FOR FCC RECORD ONLY $// Order, Cable Act of 1992, certification, DA 995-236//$ $/ 600.623 Regulation of Rates/$ $/ 76.905 Standards for Effective Competition/$ $/ 76.906 Presumption of No Effective Competition/$ $/ 76.910 Franchising Authority Certification/$ $/ 76.911 Petition for Reconsideration/$ $/ 76.914 Revocation of Certification/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) DA-95-236 ) MID-TENNESSEE CABLE ) LIMITED PARTNERSHIP ) D/B/A HICKORY HILL CABLEVISION ) ) Petition for Reconsideration ) ) of the Certification of ) City of Kingsport, Tennessee ) to Regulate Basic Cable Rates ) (TN0534) ) MEMORANDUM OPINION AND ORDER Adopted: February 14, 1995 Released: February 15, 1995 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. On November 19, 1993, Mid-Tennessee Cable Limited Partnership ("Mid- Tennessee") filed a timely petition for reconsideration challenging the certification of the City of Kingsport, Tennessee ("City") to regulate rates for basic cable service and associated equipment. The City did not file an opposition to Mid-Tennessee's petition. 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. Petitions for reconsideration may allege that the cable operator is not subject to rate regulation because: (1) effective competition exists; or (2) the franchising authority does not meet the certification standards set forth in the 1992 Cable Act. Rate regulation is automatically stayed pending review of a timely-filed petition for reconsideration alleging the presence of effective competition. II. DISCUSSION 3. Mid-Tennessee challenges the City's certification based on two grounds. First, Mid-Tennessee alleges that the City lacks the legal authority to regulate Mid-Tennessee's rates and therefore does not meet the certification standards. Specifically, it argues that under Tennessee law, a municipality cannot regulate a cable operator unless the municipality has granted that operator a franchise to provide cable television service, Mid-Tennessee states that on November 20, 1987 and on December 7, 1991, certain unincorporated sections of Sullivan County, TN were annexed to the City. It states that it previously provided cable service to these sections pursuant to a franchise agreement with Sullivan County. Mid- Tennessee maintains that it has continued service to these newly annexed areas but has not yet been granted a franchise from the City despite continued negotiations since 1987. As support for its factual contentions, Mid-Tennessee submits an affidavit from a responsible official which provides a chronology of events surrounding the annexation of portions of Sullivan County to the City. Based on these facts and its interpretation of Tennessee law, Mid-Tennessee argues that because it does not have a franchise with the City, the City does not have the requisite legal authority to regulate Mid-Tennessee's rates. Moreover, Mid- Tennessee argues that the Commission lacks the power to vest such regulatory authority in the City. 4. In addition, Mid-Tennessee argues that even if it were subject to rate regulation by the City, its cable system is subject to effective competition because it serves fewer than 30 percent of the households in the City, its alleged franchise area. Specifically, Mid-Tennessee claims that it serves only 251 of the 16,742 households (that is, occupied housing units) in the City, or 1.5 percent of the total number of households. As supporting documentation, Mid-Tennessee provides the affidavit of a responsible official at Mid- Tennessee, and correspondence between officials at Mid-Tennessee and the City. The affidavit gives a chronology of events surrounding the annexation of portions of Sullivan County to the City, states the 1990 census data for "homes" in the City, and states the number of subscribers to Mid-Tennessee's system within the City. The correspondence relates to discussions between Mid-Tennessee and the City regarding a franchise agreement for cable services. 5. First, we can not find that Mid-Tennessee is subject to effective competition. 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. Mid-Tennessee has failed to meet this burden. The Communications Act of 1934, as amended, and the Commission's rules require that claims of effective competition be based on the franchise area. The Commission has stated that generally, a "franchise area" "is the area a system operator is granted authority to serve in its franchise." Mid- Tennessee's effective competition claim is apparently based on the total number of "housing units" within the entire City of Kingsport. However, as Mid-Tennessee does not have operating rights for the City of Kingsport as a whole, its comparison of subscribers that it serves to the number of households in Kingsport cannot be relied on. Accordingly, its effective competition claim must be denied. 6. As to the legal authority of the City of Kingsport to engage in rate regulation with respect to this system, we are not persuaded that such authority does not exist. While the manner in which any such authority may be exercised remains in dispute and subject to negotiation between Mid-Tennessee and the City of Kingsport, the absence of a current franchise agreement does not necessarily indicate that such authority ultimately is lacking. We note, however, that the City did not file an opposition to Mid-Tennessee's petition. The record is thus left somewhat incomplete. Given the situation, we are not persuaded that this is yet a situation where the Commission would be required to assume jurisdiction under Section 76.911(e) of its rules. Accordingly, if at such time as the City attempts to exercise its authority, Mid-Tennessee continues to dispute the legal authority of the City, a petition for revocation pursuant to Section 76.914 of the Commission's rules could then properly be filed with the issues more properly joined. III. ORDERING CLAUSES 7. Accordingly, IT IS ORDERED that the petition for reconsideration filed by Mid-Tennessee Cable Limited Partnership, challenging the certification of the City of Kingsport, Tennessee to regulate Mid-Tennessee's basic cable service rates IS DENIED. 8. 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. 9. 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