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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) ) AMERICABLE INTERNATIONAL ) CUID No. AZ0295 ARIZONA, INC. ) ) Petition for Reconsideration ) or Revocation ) of the Certification of ) Mohave County, Arizona ) to Regulate Basic Cable Service Rates) MEMORANDUM OPINION AND ORDER Adopted: September 13, 1996 Released: September 18, 1996 By the Chief, Cable Services Bureau: INTRODUCTION 1. On March 10, 1995, Americable International Arizona, Inc., ("Americable") filed a pleading denominated "Petition for Reconsideration or Revocation" challenging the certification of the Mohave County, Arizona Board of Supervisors (the "County") to regulate Americable's rates for basic cable service and associated equipment in one of Americable's Mohave County franchise areas, the Fort Mohave franchise area. On June 20, 1995, in response to a Commission staff inquiry, Americable submitted a supplement to its petition for revocation. The County did not file an opposition to Americable's petition or supplement. BACKGROUND 2. On December 20, 1993, Americable filed a timely petition for reconsideration of the County's certification to regulate Americable's basic cable service rates in its Fort Mohave franchise area. Americable argued that it was subject to effective competition under the competing provider effective competition test. Americable asserted that American Cable Television d/b/a Dimension Cable Services ("Dimension") competes with Americable in its Fort Mohave franchise area. In the alternative, Americable argued that it was subject to low penetration effective competition because it served fewer than 30 percent of the "households" in its franchise area. 3. The Cable Services Bureau (the "Bureau") denied Americable's petition, finding that Americable did not provide the appropriate household data necessary to determine the number of households in its franchise area. Americable provided household (i.e., occupied housing unit) data which was based, in part, on unsupported assumptions about the number of households in certain portions of its franchise area. The Bureau rejected Americable's methodology and concluded that based on the information provided it could not be determined that Americable satisfied either the low penetration or competing provider effective competition tests. DISCUSSION A. Petition for Reconsideration 1. Americable's Petition 4. In its pleadings, Americable first seeks reconsideration of the Bureau's Americable Order, arguing that its original petition for reconsideration demonstrated the presence of effective competition "based on household data without distinguishing between occupied and unoccupied [housing] units." Americable asserts that the Commission should not restrict a cable operator's effective competition showing solely to occupied household data if that operator's petition, like Americable's initial petition, was filed prior to the March 30, 1994 "amendments to the cable television regulations requiring occupied housing data in effective competition showings." Americable argues that its initial petition predates the Third Recon. Order, and therefore, application of the "amendments" adopted in the Third Recon. Order to Americable's initial petition constitutes "impermissible retroactive rulemaking." 5. Americable also asserts that the Bureau's order permitting parties to supplement their pending petitions for reconsideration and revocation (also issued after Americable filed its initial petition) failed to require that such supplemental data consist of occupied housing unit data. Americable argues that the Effective Competition Order contained no reference to the Third Recon. Order, but rather cited the Commission's discussion of the effective competition criteria set forth in its May 3, 1993 Rate Order. Americable asserts that the Commission failed to specify in the Effective Competition Order that occupied housing unit data, rather than occupied and vacant housing unit data, was required for petitions filed before March 30, 1994. Americable states that "[i]ndeed, if any retroactive application were permissible, which it is not, there is a presumption that pre-March 30 petitions are not required to base their showings on occupied household data." Americable argues that, to avoid retroactive ratemaking, the Commission must accept housing unit data which includes both occupied and vacant units for petitions filed before March 30, 1994. Americable asserts that application of this broader "household" standard demonstrates that Americable's Fort Mohave franchise area is subject to competing provider effective competition with Dimension, and therefore, the Bureau must grant reconsideration of the Americable Order. 2. Analysis 6. In enacting the three statutory tests for effective competition, Congress utilized service to households in a given franchise area as the appropriate measure of the presence of competition. Americable interprets the Commission's initial implementation of this requirement as permitting the use of data reflecting both occupied and vacant housing units. Americable's interpretation is incorrect. Since the enactment of the 1992 Cable Act and its implementation, the Commission has required that effective competition demonstrations be based on data utilizing only occupied housing units. In the Rate Order, the Commission stated that: Each separately billed or billable customer will count as a household subscribing to or being offered video programming services, with the exception of multiple dwelling buildings billed as a single customer. Individual units of multiple dwelling buildings will count as separate households. This definition indicates that the Commission was referring to occupied housing units and not all housing units (occupied and vacant). By limiting the definition to "each separately billed or billable customer," the Commission restricted the term "household" to occupied housing units. It is axiomatic that vacant housing units contain no actual or potential customers to which to issue a bill -- only occupied housing units can be billed or billable by a cable operator. 7. Americable bases its incorrect interpretation of the household criteria set forth in the Rate Order upon the Commission's subsequent statement contained in the Third Recon. Order. Americable ignores the context of the Commission's statements in the Third Recon. Order and interprets the effective competition discussion therein as an amendment to, and a departure from, the Commission's prior statements regarding the appropriate definition of the term "household." In the Third Recon. Order, the Commission, inter alia, clarified the status of partial year or seasonal subscribers for purposes of determining effective competition, stating that: As used in the Cable Act, we presume that Congress did not intend "households" to have a different meaning than in the 1990 Census that would include vacant units or even partial-year vacant units. . . . People who are not present cannot be presumed to be choosing local competitive alternatives. We believe that the best and most constant indicator of local viewers' choices is represented by the full-time residents of an area. Moreover, it is the full-time residents who are most affected by the determination whether their cable rates are subject to regulation. Consequently, the operator should measure its penetration rate of full-time subscribers as a percentage of full-time households, i.e., by excluding housing units used for seasonal, occasional, or recreational use. Thus, the Commission's statement in the Third Recon. Order established the status of seasonal and part-time subscribers for purposes of determining effective competition. The Commission's statements in the Third Recon. Order do not define or redefine the term "household," for purposes of the three effective competition tests, as suggested by Americable. 8. Finally, Americable misconstrues the Bureau's Effective Competition Order. Because the Effective Competition Order referenced the effective competition criteria set forth in the Rate Order, and not the seasonal and part-time subscriber clarification contained in the Third Recon. Order, Americable claims that the Effective Competition Order did not request that updated household data consist of occupied housing unit data. Americable's assumption that the Commission did not originally require occupied household information leads to this incorrect conclusion. As discussed above, the Commission has consistently required that effective competition demonstrations be based on occupied housing unit data. Therefore, the Commission correctly cited the criteria established in the Rate Order and not the clarification contained in the Third Recon. Order. 9. Americable's argument that the Effective Competition Order did not provide sufficient notice that its petition for reconsideration was deficient is equally unavailing. In the Effective Competition Order, the Bureau stated that: Systems alleging that they face competition from another multichannel video programming distributor ("MVPD") must . . . provide the number of households passed in the franchise area by each cable system allegedly serving the franchise area. . . . Finally, the petitioning cable system must include the number of households subscribing to the cable systems serving the franchise area. * * * With respect to household data, we realize that in many cases 1990 census data represents the most recent data available. Accordingly, we believe that 1990 census data is an appropriate measure of households. Operators that have access to more recent data may submit such information if they so choose. Thus, the Bureau clearly indicated that household data is required to establish competing provider effective competition, and that 1990 Census data is one appropriate measure of the households in a franchise area. The 1990 Census defines the term "household" as ". . . all the persons who occupy a housing unit." Conversely, the term "housing unit" is defined as ". . . a house, an apartment, a mobile home or trailer, a group of rooms or a single room occupied as separate living quarters or, if vacant, intended for occupancy as separate living quarters." Thus, the Effective Competition Order indicated to cable operators, including Americable, that the 1990 Census contained acceptable household information. The household information contained in the 1990 Census relates only to occupied housing units. Therefore, we believe that the Effective Competition Order provided ample notice that only occupied housing unit data was acceptable for purposes of establishing effective competition. Moreover, the Effective Competition Order also clearly indicated that cable operators who filed deficient petitions for reconsideration or revocation were being extended an opportunity to supplement their original petitions with correct or updated information. Americable's argument that it did not have notice of the necessity and opportunity to supplement its petition is not persuasive. 10. Because we find that the Commission has consistently required that effective competition claims be brought using only occupied housing unit information, and because Americable had notice that its petition was deficient and had an opportunity to correct this deficiency, we deny Americable's petition for reconsideration of the Americable Order. B. Petition for Revocation 1. Americable's Petition 11. In the event it did not prevail upon its petition for reconsideration of the Americable Order, Americable's petition also sets forth an alternative petition for revocation of the County's certification based upon updated information applicable to its Fort Mohave franchise area. Americable bases its challenge to the County's certification on the competing provider test for effective competition, which requires Americable to demonstrate that its franchise area is: 1) 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; and 2) the number of households subscribing to the programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the households in the franchise area. Specifically, Americable argues that its Fort Mohave franchise area is served by itself and Dimension, an unaffiliated MVPD, each of which offers comparable programming to at least 50 percent of the households in the franchise area. 12. Americable's petition first seeks to establish the number of households in its Fort Mohave franchise area. Americable asserts that 1990 Census household data is not available for its entire franchise area. Thus, in order to determine the number of households, Americable divides its franchise area into northern and southern portions. In order to calculate the number of households in the southern portion, Americable relies upon 1990 Census data reflecting households (i.e., occupied housing units) for the southern portion of its Fort Mohave franchise area. According to the Census data, there are 2,549 households in Mohave Valley and 190 households in Willow Valley, for a total of 2,739 households in the southern portion of the Fort Mohave franchise area. In order to determine the number of households in the northern portion of the franchise area, Americable conducted a hand count of every housing unit that its system does not pass in the northern portion of its franchise area. By adding the figure from the hand count (216) to the "house count of homes served by the system" in the northern portion, determined from Americable's regular business records (2,874), Americable concludes that there is a total of 3,090 housing units in the northern portion of its franchise area. Americable then adjusts this figure using an "occupied household factor" of 54.03 percent (3,090 x .5403) and calculates that there are approximately 1,670 households in the northern portion of its franchise area. Accordingly, Americable calculates the total number of households in its entire Fort Mohave franchise area to be 4,409 (2,739 southern portion households + 1,670 northern portion households). 13. Americable states that it offers service to 4,849 of the total housing units, and 2,620 of the 4,409 households in its franchise area, and that it actually serves 2,024 subscribers in the franchise area. Americable states that Dimension, its competitor in the Fort Mohave franchise area, passes 3,186 households in the franchise area, and serves 898 subscribers. 2. Analysis 14. 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. Based on the totality of the evidence, we find that Americable has met this burden. 15. At the outset of our analysis, we note that Americable and Dimension do not share the same franchise area. According to Americable, its Fort Mohave franchise area is located entirely within the borders of Dimension's larger Mohave County franchise area. Ordinarily, it would be inappropriate to compare for purposes of effective competition Americable's smaller franchise area with Dimension's larger franchise area because of the disparity in the location of each cable operator's system and subscribers. For example, we would expect some of the subscribers served and households passed by Dimension's system to lie outside the borders of Americable's Fort Mohave franchise area. However, Americable asserts that, despite its larger franchise area, all of Dimension's subscribers and cable plant are located within Americable's Fort Mohave franchise area. Americable submits a declaration by its General Manager and a letter from Dimension's General Manager as support for this assertion. Based on this evidence, we find that Dimension's entire system and subscribership are located within the boundaries of Americable's Fort Mohave franchise area. Accordingly, we conclude that it is appropriate in this instance to compare Dimension's reach and subscribership with Americable's for purposes of the competing provider test. 16. We next address the issue of the number of households in Americable's Fort Mohave franchise area. We recognize that determining the number of households passed by a cable operator and existing in the franchise area may be difficult, and that such information may not be provided by the Census data upon which we routinely urge operators to rely. Americable calculates its household data by dividing its Fort Mohave franchise area into northern and southern portions, providing Census data where available, and making a reasonable calculation for the remainder. In light of the apparent absence of Census data for the northern portion of Americable's franchise area, we find this approach reasonable. Accepting this methodology, we find that Americable's franchise area consists of approximately 4,409 households (2,739 in the southern portion and 1,670 in the northern portion). 17. The first part of 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 service to at least 50 percent of the households in the franchise area. If we apply the occupancy rate to the "homes passed" data that Americable provides, we conclude that Americable passes approximately 2,620 households (4,849 x .5403). Thus, Americable offers its cable service to 2,620 of 4,409 households, or 59.4 percent of the households in the franchise area, meeting the 50 percent standard. We accept the data supplied by Dimension in its prior certification challenge to demonstrate that Dimension passes the same number of households in its own larger Mohave County franchise area as are found in Americable's Fort Mohave franchise area. Dimension passes 3,186 of 4,409 households, or 72.3 percent of the households in Americable's Fort Mohave franchise area, meeting the 50 percent standard. 18. With regard to the second part of the first prong of the competing provider test, programming comparability, we find that Americable has submitted sufficient evidence that the programming of the two operators are comparable. The channel lineups for both operators submitted by Americable establish that each operator offers at least 12 channels, including at least one channel of non-broadcast service programming. This satisfies the Commission's programming comparability criterion. 19. With regard to the second prong of the competing provider effective competition test, we find that the evidence shows that more than 15 percent of the households in the franchise area subscribe to the multichannel video programming distributor other than Americable, the largest MVPD. Here, Americable has submitted sufficient evidence that Dimension, the smaller of the two competitors, serves 898 subscribers out of the 4,409 households, or 20.4 percent of the households in Americable's Fort Mohave franchise area. 20. As Americable has submitted sufficient evidence demonstrating that its cable system serving the Fort Mohave franchise area is subject to competing provider effective competition from Dimension, its petition is granted, and the certification of Mohave County, Arizona to regulate basic cable rates is revoked. ORDERING CLAUSES 21. Accordingly, IT IS ORDERED that Americable International Arizona, Inc.'s petition for reconsideration of the Bureau's February 8, 1995 Americable Order IS DENIED. 22. IT IS FURTHER ORDERED that the petition for revocation filed by Americable International Arizona, Inc. challenging the certification of the Mohave County Board of Supervisors to regulate its basic cable rates in its Fort Mohave franchise area IS GRANTED. 23. IT IS FURTHER ORDERED that the certification granted to Mohave County, Arizona to regulate Americable's basic cable rates in the Fort Mohave franchise area IS REVOKED. 24. 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