NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file how2ftp. File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//Jones Intercable, Inc., Anne Arundel County, MD, MO&O, DA 96-361//$ $/76.922 Rates for Cable Programming Service tiers/$ $/benchmark cable rates/$ Before The Federal Communications Commission Washington, D.C. DA 96-361 In the Matter of ) ) Jones Intercable, Inc. ) CUID No. MD0211 (Anne Arundel County) ) Complaints Regarding ) Cable Programming Service Price ) Memorandum Opinion and Order Adopted: March 14, 1996 Released: March 22, 1996 By the Chief, Cable Services Bureau: 1. Here we consider complaints about the price Jones Intercable, Inc. ("Operator") was charging for its cable programming service ("CPS") tier in Anne Arundel County, Maryland, CUID No. MD0211. In response to the complaints, Operator chose to file a motion to dismiss because it claims it is subject to effective competition and thus its CPS rate is not subject to regulation by the Commission. 2. Under the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), and our rules implementing it, 47 C.F.R. Part 76, Subpart N, the Commission must review CPS prices upon the filing of a valid complaint. The filing of a valid complaint triggers an obligation on behalf of the cable operator to file a justification of its CPS prices. Under our rules, an operator may attempt to justify its prices through either a benchmark showing or a cost-of-service showing. In either case, the operator has the burden of demonstrating that its CPS prices are not unreasonable. Similarly, where the operator claims that it faces effective competition, the Commission's Rules require the cable operator to produce information that rebuts the presumption that it is not subject to effective competition. 3. The Commission's original rate regulations took effect on September 1, 1993. The Commission subsequently revised its rate regulations effective May 15, 1994. Operators with valid CPS complaints filed against them prior to May 15, 1994 must demonstrate that their CPS prices were in compliance with the Commission's initial rules from the time the complaint was filed through May 14, 1994, and that their prices were in compliance with the revised rules from May 15, 1994 forward. Operators attempting to justify their prices for the period prior to May 15, 1994 through a benchmark showing must complete and file FCC Form 393. Generally, to justify their prices for the period beginning May 15, 1994 through a benchmark showing, operators must use the FCC Form 1200 series. 4. The first valid CPS complaint in Anne Arundel County was completed and served on Operator on October 7, 1993 and was filed with the Commission on October 13, 1993. Operator filed a "Response to Form 329 Complaint" ("Response") on February 22, 1994 declaring that the system serving the subject community is subject to effective competition under C.F.R. 76.906. Operator submitted additional information in response to requests for documentation by Commission staff on May 22, 1995, July 11, 1995, August 7, 1995 and August 8, 1995. 5. Operator's claim of effective competition is based on the competing provider test for effective competition set forth in the 1992 Cable Act and the Commission's Rules. The 1992 Cable Act and the Commission's Rules provide that only the rates of cable systems that are not subject to effective competition may be regulated. One basis upon which a cable system is deemed subject to effective competition is where the franchise area is: 1) served by at least two unaffiliated multichannel video programming distributors ("MVPDs") each of which offers comparable programming to at least 50 percent of the households in the franchise area; and 2) the number of households subscribing to multichannel video programming other than the largest MVPD exceeds 15 percent of the households in the franchise area. 6. We have issued a number of decisions in which we have applied the competing provider test In these decisions we first determined whether a competing service was offered to at least 50% of the households in the franchise area. From these 50% or greater competitors exclusively, we calculated the number of households needed to satisfy the second portion of the competing provider test, the minimum penetration threshold of 15% (of the total households in the franchise area). Under our interpretation of the competing provider test, households subscribing to the MVPDs offering service to less than 50% of the households in the franchise area were excluded from the minimum penetration threshold of 15%. Thus, for purposes of determining whether the 15% threshold was met, we examined only the number of households subscribing to the MVPD that offered comparable programming to at least 50% of the households in the franchising area. 7. A recent decision by the U.S. Court of Appeals for the D.C. Circuit clarified the manner in which both the 50% and 15% threshold is to be applied. The court held that "...Congress did not limit the 15% threshold in 543(1)(1)(B)(ii) of the Cable Act to only those cable systems that also satisfy the 543(l)(1)(B)(i) standard of passing at least 50% of the households in the franchise area." The Court reasoned that in applying the statutory measure of effective competition,". . . Congress explicitly listed satellite providers among the multichannel video programming distributors to be considered in calculating both the 50% and 15% figures." Thus, all MVPDs providing comparable programming in the franchising authority are to be included in the calculation of the first and second portion of the test. 8. For the purpose of determining the availability of unaffiliated MVPDs, ". . . DBS [Direct Broadcast Satellite] will be deemed technically available to households in a franchise area. . . if its footprint covers those households, absent extraordinary circumstances." An "extraordinary circumstance" is deemed to exist in situations where franchise areas restrict the use of home satellite dishes. 9. Operator asserts that its cable system competes with Intermedia Cable Television Company ("Intermedia"), an unaffiliated MVPD distributor that is not operated by a franchising authority and that offers comparable multichannel video programming in the same franchise area as Operator. In its May 22, 1995 response to an information request by Commission staff, Operator provided Census data which showed that the number of occupied households in Anne Arundel County is 149,114, and documentation establishing that the number of households passed by Operator is 92,898 (62.3%). Competitor submitted a "Declaration Made Under Penalty of Perjury" ("Declaration") in which it agreed that it competes directly with Operator as an "overbuilder" or second franchised cable television operator providing service in the same franchise area as Operator. The Declaration states that Competitor passes 73,920 (49.6%) households in the Anne Arundel County franchise area and the number of households who subscribe to Competitor's service is 48,685, or 33% of the total households in the franchise area. 10. CPS programming packages for Home Satellite Dish ("HSD") owners ("C" band fixed satellite service) have been available in the continental United States since the 1980's. In addition, in its August 7, 1995 response to an additional information request by Commission staff, Operator disclosed that Direct Broadcast Satellite ("DBS") service (Primestar) began offering comparable programming in the franchise area during September, 1994. Since that time, a second DBS vendor (DirectTV) began offering comparable programming in the franchise area as well. Thus, in addition to Operator and Intermedia, households in the franchise area were able to obtain comparable multichannel video CPS programming from HSD program packages in October 1993, and comparable multichannel video CPS programming from two DBS vendors in September 1994. 11. The first prong of the competing provider test for effective competition requires that the franchise area be served by at least two unaffiliated MVPDs, each of which offers comparable programming to at least 50 percent of the households in the franchise area. Operator has demonstrated that it and Intermedia pass 62.3% and 49.6%, respectively, of the households in the franchise area, which does not satisfy the first prong of the test. However, in October 1993, all households in the Anne Arundel County franchise area also had available HSD service which offered comparable programming. Thus, in keeping with the holding of the District of Columbia Circuit in Time Warner, we find that the first prong of the competing provider test is satisfied by the availability of Operator's service in conjunction with HSD service within the franchise area. With regard to the second prong of the competing provider effective competition test, we note that Operator is the largest MVPD in the franchise area, thus, we look initially to Intermedia, a smaller MVPD, to determine if the 15% threshold is satisfied. We find that Operator has submitted sufficient evidence demonstrating that 33% of the households subscribe to Intermedia, which is greater than the 15% threshold required by the Cable Act. 12. Based upon the information provided by Operator and Competitor, we find that Operator's system in Anne Arundel County is subject to competing provider effective competition. 13. Accordingly, IT IS ORDERED, pursuant to Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321, that the complaints against the cable programming service price charged by Operator in Anne Arundel County, Maryland CUID No. MD0211, ARE DISMISSED. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau