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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 5053-E ) Time Warner Entertainment- ) Glendale Heights, IL Advance /Newhouse Partnership ) CUID No. IL0404 d/b/a Time Warner of DuPage County ) ) Petition for Special Relief ) MEMORANDUM OPINION AND ORDER Adopted: October 30, 1997 Released: October 31, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Time Warner Entertainment-Advance /Newhouse Partnership d/b/a Time Warner of DuPage County ("Time Warner") has filed a Petition for Special Relief seeking a determination of effective competition. Time Warner asserts that it is subject to effective competition in the Village of Glendale Heights, Illinois ("Glendale Heights") because of the presence of Ameritech New Media's cable service in that Community. This petition is unopposed. For the reasons discussed below, the Petition is granted. 2. 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. A finding that a cable system is subject to effective competition precludes regulation of its cable rates by the local franchising authority. 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. Time Warner asserts that it is subject to LEC effective competition in its Glendale Heights, Illinois franchise area. With regard to the LEC affiliation requirement, Time Warner asserts that Ameritech New Media, Inc. ("Ameritech") is a competing franchised cable operator wholly owned by Ameritech Corporation, a local exchange carrier serving customers in Michigan, Illinois, Indiana, Michigan, and Wisconsin. 4. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Time Warner asserts that Ameritech has completed construction of a cable system throughout the entire Village of Glendale Heights and has been providing cable service to subscribers since May 1996. Time Warner estimates that Ameritech serves approximately 500 subscribers in the Village. Time Warner adds that Ameritech has heavily marketed the availability of its cable service through local media and other means, and advertises that it will activate service to new subscribers quickly. Time Warner asserts there are no regulatory, technical, or other impediments to households taking service from Ameritech. 5. Time Warner also asserts that Ameritech offers comparable programming to Glendale Heights subscribers. Specifically, Time Warner provides Ameritech's channel line-up which demonstrates that Ameritech offers over 80 channels, of which at least 9 are local television broadcasting signals. Time Warner offers 78 channels of programming in Glendale Heights, of which at least 12 are local television broadcast signals. 6. Finally, Time Warner states that it has made several pricing and marketing changes in response to increased competition from Ameritech. Time Warner notes that it recently: (1) expedited a fiber upgrade of its cable plant, resulting in an increase in channel capacity from 42 to 78; (2) moved the Disney Channel from the premium to the basic service tier; (3) offered a discount plan to customers committing to continue Time Warner service for a year; (4) implemented a pay-per-view technology which permits advanced services such as parental lockout and impulse pay-per-view; and (5) designated a specific phone line for Glendale Heights subscribers at Time Warner's nearby Hickory Hills, Illinois customer service office. 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 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. Time Warner 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 Time Warner has provided sufficient evidence demonstrating that Ameritech is an MVPD wholly owned by a LEC. Ameritech Corporation is a LEC as defined by the Communications Act, and Ameritech meets the Commission's definition of MVPD. Therefore, we find that Time Warner has demonstrated that Ameritech satisfies the affiliation prong of the LEC effective competition test. Time Warner is unaffiliated with both Ameritech and Ameritech Corporation. 9. We also find that Time Warner has submitted sufficient evidence to show that the programming of Ameritech is comparable to the programming which it provides. The channel information for Ameritech submitted by Time Warner establishes that Ameritech offers more than 80 channels of programming, including 9 local broadcast channels. This satisfies the programming comparability criterion. 10. In addition, we find that based on the information before us, Ameritech is offering service in Time Warner's franchise area sufficient to demonstrate the presence of effective competition. Ameritech has completed its overbuild of Time Warner's system in the Village of Glendale Heights and is now competing for customers with Time Warner in the area at issue. We find that Ameritech's presence and its undisputed recruitment of 500 subscribers in the franchise area are indicia that Ameritech is physically able to offer service in the cable community. 11. We note that Ameritech's extensive marketing efforts and the wide press coverage of Ameritech's cable service offerings in the local media ensure that potential subscribers are reasonably aware of the availability of Ameritech's service. Subscribers in Glendale Heights are able to receive Ameritech's cable service for little or no additional investment and without encountering regulatory or technical obstacles. We also note that Time Warner has upgraded its cable plant, and added 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 12. Accordingly, IT IS ORDERED that the Petition for Special Relief seeking a determination of effective competition filed by Time Warner Entertainment-Advance /Newhouse Partnership d/b/a Time Warner of DuPage County IS GRANTED. 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