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Sq-In the Matter of:R)hCSR 5137E  SI-R)h  S!-Paragon Communications, d/b/aR)hGardena  xx(CUID CA0934)  S-Time Warner Communications andR)hHawthorne  xx(CUID CA1022)  S-KBL Cable Systems of the SouthwestR)hLawndale  xx(CUID CA1099)  S-R)hLos Angeles County  xx(CUID CA1557)  S-Petition for Determination ofR)hEl Segundo  xx(CUID CA0467)  SY -Effective CompetitionR)hTorrance  xx(CUID CA0941)  S1 -R)h  S -R)hFountain Valley  xx(CUID CA0752)  S -R)hHuntington Beach  xx(CUID CA0751)  S -R)hStanton  xx(CUID CA0932)  S -R)hWestminster  xx(CUID CA0750)  Si-R)hGarden Grove  xx  SA-x` `  hh @R)h (Orange Co. uninc.)xx(CUID CA0943)  S-R)hLos Alamitos  xx(CUID CA0944)  S-R)hRossmoor  S-x` `  hh@R)h (Orange Co. uninc.)xx(CUID CA0845)  S-R)hMidway City  xx 0(#(#X Sy-x` `  hh@R)h (Orange Co. uninc.)xx(CUID CA0931)  SQ-R)hCypress    S)- x` `  hh@R)h (Orange Co. uninc.)xx(CUID CA1540)  S-R)hCity of Orange  xx(CUID CA0940)  S-R)hOrange County uninc.  xx(CUID CA0814) R)  S-R)hSouth Pasedena  xx(CUID CA0893)  Sa-R)hSan Marino  xx(CUID CA0992) R  S-  MEMORANDUM OPINION AND ORDER TP  S- Adopted: April 30, 1998 hh@hpp Released: May 1, 1998 By the Acting Chief, Cable Services Bureau:  S - I.xINTRODUCTION  S"- ` x1.` ` Paragon Communications, d/b/a Time Warner Communications and KBL Cable Systems  xNof the Southwest (collectively, "Time Warner"), filed a petition asserting that it is subject to local  SY$- xexchange carrier ("LEC")  Y$o yO&-ԍThe Communications Act defines the term "local exchange carrier" as:  ` pXxX` ` any person that is engaged in the provision of telephone exchange service or exchange  ` paccess. Such term does not include a person insofar as such person is engaged in the"),**F)"  ` p3provision of a commercial mobile service under Section 332(c), except to the extent that the Commission finds that such service should be included in the definition of such term. ` Communications Act 3(26), 47 U.S.C. 153(26). effective competition in the abovecaptioned communities (the "Communities");XY$o yOx- xYԍTime Warner states that it serves the Communities through three systems: the Los Angeles County System, the  xjOrange County System, and the South Pasadena System. In the above caption, the Communities are grouped separately according to system.;"Y$,**88%"  x=from Pacific Bell Video Services ("PBVS"), d/b/a Pacific Bell Digital TV, a digital wireless cable operator  xserving Los Angeles and Orange counties, California. A number of the Communities (collectively, "the  S-Cities")1XX yO - xԍThe Cities include Cypress, Gardena, Garden Grove, Hawthorne, Lawndale, Los Alamitos, Torrance, as well  xJas the Public Cable Television Authority on behalf of the cities of Fountain Valley, Huntington Beach, Stanton, and Westminster.1 filed a joint opposition to Time Warner's petition and Time Warner filed a reply. X yO@- xԍTime Warner filed a request for extension of time to respond to the Cities' opposition. The Cities did not oppose the request. Time Warner's extension is hereby granted.  S`- ` 3x2.` ` Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications  xAct") allows franchising authorities to become certified to regulate basic cable service rates of cable  S- x!operators which are not subject to effective competition.bH X yO-ԍCommunications Act 623(a)(4), 47 U.S.C. 543(a)(4).b For purposes of the initial request for  xkcertification, local franchising authorities may rely on a presumption that cable operators within their  S- xjurisdiction are not subject to effective competition unless they have actual knowledge to the contrary.OX yO8-ԍ47 C.F.R. 76.906, 76.910(b)(4).O  xCertification becomes effective 30 days from the date of filing unless the Commission finds that the  Sp- xauthority does not meet the statutory certification requirements.phX {Ox-ԍ47 C.F.R. 76.910(e); 47 C.F.R. 76.910(b); see also Communications Act 623(a)(4), 47 U.S.C. 543(a)(4). In Implementation of Cable Act Reform  SJ - x?Provisions of the Telecommunications Act of 1996 ("Cable Act Reform Order"),EJ X yO-ԍ11 FCC Rcd 5937, 5944 (1996).E the Commission  x?instructed cable operators believing themselves subject to local exchange carrier ("LEC") effective  xcompetition under Section 623(l)(1)(D) of the Communications Act to file a petition for determination of  S - xeffective competition pursuant to Section 76.7 of the Commission's rules.; X yO -ԍ47 C.F.R. 76.7.; Section 623(l)(1)(D) of the Communications Act provides that a cable operator is subject to effective competition where:  ` pXxX` ` a local exchange carrier or its affiliate (or any multichannel video programming  ` p distributor using the facilities of such carrier or its affiliate) offers video  ` pprogramming services directly to subscribers by any means (other than directto ` pThome satellite services) in the franchise area of an unaffiliated cable operator  ` pwhich is providing cable service in that franchise area, but only if the video" ,p(p(88"  ` pFprogramming services so offered in that area are comparable to the video  S-programming services provided by the unaffiliated cable operator in that area.h X yO@-ԍCommunications Act 623(l)(1)(D), 47 U.S.C. 543(l)(1)(D).h `  S- II.xTHE PLEADINGS  S8- ` `x3.` ` Time Warner argues that it is subject to LEC effective competition in the Communities  xfrom PBVS, a digital wireless cable operator serving Los Angeles and Orange counties. With regard to  S- xthe LEC affiliation requirement, XX yO - xԍThe Commission determined that the definition of affiliate provided in Section 3 of the 1996 Act will apply to the LEC effective competition test: xThe term "affiliate" means a person that (directly or indirectly) owns or controls, is owned xor controlled by, or is under common ownership or control with another person. For xpurposes of this paragraph, the term "own" means to own an equity interest (or the xequivalent thereof) of more than 10 percent.  {O -Cable Act Reform Order, 11 FCC Rcd at 5944 (quoting Communications Act  3(1), 47 U.S.C.  153(1)).  Time Warner contends that the corporate relationships that exist between  xPBVS, Pacific Bell, Pacific Telesis Group ("PTG"), and SBC Communications Inc. demonstrate that PBVS  xkis a LEC affiliate. Time Warner asserts that according to PTG's world wide web home page, PBVS is  Sp- xa whollyowned subsidiary of Pacific Bell, a LEC serving threefourths of the residents in California. p X yO-ԍPTG's world wide web home page materials are attached as Exhibit A to Time Warner's petition.  xLTime Warner states that the web materials also indicate that Pacific Bell is owned by PTG, "[o]ne of the  S - xnation's largest telecommunications providers."[ X {OB-ԍSee Exhibit A to Time Warner's petition at 1.[ Finally, Time Warner asserts that PTG is, in turn, owned by SBC Communications Inc., which is also a LEC.  S - ` P x4.` ` With regard to the requirement that the LEC competitor offer( X yO\- xԍIn implementing the LEC effective competition test on an interim basis, the Commission determined that its  xpreexisting definition of the term "offer" as used in the three effective competition definitions set forth in the 1992  yO- xCable Act would apply to the LEC test. 11 FCC Rcd at 5942. The Commission previously determined that service of a multichannel video programming distributor will be deemed offered:  ` pCXxX` ` (1) When the multichannel video programming distributor is physically able to deliver  ` p5service to potential subscribers, with the addition of no or only minimal additional  ` pinvestment by the distributor, in order for an individual subscriber to receive service; and  ` p(2) When no regulatory, technical or other impediments to households taking service exist,  ` pand potential subscribers in the franchise area are reasonably aware that they may purchase the services of the multichannel video programming distributor. ` 47 C.F.R. 76.905(e).  video programming service  xin the unaffiliated cable operator's franchise area, Time Warner asserts that PBVS is physically able to  xdeliver service to potential subscribers in the Communities. Time Warner explains that PBVS provides"X,p(p(88<"  x!digital wireless cable service to Los Angeles and Orange counties through the use of two MMDS  xtransmitters, which are located at Mt. Wilson in Los Angeles County and Modjeska Peak in Orange  S- xCounty.$X yO- xԍWe note that the Modjeska Peak transmitter was initially owned by Cross Country Wireless, Inc. ("Cross  {O- xCountry") and is the same transmitter that was involved in our decision in Charter Communications Entertainment  {O- xII, L.P., CSR 4864E, DA 97981, rel. May 9, 1997. The transmitter was acquired by PBVS when PTG purchased Cross Country in 1995.  Time Warner provides a map indicating that the Communities are located within one or both  S- xof the estimated 35mile protected service areas surrounding PBVS's transmitters.dX {O-ԍSee Exhibits C and D to Time Warner's petition. d Time Warner also  xsubmits a lineofsight/shadow plot map which Time Warner contends demonstrates that PBVS's actual  S8- xservice area encompasses the Communities, due chiefly to the flat terrain in the area.V8FX {O -ԍSee Exhibit E to Time Warner's petition.V Based on these  xmmaps, Time Warner asserts that PBVS's service is technically available to all homes within the  xCommunities. Moreover, Time Warner claims that PBVS already serves many customers in the  xCommunities. In support of this contention, Time Warner submits photographs of 65 homes in the  S- x=Communities with PBVS receive antennas attached to the rooftops.MZX {O- x;ԍSee Exhibit G to Time Warner's petition. But Time Warner argues that regardless of the number of subscribers  xserved by PBVS, the Commission has recognized that the LEC test for effective competition does not include a percentage pass or penetration rate.M In addition, Time Warner submits  xa PBVS subscriber bill belonging to a Time Warner employee who lives in one of the Communities,  SH - xGarden Grove.VH X {O-ԍSee Exhibit H to Time Warner's petition.V Time Warner argues that PBVS's actual service to subscribers in the Communities demonstrates that PBVS is "physically able" to deliver service.  S - ` x5.` ` Time Warner claims that potential subscribers in the Communities are reasonably aware  x that they may purchase PBVS's video service. Time Warner submits examples of PBVS's marketing  S - xmaterials which Time Warner alleges have been "distributed in the abovecaptioned communities." X {O-ԍTime Warner's petition at 10. See PBVS's marketing material at Exhibit J to petition. Time  SX- xWarner also includes an article on the launch of PBVS's video service from a local newspaper, the Daily  S2- xzBreeze, which serves communities covered by the Los Angeles County System.V2X {O-ԍSee Exhibit K to Time Warner's petition.V Furthermore, Time  xWarner contends that the fact that numerous subscribers in the Communities receive PBVS's service  xydemonstrates that subscribers are aware that they may purchase the service since they have already done  x/so. Time Warner states that it must also be assumed that many of these subscribers have made their  xneighbors aware of PBVS's service, given the presence of PBVS receive antennas on their rooftops. Time  xkWarner further contends that no regulatory, technical or other impediments exist to households in the  xMCommunities taking service from PBVS. According to Time Warner, potential subscribers need only contact PBVS to activate service. ",p(p(88C"Ԍ S- ` Px6.` ` Time Warner asserts that PBVS offers programming comparableX yOh- xԍThe Commission observed that Congress specified a different definition of comparable programming for the  x LEC effective competition test from that adopted for the first three effective competition tests enacted as part of the  x/1992 Cable Act. The Commission on an interim basis determined that it will apply this new comparable  xiprogramming standard which "includes access to at least 12 channels of programming, at least some of which are  {O- xYtelevision broadcasting signals" to the LEC effective competition test. See Cable Act Reform Order at 12 (quoting 1996 Act Conference Report, S. Rep. 104230 at 170 (Feb. 1, 1996)). to that offered by Time  xkWarner in the Communities. Time Warner provides PBVS's channel lineup which demonstrates that  xPBVS's most basic service consists of 49 channels of video programming, including numerous local  S-television broadcast signals.BX {Oj - xԍSee Exhibit L to Time Warner's petition. Time Warner also includes its own channel lineup at Exhibit M to its petition.  S8- ` x7.` ` Finally, Time Warner maintains that actual competition currently exists in the  xkCommunities. Time Warner claims that it has, in fact, lost subscribers to PBVS and has taken certain  xactions in response to competition from PBVS. For example, Time Warner states that it has added  xchannels to some of its systems serving the Communities. In addition, Time Warner asserts that it has established a seven day per week, 24 hours per day inhouse customer service office.  SH - ` x8.` ` The Cities, which are located in Los Angeles and Orange counties and are served by Time  S - xWarner, oppose the petition. X yO\- xJԍThe Cities state that they have all entered into franchise agreements with Time Warner either on their own or through the Public Cable Television Authority. The Cities do not dispute that PBVS is a LEC affiliate or that it offers  x[programming comparable to Time Warner's video programming. They argue that Time Warner has failed  xto demonstrate that PBVS "offers" service in the Cities within the meaning of the Commission's rules.  x.The Cities argue that the evidence presented by Time Warner is insufficient to demonstrate that PBVS's  xkservice is actually available, from both a physical and marketing viewpoint, in the Communities. The  xCities assert that Time Warner has not shown that PBVS's service is available in all of Los Angeles and  x Orange counties or that subscribers residing in all of Time Warner's Los Angeles and Orange County  xcommunities can actually receive PBVS's service. The Cities contend that the fact that they are within  x0PBVS's estimated 35mile protected zone does not establish serviceability because topographical  xconditions can minimize or prevent service delivery notwithstanding proximity to transmitters. The Cities  xstate that the same conditions that preclude the clear reception of broadcast signals in material portions  xof these communities may affect the ability of an MMDS operator to offer video programming service  x\within the communities. The Cities argue that Time Warner must demonstrate on a franchise area by franchise area basis that service is "offered."  S- ` qx9.` ` The Cities further dispute Time Warner's claim that subscribers in the Cities are  xreasonably aware of PBVS's video service offerings. They contend that the PBVS marketing materials  xsubmitted by Time Warner fail to demonstrate the existence of either any direct marketing campaign or  SP- x{any PBVS subscribers within the Cities. Citing the Bureau's decision in Charter Communications  S*- x"Entertainment II, L.P. ("Charter"), the Cities contend that Time Warner cannot rely on broad  xgeneralizations with respect to marketing or serviceability to establish that effective competition exists" ,p(p(88M"  S- xNwithin specific franchise communities.RZX {Oh- xxԍCharter Communications Entertainment II, L.P., CSR4864E, May 9, 1997 (denying Charter's Petition for  xDetermination of Effective Competition with respect to the City of Norco, CA and granting the Petition with respect to three other California communities). R The Cities also argue that the alleged subscription of an  xunnamed Time Warner employee in Garden Grove is statistically insignificant in Garden Grove and proves  xknothing about subscribers outside of Garden Grove. The Cities further argue that the photographs of  xrooftop dishes submitted by Time Warner could depict the homes of PBVS employees engaged to test  xmarket the service. In addition, the Cities contend that there is significant doubt as to the availability of  xPBVS on a widespread basis. The Cities point to several articles which suggest that PBVS plans a  S- x"gradual rollout" of its video services.^X {O - xԍSee, e.g., Wall Street Journal article stating that PBVS only expected to market its video services to "several  {Od - xthousand" people in the Los Angeles market notwithstanding the potential of 3.5 million subscribers. Wall Street  {O. -Journal, May 30, 1997 at Exhibit 1 to the Cities' opposition. See also Exhibits 2 and 3 to the Cities' opposition. The Cities contend that this type of marketing does not satisfy  xthe "offer" requirement within the Commission's rules. The Cities further argue that the present and future  xviability of PBVS's video service is so doubtful that it cannot be considered effective competition to Time  xWarner's cable service. In support of this assertion, the Cities cite numerous articles which they claim  x.raise questions about the commitment of SBC Communications Inc. (PBVS's new owner) to its wireless cable service.  S - ` x10.` ` In reply to the Cities' opposition, Time Warner argues that PBVS does "offer" service to  xthe Communities within the meaning of the Commission's rules. Time Warner contends that the evidence  x>it has presented meets or exceeds the evidentiary standards accepted by the Commission in previous  S - xMdecisions. X {O0- xԍIn particular, Time Warner cites Charter Communications Entertainment II, L.P., CSR4864E, May 9, 1997  yO-and argues that this case and other effective competition decisions warrant grant of Time Warner's petition.. granting effective competition petitions and "demonstrates that PBVS is in fact providing  SX- x[MMDS service to many subscribers in the Communities."BXj X yOb-ԍTime Warner's reply at ii.B To demonstrate that PBVS "offers" service  xto the Communities, Time Warner states that it has submitted 35mile contour maps, lineofsite maps,  xPBVS marketing materials, photographs of homes in the Communities with PBVS antennas on their  xrooftops, a PBVS subscriber bill, and newspaper articles. Time Warner maintains that it was not required  x.to prove that PBVS serves any customers because its petition was filed under the Commission's interim  xzrules which do not require a percentage pass or penetration rate. Time Warner states that in previous  x[decisions the Bureau has found that effective competition exists in certain franchise areas even where the competitor's service is not currently available throughout such franchise areas.  S- ` x11.` ` Time Warner contends that evidence of PBVS's actual service to subscribers in the  xCommunities, in addition to other evidence included in the petition, proves that PBVS is "physically able"  xto serve residents in the Communities. In response to the Cities' argument that the homes in Time  xWarner's photographs could represent those of PBVS employees assigned to test market the service, Time  x!Warner cites an article which states that as of the beginning of October 1997, "[o]f the 4,000 test  xycustomers in Southern California that were offered free trial services, 80% have been converted to paying"( ,p(p(88{"  S- xsubscribers."=ZX {Oh- xԍTime Warner reply at 8 (quoting from "Pac Bell's LowKey Digital," Broadcasting & Cable, October 6, 1997  xat 62, attached as Exhibit A to reply). Time Warner adds that the photographs included in its petition were taken in October of 1997.= Time Warner further argues that it makes no difference whether the homes in the  xjphotographs represent paying subscribers or a mixture of paying subscribers and PBVS employees since  xthe photographs were submitted to prove that PBVS is physically able to serve homes in the Communities  S-for little or no additional investment.eXX yO- x-ԍTime Warner contends that PBVS has paying customers as evidenced by the subscriber bill included with its  xZpetition, the newspaper articles attached both to the petition and the reply indicating that PBVS was connecting subscribers, and the fact that PBVS's employee trial has ended. e  S8- ` x12.` ` Time Warner argues that the lineofsight maps and 35mile contour maps it provided  xdemonstrate that PBVS's signal is available throughout all of the Communities from one or both  S- x transmitters. X yO- xԍTime Warner asserts that the only area served by Time Warner that is shaded on the maps is in part of the City of Orange. Time Warner states that the shaded area covers only 15%20% of its service area in the City of Orange. Time Warner states that the Bureau has previously relied on similar maps in granting  xzeffective competition petitions. Furthermore, Time Warner asserts that most of the Communities are  x[located considerably closer than 35 miles to the relevant PBVS transmitter. Time Warner argues that the  xkCities do not provide any evidence to indicate that PBVS's signal is not available in the Communities.  x=According to Time Warner, there is no topographic reason why the Communities cannot receive PBVS's  S - x.signal. Time Warner contends that the key fact supporting the Bureau's decision in Charter to deny the  x<effective competition petition with respect to the City of Norco was a signal reception problem which does  x/not exist here. Time Warner reasserts that there are no regulatory, technical or other impediments to households taking service from PBVS.  SZ- ` ~x13.` ` Time Warner argues that the Cities offer no facts to counter the petition's evidence that  x residents of the Communities are "reasonably aware" that they may purchase PBVS's service. Time  xWarner states that it included with its petition PBVS marketing materials which were distributed in the  S- xCommunities as well as a local newspaper article regarding PBVS.c Zb X yO- xԍTime Warner attaches at Exhibit A to its reply additional articles on the launch of PBVS's service in Orange  {O- xZCounty, including an article found in the Orange County Register, entitled "Pacific Bell plugs into 'wireless cable' TV," Stephen Lynch, May 30, 1997.c In addition, Time Warner contends  xthat Pacific Bell's world wide web home page helps to ensure that residents are "reasonably aware" that  S- xthey may subscribe to PBVS's service.!" X yO - xԍExcerpts from Pacific Bell's home page are attached at Exhibit C to Time Warner's reply. Time Warner also  xasserts that these materials indicate that PBVS is "physically able" to provide service since they state that the service  {OF"- xis "now available" in Los Angeles and Orange counties, where the Communities are located. See Pacific Bell world wide web home page at www.pacbell.com. Time Warner further asserts that it is not asking for a finding  Sj- xof effective competition with respect to all of Los Angeles and Orange counties or even with respect to  SD- xNall of the communities it serves in these counties. Rather, Time Warner states that it is seeking a  x\determination of effective competition only with respect to the discreet community units listed in its petition. "n!,p(p(88"Ԍ S- ` x14.` ` Time Warner argues that its petition contained evidence that actual competition exists  xtoday in the Communities. Time Warner claims that it has lost subscribers to PBVS and has taken certain  xactions, such as upgrading its systems and improving customer service, to respond to the competition.  xIn particular, Time Warner asserts that it has lost almost 1,200 subscribers in the Communities who have  S`- xstated that their reason for disconnecting was to subscribe to PBVS."\`X yO- xԍTime Warner provides charts listing the number of subscribers in each of the communities at issue who have  {O- xcancelled their Time Warner service in order to subscribe to PBVS. See Exhibit B to Time Warner's reply.  {OZ-According to the charts, Midway City is the only community showing no such subscriber disconnects.  Id.ı Furthermore, based on its own  x[observations of PBVS rooftop antennas, Time Warner estimates that some 2,500 subscribers throughout  xyall of the Communities have switched to PBVS. As to the Cities' arguments regarding the future viability  xof PBVS, Time Warner contends that the articles cited by the Cities are "speculative and hearsayridden."  xIn addition, Time Warner submits its own article containing quotes from current PBVS management  S-regarding PBVS's viability.S#X {O$ -ԍSee Exhibit A to Time Warner's reply.S  SH - III.xANALYSIS  S - ` x 15.` ` In the absence of a demonstration to the contrary, cable systems are presumed not to be  S - xsubject to effective competition.>$ ~X yO-ԍ47 C.F.R.  76.906.> The cable operator bears the burden of rebutting the presumption that  xeffective competition does not exist with evidence that effective competition, as defined by Section 76.905  S - xkof the Commission's rules, is present within the franchise area.T% X yO.-ԍ47 C.F.R.  76.905 and  76.911(b)(1).T Time Warner has failed to meet this  xburden. While Time Warner partially satisfies the LEC test for effective competition by demonstrating  xthat PBVS is a LEC affiliate that provides comparable programming, Time Warner fails to establish that PBVS "offers" service as contemplated by the statute and our rules.  S- ` x16.` ` With regard to the first part of the LEC test, which requires that the alleged competitive  xservice be provided by a LEC or its affiliate (or any multichannel video programming distributor using  xthe facilities of such LEC or its affiliate), Time Warner has provided sufficient evidence demonstrating  S@- xthat PBVS is LECaffiliated under the Commission's interim rules.j&@X {O~-ԍCable Act Reform Order, 11 FCC Rcd at 59385945, 59615964. j The corporate relationships that exist  S- xbetween PBVS, Pacific Bell, PTG, and SBC establish PBVS's LEC affiliation.n'0 X yO -ԍWe note that PTG merged with SBC Communications Inc. in April of 1997.n Additionally, we find that Time Warner is unaffiliated with PBVS, Pacific Bell, PTG, or SBC.  S- ` % x17.` ` Time Warner has submitted sufficient evidence demonstrating that PBVS provides  xprogramming comparable to Time Warner's channel lineup in the Communities. PBVS's most basic  xservice consists of 49 channels of video programming, including numerous local television broadcast channels, which satisfies the programming comparability criteria. " ',p(p(88z"Ԍ S- ` Ԋx18.` ` As to the requirement that the LEC competitor "offer" service, Time Warner has not met  x[its burden. Time Warner has failed to establish that PBVS "offers" service because Time Warner has not  xpresented sufficient evidence that subscribers in the Communities are reasonably aware that they may take  xyservice from PBVS. Cable operators seeking to prove that they are subject to effective competition from  x.a LEC or its affiliate must not only show that the competitor is physically able to deliver service free of  xany regulatory, technical or other impediments but that subscribers are "reasonably aware" that they may  S- xpurchase the competitor's service.N(* {Ox-ԍSee 47 C.F.R.  76.905(e)(2).N Consumer awareness of a competing service is an essential element of the offer requirement of the LEC effective competition test.  S- ` x19.` ` We have stated that potential subscribers may be made reasonably aware of the availability  Sp- xof a competing service through, for example, advertising in the media or direct mail.V)pZ* {Oj -ԍCable Act Reform Order, 11 FCC Rcd 5942.V We have also  xstated that cable operators seeking to prove that they face effective competition may rely on marketing  S - xinformation to demonstrate consumer awareness of the competing service.V* * {O-ԍCable Act Reform Order, 11 FCC Rcd 5942.V In this instance, Time Warner  xksubmits examples of PBVS's direct mail marketing materials. Time Warner does not present evidence that PBVS has engaged in any type of mass media marketing.  S - ` Px20.` ` The direct mail materials submitted by Time Warner are not sufficient to demonstrate that  x potential subscribers in all of the Communities are aware of PBVS's service. Although Time Warner  xclaims that the marketing materials were distributed "in the abovecaptioned communities," there is no  x=evidence in the record defining the scope of the direct mail campaign. Specifically, there is no proof that  xthe mailings were made to subscribers in all of the Communities and there is no information concerning  S-how many subscribers in the Communities were actually sent mailings.k+Z~* {O- xԍSee also Los Angeles Times, "PacBell Digital TV Venture Begins in L.A., Orange Counties," Marla Matzer,  x,May 30, 1997 ("SBC representative declined to say how many people are being targeted or on what basis customers would be selected, should demand outweigh SBC's ability to deliver.")k  Sh- ` x21.` ` Time Warner points to articles on the launch of PBVS as evidence that subscribers in the  xyCommunities are reasonably aware of PBVS's service. One of the articles Time Warner cites is contained  S- xin a newspaper called the Daily Breeze, which Time Warner concedes only serves communities covered  S- xLby its Los Angeles County System. Another article that Time Warner submits from the Orange County  S- xRegister confirms that PBVS "will expand slowly across the county through directmail.",* {O !- xԍOrange County Register, "Pacific Bell plugs into 'wireless cable' TV," Stephen Lynch, May 30, 1997, attached at Exhibit A to Time Warner's reply. It appears that  xsome subscribers were targeted for the mailings while many other potential subscribers were not solicited.  x.Former PBVS Vice President and General Manager Jeff Carlson has said that the company is purposely  SV- xcontrolling the number of subscribers to "contain demand."-V * {O%-ԍElectronic Media "Pacific Bell Pushes On With Cable," Michael Schneider, September 1, 1997. According to Carlson, the company will add"V -,p(p(88"  S- xnew customers gradually to ensure highquality service..* {Oh- x-ԍThe San Francisco Chronicle, Business, "L.A. Gets 'Wireless Cable' TV/ Pac Bell's Bay Area service still on  {O2- xhold," Jonathan Marshall, May 30, 1997. See also Multichannel News, "PacBell Taking Cable's Best Subs in S.  xKCalif. Has signed up 10,000 customers since launching cable services," Linda Haugsted, October 6, 1997 ("PBVS  x;is still not ready for the increase in demand that a widespread campaign might engender: Each installation still takes one hour and 50 minutes, on average, executives said.") Carlson has also stated that "[a]s for the  xadvertising, we are doing a very controlled rollout; it is conservative by design. We have limited our  S- xmarketing to very specific demographics."/|* {O- x<ԍBroadcasting & Cable, "Pac Bell's lowkey digital: Company is quietly building California wireless system," Jon Schlosser, October 6, 1997. The Orange County Register article cited by Time Warner  xand other articles, for the most part, simply corroborate the statements made by Carlson and describe the  Sb-launch of PBVS's video service as a "gradual rollout" and as "low key."02 b* {O - xԍSee e.g., The Wall Street Journal, "PacTel Launches Wireless CableTV On ScaledBack Basis in California,"  xZLeslie Cauley, May 30, 1997 ("SBC yesterday said it has begun a limited commercial rollout of video services in  x.Los Angeles and Orange counties, but it will wait to see how customers respond before proceeding further.");  {O2- xxElectronic Media, "Pacific Bell Pushes On With Cable," Michael Schneider, September 1, 1997 ("Pacific Bell has  xquietly started rolling out the system," and quoting Carlson, "[w]e have not used any media [to market the service]  {O- xand have no plans to do so."); Multichannel News, "SBC tiptoes into L.A. cable market; SBC Communications,  xInc.," Kent Gibbons, June 2, 1997 ("Pacific Bell Video Services has quietly started signing up paying customers"  xand "PacBell said it plans a 'gradual' rollout to make sure that the service quality is high and to test market  {O- xKacceptance."); Broadcasting & Cable, "Pac Bell's lowkey digital: company is quietly building California wireless  xsystem," Joe Schlosser, October 6, 1997 ("company officials acknowledged that there are no plans for a marketing  {O- x-blitz anytime soon."); Los Angeles Times, "PacBell Digital TV Venture Begins in L.A., Orange Counties," Marla  xMatzer, May 30, 1997 ("Though the company said the service is available now, it's not clear where or how quickly consumers can subscribe.").  S- ` x22.` ` We note that several thousand PBVS employees were used to test market the service.  xyThat certain specific subscribers are aware of PBVS because they are employees of the company or were  xjspecifically targeted does not mean that subscribers in the Communities generally are informed that there  xis an alternative video service provider to the cable operator. The cable operator must submit evidence  xKdemonstrating that potential subscribers in the Communities, not only segments of the population that may  xhave been specifically targeted or handpicked for solicitation, are reasonably aware that they may purchase  xservices from a video provider other than the cable operator. Contrary to Time Warner's assertions, the  xexistence of a world wide web page (with the address "www.pacbell.com") does not demonstrate that  x<subscribers in the Communities are reasonably aware of the competing service. Many potential subscribers  xLmay not have access to, or a working familiarity with, the internet or may not be aware of this particular  xsite. Furthermore, the web site suggests that PBVS's service is limited to certain areas and that only  SZ- xresidents of those areas will be contacted directly.1XZ* yO"- xԍPacific Bell's world wide web home page (www.pacbell.com) states: "Call 1888WATCHPB (1888928 x2472) to find out if service is available in your area. As we add more neighborhoods to our service area, we will contact residents of those neighborhoods directly with all the details about Pacific Bell Digital TV." Because evidence of a broad awareness of the  x.existence and availability of PBVS's service is lacking, we find that Time Warner has failed to prove that PBVS "offers" service in the Communities. " 1,p(p(88"Ԍ S- ` x23.` ` As a general matter, we note that evidence presented by cable operators regarding the  xnumber and location of subscribers to the competing service shows that the competitor is physically able  x\to deliver service. Such evidence, in most cases, can also reflect the degree subscribers are reasonably  xaware of the competing service since they are, in fact, receiving it. However, in this instance, evidence  xsubmitted by Time Warner that 1,200 subscribers throughout the 19 Communities have switched from  xTime Warner's service to PBVS's service does not persuade us that consumers in the Communities  S- xgenerally are knowledgeable about PBVS's service. If totalled, the number of households in the  S- x.Communities is roughly 375,000.2@* yOP-  ԍWe derived the 375,000 household figure by making the following calculations: (1) adding together the   population figures for each of the communities at issue (with the exception of Los Angeles County, CA1557, for   which no population figure was available) to reach a total population figure of 984,186; and (2) dividing the total   hpopulation figure by 2.62, which represents the Census Bureau's estimate of people per household as of July 1, 1996,  yOp -  in order to convert the population figure into a household figure (984,186  2.62 = 375,644 households). We   obtained the population figures for each of the Communities based on information contained in FCC 325 Forms filed   by the cable operators. We used census data to determine the population of Cypress, CA1540, since no FCC Form 325 was available for this community. The number of subscribers that Time Warner claims are definitively  S- x.aware of PBVS's service because they have switched from Time Warner to PBVS is 1,200.z3X* yO0- xԍWe assume that the 65 homes with PBVS antennas on their rooftops that Time Warner photographed are  xincluded in the 1,200 household count. In any case, that 65 homes subscribe to PBVS does not persuade us that subscribers in all of the Communities generally are aware that they may purchase PBVS's service.z This figure  S- x=represents only .3% percent of the total number of households in the 19 Communities (1,200  375,000  Sp- xz= .3%).k4Xp * yO- xԍEven if Time Warner's estimate of 2,500 PBVS households is used, the number of subscribers that are  xdefinitively aware of PBVS's service because they receive it is still a very small percent of the total number of  yO-households in the Communities (2,500  375,000 = .6%).k Given the lack of information concerning the scope of PBVS's direct mail campaign as well  xkas what appears to be PBVS's incremental marketing strategy, that PBVS has some subscribers in the  xCommunities does not demonstrate that subscribers throughout the Communities are reasonably aware of the availability of PBVS's service.  S - ` x24.` ` We find that Time Warner has failed to submit sufficient evidence demonstrating that its  x cable system serving the abovecaptioned communities is subject to LEC effective competition from  x\PBVS. Time Warner's petition is denied. Our determination is consistent with our recent decision in  S0- x\Charter Communications Entertainment II, L.P. in which we denied that cable operator's claim that it  S -faced effective competition from PBVS in numerous communities in Los Angeles County, California.5 * {O-ԍCharter Communications Entertainment II, L.P., CSR 5070E, DA 980766 (rel. April 22, 1998). " 5,p(p(88"  S- IV.xORDERING CLAUSES  S-  S- ` %x25.` ` Accordingly, IT IS ORDERED that the Petition for Determination of Effective  x>Competition filed by Paragon Communications, d/b/a Time Warner Communications and KBL Cable  xSystems of the Southwest, challenging the certification of local franchising authorities in the above S8-captioned communities IS DENIED.  S- ` x26.` ` This action is taken pursuant to the interim rules adopted in Implementation of Cable  S- x Reform Provisions of the Telecommunications Act of 1996, 11 FCC Rcd 5937 (1996), and is without  xprejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of  St-Proposed Rulemaking contained therein.i6t* {O -ԍCable Act Reform Order, 11 FCC Rcd at 59385945, 59615964.i  S$ - ` x27.` ` This action is taken pursuant to delegated authority under Section 0.321 of the  S -Commission's rules, as amended.<7 Z* yO-ԍ47 C.F.R  0.321.< x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhJohn E. Logan x` `  hhActing Chief, Cable Services Bureau x x x x  XT- #Xj\  P6G;9XP#