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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: ) ) DANIELS CABLEVISION, INC. d/b/a/ ) PALA MESA CABLEVISION, ) d/b/a/ NORTH COUNTY CABLEVISION ) d/b/a/ CABLE TV OF LAKE ) SAN MARCOS ) ) Application for Review of Order of ) the Cable Services Bureau Granting ) Petition for Revocation of the Certification of ) San Diego County to Regulate Basic Cable) Service Rates (CA0198) (CA0672) (CA0641)) MEMORANDUM OPINION AND ORDER Adopted: October 2, 1997 Released: October 7, 1997 By the Commission: I. INTRODUCTION 1. By this Order, we deny the application for review of San Diego County, California (the "County") seeking review of an order adopted by the Cable Services Bureau (the "Bureau") granting Daniels Cablevision, Inc.'s ("Daniels") petition for revocation of the County's certification to regulate its basic cable service rates ("Bureau Order"). Daniels filed an opposition to the County's application for review. II. BACKGROUND 2. Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications Act"), allows franchising authorities to become certified to regulate the basic cable service rates of cable operators which are not subject to effective competition. Section 623(l)(1) of the Communications Act provides that low penetration effective competition exists if "fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system." The measurement of subscribership under this test is based on the subscribership of the particular cable system in question and not on the aggregate subscribership of all cable systems in the franchise area. 3. For purposes of the initial request for certification, a franchising authority may rely on the presumption that cable operators within its jurisdiction are not subject to effective competition, unless the franchising authority has actual knowledge to the contrary. Such certification becomes effective thirty 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 thirty days from the date such certification becomes effective. Rate regulation is automatically stayed pending review of a timely filed petition for reconsideration alleging effective competition. After the 30-day deadline for filing petitions for reconsideration has elapsed, cable operators may challenge the franchising authority's certification by filing a petition for revocation. However, regardless of its grounds, a petition for revocation does not automatically trigger a stay of the franchising authority's power to regulate basic rates. III. THE BUREAU ORDER 4. Daniels filed a petition for revocation of the certification of the County to regulate its basic cable service rates. The Bureau issued an order granting Daniel's petition for revocation of the County's certification, concluding that Daniels had submitted sufficient evidence demonstrating that its cable system serves only 10,622 of the 127,665 households, or 8.3% of the households in the unincorporated portion of the County. That penetration rate is significantly below the 30% threshold of the low penetration effective competition test. The County argued that Daniels had affirmatively redefined its franchise area. According to the County, the correct number of households in Daniels' redefined franchise area (consisting of Daniels' actual service area) was 19,743 households, significantly below the 127,665 households located in the unincorporated portion of the County. The County argued that Daniels' use of the county-wide household figure instead of the redefined franchise area figure, resulted in a penetration rate that was significantly understated. 5. In considering the County's claim that Daniels affirmatively redefined its franchise area, the Bureau, relying on the Commission's previous decision in Valley Center Cablesystems, L.P., stated that: . . . we find that the County's argument that Daniels has failed to expand into areas served by other cable operators is not determinative of the issue of whether Daniels has redefined its franchise area. The franchise agreement between Daniels and the County designates Daniels' authorized service area to be county-wide with primary responsibility for providing service to [Pala Mesa/Fallbrook, San Diego County-North and Lake San Marcos]." The County does not contest that over the last ten years Daniels has expanded its system in unincorporated San Diego County, but argues that Daniels has failed to expand within areas served by other cable operators. The fact that Daniels has not constructed its cable plant in locations deemed most desirable by the County does not obviate the fact that Daniels has continued to expand its cable system. Therefore, we find that the County has failed to sustain its burden of proof that Daniels has redefined its franchise area. IV. THE PLEADINGS 6. In its application for review of the Bureau Order, the County argues without specification that the Bureau's actions are in conflict with the Commission's effective competition regulations, and that the Bureau Order contains erroneous findings regarding material questions of fact. The County argues that this proceeding is distinguishable from the Commission's Valley Center decision because Daniels applied for and received multiple county-wide franchise licenses requiring that Daniels initially serve distinct areas of the unincorporated portion of the County, which constitutes an affirmative decision to limit its service area. The County argues that Daniels' separate licenses for the areas of primary responsibility combined with its limited cable plant extension and failure to provide competing service in any area served by other cable operators is conclusive evidence of Daniels' decision to limit its franchise area. The County asserts that Daniels' decision to obtain individual cable television licenses for previously unserved, unincorporated County communities, confirms Daniels' intention to establish distinct designated service areas and also confirms the County's willful acceptance of the limited scope of each license. The County concludes by stating that: By failing to take into account the unique nature of county licenses, the [Commission] opened the door for numerous petitions for revocation based upon the creative interpretations of cable operators. Daniels' subsequent Petition and the Bureau's response has only confirmed our worst fears and resulted in rural customers ending up with little or no protection from de facto monopolies. 7. In its Opposition, Daniels argues that the County has not alleged grounds warranting reversal of the Bureau Order. Daniels asserts that the County has offered no "meaningful factual support" to the Bureau, offers no new evidence in its application for review, and is "essentially asking that the Commission presume," that the County has met its burden of proof that Daniels affirmatively redefined its franchise area. Daniels argues that it is incorrect to assume that its compliance with County licensing practices constitutes an intent to constrain its service area. Daniels states that the County granted Daniels the legal authority to provide cable service county-wide. Daniels claims that the "area of primary responsibility" language contained in its franchise agreements is properly viewed as an assurance that a cable operator serve a populated area of the unincorporated portion of the County and, once that area is served, the cable operator is free to expand its facilities elsewhere based upon demand. Daniels argues the County has attempted to distinguish Valley Center on the basis that the operator in Valley Center had only a single franchise license with county-wide authority. Daniels, however, claims it did not accept multiple licenses with the intention of serving only the areas of primary responsibility as the County contends. Daniels states its subscriber base and physical plant in previously unserved portions of North San Diego County, including areas outside Daniels' areas of primary responsibility, have doubled over the last ten years which proves Daniels did not believe or interpret individual licenses as limiting the franchise area to anything less than all of the unincorporated portion of the County. Daniels claims it has always possessed and has repeatedly exercised its right to expand its service area beyond its areas of primary responsibility. V. DISCUSSION 8. We uphold the Bureau Order. The County argues that, because Daniels obtained three separate franchise licenses with three areas of primary responsibility, the situation presented in the instant proceeding is factually distinguishable from the Commission's Valley Center decision. We disagree. The Bureau correctly concluded that the facts present in this proceeding are materially indistinguishable from the facts presented to the Commission in Valley Center. As observed in the Bureau Order, and unrefuted here, "[t]he franchise agreement between Daniels and the County designates Daniels' authorized service area to be county-wide with primary responsibility for providing service to [Pala Mesa/Fallbrook, San Diego County-North, and Lake San Marcos]. " The County's statement that Daniels accepted primary responsibility to serve a particular area, while retaining the right to operate elsewhere in the unincorporated portion of the County, does not constitute evidence that Daniels has affirmatively redefined its franchise area. The County does not contest that Daniels has expanded its system both inside and outside Daniels' areas of primary responsibility, but argues that Daniels has failed to expand within areas served by other cable operators. As the Commission stated in Valley Center: The County's argument, without more, is simply an argument that a cable operator has not yet filled out its entire franchise area. This fact, if true, is insufficient to constitute evidence by which we could conclude that a cable operator has redefined its franchise area. Indeed, we note that the instant proceeding is not a case where the cable operator has engaged in no expansion. . . . In light of these facts, we find that [Valley Center Cablesystem's] alleged failure to expand into areas served by other cable operators, by itself, is not grounds upon which to reverse the Bureau's decision. The County has not convinced us that this reasoning is not equally applicable to the instant proceeding. 9. In summary, the County had the burden of demonstrating that Daniels had affirmatively redefined its unincorporated San Diego County franchise area. The County has raised no arguments, nor has it introduced new evidence which brings into question the reasoning and conclusions of the Bureau Order. In light of the foregoing, we find that the County's application for review should be denied. VI. ORDERING CLAUSES 10. Accordingly, IT IS ORDERED, that the application for review of the Bureau Order granting the petition for revocation of Daniels Cablevision Inc. d/b/a/ Pala Mesa Cablevision, d/b/a/ North, County Cablevision, d/b/a/ Cable TV of Lake San Marcos filed by the County of San Diego, California IS DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary