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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) CSR 4955-E ) Falcon Cablevision ) Thousand Oaks, CA ) CUID No. CA0850 ) Petition for Determination of ) Effective Competition ) MEMORANDUM OPINION AND ORDER Adopted: April 17, 1997 Released: April 24, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Falcon Cablevision has filed a Petition for Determination of Effective Competition asserting that it is subject to effective competition in Thousand Oaks, California ("Thousand Oaks") because of the presence of GTE Media Venture's ("GTE") cable service in that City. This petition is unopposed. 2. Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications Act") 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 authority does not meet the statutory certification requirements. In Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996 ("Cable Act Reform Order"), the Commission instructed cable operators believing themselves subject to local exchange carrier ("LEC") effective competition under Section 623(l)(1)(D) of the Communications Act to file a petition for determination of effective competition pursuant to Section 76.7 of the Commission's rules. Section 623(l)(1)(D) of the Communications Act provides that a cable operator is subject to effective competition where: a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. II. THE PLEADINGS 3. Falcon asserts that it is subject to LEC effective competition in its Thousand Oaks, California franchise area. With regard to the LEC affiliation requirement, Falcon asserts that GTE is a competing franchised cable operator wholly owned by the GTE Corporation, a local exchange carrier serving customers in California and throughout the United States. 4. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Falcon asserts that GTE has submitted a map to the City detailing its cable system construction schedule. Falcon states that GTE has activated its plant in the City and is providing service to an increasing number of subscribers. Falcon's entire franchise area is now said to have been overbuilt by GTE. Falcon states that GTE has heavily marketed the availability of its cable service through the local media and it has been made aware that GTE has begun a telemarketing campaign aimed at Falcon's customer base. Falcon asserts there are no regulatory, technical, or other impediments to households taking service from GTE. 5. Falcon also asserts that GTE offers comparable programming to Thousand Oaks subscribers. Specifically, Falcon provides GTE's channel line-up which demonstrates that GTE offers over 80 channels, 21 of which are local television broadcasting signals. Falcon offers nearly 60 channels of programming on its Thousand Oaks cable system. 6. Falcon asserts that it has slashed its service prices and increased its service offerings since GTE has entered the market. Falcon states that it has reduced the cost of its expanded basic tier by 93 percent and has added several new channels of cable programming to meet GTE's competitive challenge. Falcon also asserts that it plans to cut the rates it charges for premium channels such as HBO, Showtime, and The Movie Channel from $9.95 to $5.00 each. Finally, Falcon notes that its competitive reactions may "lead to a rate war with GTE." III. ANALYSIS 7. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition as defined in the Communications Act. The cable operator bears the burden of rebutting the presumption that such effective competition does not exist and so must provide evidence sufficient to demonstrate that effective competition, as defined by Section 76.905 of the Commission's rules, is present in the franchise area. Falcon has met this burden. 8. With regard to the first part of the LEC effective competition test, which requires that the alleged competitive service be provided by a LEC or its affiliate (or any multi-channel video programming distributor ("MVPD") using the facilities of such LEC or its affiliate), we find that Falcon has provided sufficient evidence demonstrating that GTE is an MVPD wholly owned by a LEC. GTE is a LEC as defined by the Communications Act, and GTE meets the Commission's definition of MVPD. Therefore, we find that Falcon satisfies the affiliation prong of the LEC effective competition test. Falcon is unaffiliated with both GTE Media Ventures and GTE. 9. We also find that Falcon has submitted sufficient evidence to show that the programming of GTE is comparable to the programming which it provides. The channel information for GTE submitted by Falcon establishes that GTE offers more than 80 channels of programming, including over 20 local broadcast channels. This satisfies the programming comparability criterion. 10. In addition, we find that based on the information before us, GTE is offering service in Falcon's franchise area sufficient to demonstrate the presence of effective competition. Falcon has provided maps and other demonstrations of GTE's offering of service. Falcon has stated that its entire franchise area has been overbuilt by GTE, which has a ten year franchise commitment to provide video service to the City of Thousand Oaks. We note that GTE's substantial marketing efforts and the extensive press coverage in the local media, ensures that potential subscribers are reasonably aware of the availability of GTE's service. Subscribers in Falcon's franchise area are able to receive service for only a minimal additional investment and without regulatory, technical or other impediments. We also note that Falcon has lowered its rates and added several new channels, all for the benefit of its subscribers. Consistent with Congressional intent in adopting Section 623(l)(1)(d) of the Communications Act, under the circumstances we find effective competition to be present. IV. ORDERING CLAUSES 11. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by Falcon Cablevision, challenging the certification of the City of Thousand Oaks, in Thousand Oaks, California IS GRANTED. 12. IT IS FURTHER ORDERED that the certification of the City of Thousand Oaks, California to regulate the basic cable rates of Falcon Cablevision in Thousand Oaks, California IS REVOKED. 13. This action is taken pursuant to the interim rules adopted in Implementation of Cable Reform Provisions of the Telecommunications Act of 1996, and is without prejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of Proposed Rulemaking contained therein. 14. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau