cecilton has made an affirmative decision to limit its service area to a small portion of the County not served by any other operator. It also claims that Cecilton has had its franchise since 1989, but does not appear to be planning significant expansion. 8. In response, Cecilton claims that it has not affirmatively decided to limit its service area. Indeed, it states that it would choose to pass more homes in the franchise area, but that such expansion would require over-building existing systems operated by competitive franchisees in Cecil County. It argues that no bank would provide Cecilton the necessary financing for overbuilding another cable system and that such an undertaking is prohibited under Cecilton's loan agreement. Cecilton argues that because Cecil County has authorized four competing cable operators to provide service on a County-wide basis, Cecilton has been inhibited from further expansion. Cecilton states it would gladly expand its operations "should Cecil County for some reason rescind or refuse at some point to renew the franchise of one of the other operators in the County." 9. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition as defined by the Communications Act. 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. Cecilton has failed to meet this burden. 10. In the First Order on Reconsideration, the Commission clarified the definition of "franchise area" for purposes of determining effective competition. Generally, "[a] franchise area is the area a system is granted authority to serve in its franchise." The Commission stated, however, that a more restrictive definition of "franchise area" may be more appropriate under limited circumstances, such as when an operator, "has itself, through its own conduct, self-defined the areas to be served to such an extent that this redefined area accurately portrays the operator's 'franchise area.'" Under this standard, the franchising authority has the burden of showing that the operator has made an "affirmative decision. . . to restrict service." 11. The record in this case demonstrates that Cecilton has made an affirmative decision to limit its franchise area. Specifically, Cecilton acknowledges that, as part of its loan agreement, it agreed not to overbuild other cable systems which are within its franchise area. By this action, Cecilton has made an affirmative decision not to expand into areas of the franchise area which are being served by other cable operators. As Cecilton has chosen to restrict its service area in this manner, we do not believe that it is appropriate for Cecilton to base its effective competition claim on the authorized area of service--the entire unincorporated areas of Cecil County. As Cecilton has not alleged facts which would allow us to determine whether it faces effective competition based on its redefined area, we will deny its petition. Should Cecilton choose to submit the appropriate information to support its effective competition claim, it may do so by filing a petition for revocation pursuant to Section 76.914 of the Commission's rules. IV. ORDERING CLAUSES 12. Accordingly, IT IS SO ORDERED that the petition for reconsideration filed by Cecilton CATV, Inc. challenging the certification of Cecil County, Maryland to regulate Cecilton CATV, Inc.'s 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 Cecilton CATV, Inc. SHALL FILE the required rate justifications on the appropriate rate forms with Cecil County within 30 days of the release date of this Memorandum Opinion and Order or within 30 days of receipt of notice from Cecil County that it is regulating Cecilton CATV Inc.'s basic cable service rates, whichever is later. 15. 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