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SH -Comcast Cablevision of Newport Beach, Inc. )City of Newport Beach, CAxx(CUID CA0458)  S -` ` )Orange County, CA  xx(CUID CA1140) )  S - )cComcast Cablevision of North Orange, Inc. )City of Buena Park, CAxx(CUID CA0895)  S -` `  Ghh})City of Fullerton, CA  xx(CUID CA0818)  S -Petition for Determination ofGhh}pp!)City of Placentia, CA  xx(CUID CA1179)  SX-Effective Competition Ghh})Orange County, CA  xx(CUID CA1148)  S-R  MEMORANDUM OPINION AND ORDER m  S- Adopted: May 1, 1998hh}  pp!XReleased: $;   $; May 5, 1998 (#(#2 By the Acting Chief, Cable Services Bureau:  S- I.INTRODUCTION  S- (#1.` ` Comcast Cablevision of Seal Beach, Inc., Comcast Cablevision of Santa Ana, Inc.,  c)^Comcast Cablevision of Newport Beach, Inc., and Comcast Cablevision of North Orange, Inc.  SP- c)/(collectively, "Comcast") filed a petition asserting that it is subject to local exchange carrier ("LEC")\@Po yO-ԍThe Communications Act defines the term "local exchange carrier" as:  XX` ` any person that is engaged in the provision of telephone exchange service or exchange   access. Such term does not include a person insofar as such person is engaged in the  3provision 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).\  c)effective competition in the abovecaptioned communities (the "Communities") from Pacific Bell Video  c)\Services ("PBVS"), d/b/a Pacific Bell Digital TV, a digital wireless cable operator serving Los Angeles  S-and Orange counties, California.o yOH%-ԍThe City of Santa Ana, California filed a letter in this proceeding after the expiration of the pleading cycle.  S- (#32.` ` Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications  c)Act") allows franchising authorities to become certified to regulate basic cable service rates of cable"`` ,**88"  S- c)!operators which are not subject to effective competition.dX yOh-ԍCommunications Act  623(a)(4), 47 U.S.C.  543(a)(4).d For purposes of the initial request for  c)kcertification, local franchising authorities may rely on a presumption that cable operators within their  S- c)jurisdiction are not subject to effective competition unless they have actual knowledge to the contrary.PXX yO-ԍ47 C.F.R.  76.906, 76.910(b)(4).P  c)Certification becomes effective 30 days from the date of filing unless the Commission finds that the  S`- c)authority does not meet the statutory certification requirements.`X {O-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  S:- c)?Provisions of the Telecommunications Act of 1996 ("Cable Act Reform Order"),E:zX yOT -ԍ11 FCC Rcd 5937, 5944 (1996).E the Commission  c)?instructed cable operators believing themselves subject to local exchange carrier ("LEC") effective  c)competition under Section 623(l)(1)(D) of the Communications Act to file a petition for determination of  S- c)effective competition pursuant to Section 76.7 of the Commission's rules.< X yOn-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:  XX` ` 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 directto Thome 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  Fprogramming services so offered in that area are comparable to the video  S\-programming services provided by the unaffiliated cable operator in that area.j\X yO-ԍCommunications Act  623(l)(1)(D), 47 U.S.C.  543(l)(1)(D).j `  S - II.THE PLEADINGS  S- (#3.` ` Comcast argues that it is subject to LEC effective competition in the Communities from  c) PBVS, a digital wireless cable operator serving Los Angeles and Orange counties. With regard to the  Sl- c)LEC affiliation requirement, l* X yO6- c),ԍThe Commission determined that the definition of affiliate provided in Section 3 of the 1996 Act will apply to the LEC effective competition test: The term "affiliate" means a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with another person. For purposes of this paragraph, the term "own" means to own an equity interest (or the equivalent thereof) of more than 10 percent.  {Ov%-Cable Act Reform Order, 11 FCC Rcd at 5944 (quoting Communications Act  3(1), 47 U.S.C.  153(1)).  Comcast contends that PBVS is a whollyowned subsidiary of Pacific Telesis"l ,p(p(88"  S-Group ("PTG"), which is a LEC. "X yOh- c)ԍComcast provides PTG's 10K report filed with the Securities and Exchange Commission on March 31, 1997,  c) which states that PTG is one of the seven regional holding companies established after the 1984 divestiture of AT&T.  {O- c)The 10K also indicates that PBVS is a subsidiary of PTG formed to provide video services. See Exhibit A to Comcast's petition.  S- (#A4.` ` With regard to the requirement that the LEC competitor offer ( X yO- c)ԍIn implementing the LEC effective competition test on an interim basis, the Commission determined that its  c)preexisting definition of the term "offer" as used in the three effective competition definitions set forth in the 1992  yO - c)Cable 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:  CXX` ` (1) When the multichannel video programming distributor is physically able to deliver  5service to potential subscribers, with the addition of no or only minimal additional  investment by the distributor, in order for an individual subscriber to receive service; and  (2) When no regulatory, technical or other impediments to households taking service exist,  and 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  c)yin the unaffiliated cable operator's franchise area, Comcast asserts that PBVS is physically able to deliver  c)service to potential subscribers in the Communities. Comcast explains that PBVS provides digital wireless  c)cable service through the use of two MMDS transmitters, which are located at Mt. Wilson in Los Angeles  c)County and Modjeska Peak in Orange County. Comcast provides a map indicating that the Communities  S- c)are located within the 35mile protected zone of PBVS's Modjeska Peak transmitter.X X {O*-ԍSee Exhibit C to Comcast's petition.X Comcast asserts  c)-that the transmitters are fully operational and subscribers need only purchase and install a low cost antenna  S- c)to receive service from PBVS. 4X yOl- c)ԍComcast provides PBVS's rate card which states that PBVS will provide and install the necessary antenna for  {O4-$99.95. See Exhibit B to Comcast's petition. Comcast contends that no regulatory, technical, or other impediments  c)to households taking service from PBVS exist. Comcast states that through the affiliation with Pacific  c)Telesis, PBVS has authority to use MMDS facilities in the Orange County area that are licensed to Cross  c)Country Wireless, Inc., another Pacific Telesis subsidiary. Comcast asserts that PBVS is currently  c)providing service within Comcast's franchise areas. Comcast provides a PBVS installation invoice and  S - c)[a subscriber bill, both addressed to Santa Ana residents, to support this contention.R X {O -ԍSee Exhibit D to Comcast's petition.R Comcast contends  c)that the existence of actual PBVS subscribers in the Communities demonstrates that PBVS's signal  c)/strength is sufficient to provide service to subscribers in Comcast's franchise areas. Comcast further  c)asserts that some Comcast subscribers in the Communities have switched to PBVS. Comcast also  c) contends that potential subscribers are reasonably aware of their ability to purchase PBVS's service.  c)=Comcast states that Pacific Telesis and PBVS have generated extensive awareness of their video services" ,p(p(88"  S- c)through "news releases, newspaper articles, and other marketing materials."f(X {Oh- c)ԍComcast's petition at 3. See also Exhibit E to petition (including a PBVS online news release, direct mail  {O2- c).marketing materials and two articles The Press Enterprise (Riverside, CA), "From out of the air: Cable TV;  {O- c)-Pacbell is trying its hand with digital broadcast system," Rick Burnham, August 18, 1996, and Broadcasting and  {O-Cable, "PacTel sees video's future as wireless; Pacific Telesis, wireless cable television," Brad Smith, July 8, 1996).f Finally, Comcast states that it is not affiliated with Pacific Telesis or PBVS.  S- (#n5.` ` Comcast asserts that PBVS offers comparable programmingX yO- c)ԍThe Commission observed that Congress specified a different definition of comparable programming for the  c) LEC effective competition test from that adopted for the first three effective competition tests enacted as part of the  c)1992 Cable Act. The Commission, on an interim basis, determined that it will apply this new comparable  c)iprogramming standard which "includes access to at least 12 channels of programming, at least some of which are  {O - c)Ytelevision 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)). in Comcast's franchise areas.  c)Comcast provides PBVS's channel lineup which demonstrates that PBVS's most basic service consists  S8- c)of 49 channels of video programming, a number of which are local television broadcast signals.82 X {O -ԍSee Exhibit F to Comcast's petition. Comcast also includes its own channel lineup at Exhibit G to its petition. Comcast states that subscribers need not install an A/B switch to receive these channels.  S- III.ANALYSIS  Sp-  (# 6.` ` In the absence of a demonstration to the contrary, cable systems are presumed not to be  SH - c)subject to effective competition.>H X yO-ԍ47 C.F.R.  76.906.> The cable operator bears the burden of rebutting the presumption that  c)effective competition does not exist with evidence that effective competition, as defined by Section 76.905  S - c)jof the Commission's rules, is present within the franchise area.T T X yO-ԍ47 C.F.R.  76.905 and  76.911(b)(1).T Comcast has failed to meet this burden.  c)While Comcast partially satisfies the LEC test for effective competition by demonstrating that PBVS is  c)\a LEC affiliate that provides comparable programming, Comcast fails to establish that PBVS "offers" service as contemplated by the statute and our rules.  S0-  (#7.` ` With regard to the first part of the LEC test, which requires that the alleged competitive  c)service be provided by a LEC or its affiliate (or any multichannel video programming distributor using  c)the facilities of such LEC or its affiliate), Comcast has provided sufficient evidence demonstrating that  S- c)PBVS is LECaffiliated under the Commission's interim rules.jX {O<"-ԍCable Act Reform Order, 11 FCC Rcd at 59385945, 59615964. j The corporate relationship that exists  c)between PBVS and PTG establishes PBVS's LEC affiliation. We note that PTG merged with SBC  c)!Communications Inc. in April of 1997 and that Comcast is unaffiliated with PBVS, PTG or SBC Communications Inc.  S-  (# 8.` ` Comcast has submitted sufficient evidence demonstrating that PBVS provides  c)programming comparable to Comcast's channel lineup in the Communities. PBVS's most basic service"v,p(p(88"  c)consists of 49 channels of video programming, including numerous local television broadcast channels, which satisfies the programming comparability criteria.  S-  (#9.` ` As to the requirement that the LEC competitor "offer" service, Comcast has not met its  c)burden. Comcast has failed to establish that PBVS "offers" service because Comcast has not presented  c).sufficient evidence that subscribers in the Communities are reasonably aware that they may take service  c)Lfrom PBVS. Cable operators seeking to prove that they are subject to effective competition from a LEC  c)zor its affiliate must not only show that the competitor is physically able to deliver service free of any  c)kregulatory, technical or other impediments but that subscribers are "reasonably aware" that they may  S- c)purchase the competitor's service.NX {O -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 - (#10.` ` We have stated that potential subscribers may be made reasonably aware of the availability  S - c)of a competing service through, for example, advertising in the media or direct mail.V ZX {O-ԍCable Act Reform Order, 11 FCC Rcd 5942.V We have also  c)stated that cable operators seeking to prove that they face effective competition may rely on marketing  S - c)information to demonstrate consumer awareness of the competing service.V X {O4-ԍCable Act Reform Order, 11 FCC Rcd 5942.V In this instance, Comcast  c)submits examples of PBVS's direct mail marketing materials, an online news release, and two articles on  c)\the launch of PBVS. Comcast does not present evidence that PBVS has engaged in any type of mass media marketing.  S- (#11.` ` The direct mail materials submitted by Comcast are not sufficient to demonstrate that  c)potential subscribers in all of the Communities are aware of PBVS's service. There is no evidence in the  c)krecord defining the scope of the direct mail campaign. Specifically, there is no proof that the mailings  c)kwere made to subscribers in all of the Communities and there is no information concerning how many  S@- c)subscribers in the Communities were actually sent mailings.kZ@~X {O^- c)ԍSee also Los Angeles Times, "PacBell Digital TV Venture Begins in L.A., Orange Counties," Marla Matzer,  c),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 Comcast simply attached the direct mail  S- c).flyers as an exhibit to its petition without any explanation as to who received them.RX {OX-ԍSee Exhibit E to Comcast's petition.R The PBVS online  c)news release submitted by Comcast also does not persuade us that subscribers in the Communities are  c).reasonably aware of PBVS's service. It appears that this news release was acquired through the internet  c)lat Pacific Telesis' world wide web home page (www.pactel.com). To obtain this release potential  c)subscribers would have been required to access Pacific Telesis' web site. Many potential subscribers may not have access to, or a working familiarity with, the internet or may not be aware of this particular site.  S-  (#12.` ` Comcast points to two articles on the launch of PBVS as evidence that subscribers in the  c) Communities are reasonably aware of PBVS's service. Other articles, for the most part, describe the"2 ,p(p(88L"  S- c)launch of PBVS's video service as a "gradual rollout" and as "low key."2 X {Oh- c)ԍSee e.g., The Wall Street Journal, "PacTel Launches Wireless CableTV On ScaledBack Basis in California,"  c)ZLeslie Cauley, May 30, 1997 ("SBC yesterday said it has begun a limited commercial rollout of video services in  c).Los Angeles and Orange counties, but it will wait to see how customers respond before proceeding further.");  {O- c)xElectronic Media, "Pacific Bell Pushes On With Cable," Michael Schneider, September 1, 1997 ("Pacific Bell has  c)quietly started rolling out the system," and quoting Carlson, "[w]e have not used any media [to market the service]  {OT- c)and have no plans to do so."); Multichannel News, "SBC tiptoes into L.A. cable market; SBC Communications,  c)Inc.," Kent Gibbons, June 2, 1997 ("Pacific Bell Video Services has quietly started signing up paying customers"  c)and "PacBell said it plans a 'gradual' rollout to make sure that the service quality is high and to test market  {O- c)Kacceptance."); Broadcasting & Cable, "Pac Bell's lowkey digital: company is quietly building California wireless  c)system," Joe Schlosser, October 6, 1997 ("company officials acknowledged that there are no plans for a marketing  {O@ - c)-blitz anytime soon."); Los Angeles Times, "PacBell Digital TV Venture Begins in L.A., Orange Counties," Marla  c)Matzer, May 30, 1997 ("Though the company said the service is available now, it's not clear where or how quickly consumers can subscribe."). It appears that some  c)subscribers were targeted for the mailings while many other potential subscribers were not solicited.  c).Former PBVS Vice President and General Manager Jeff Carlson has said that the company is purposely  S- c)controlling the number of subscribers to "contain demand." X {O-ԍElectronic Media "Pacific Bell Pushes On With Cable," Michael Schneider, September 1, 1997. According to Carlson, the company will add  S`- c)new customers gradually to ensure highquality service.~`T X {OT- c)-ԍThe San Francisco Chronicle, Business, "L.A. Gets 'Wireless Cable' TV/ Pac Bell's Bay Area service still on  {O- c)hold," Jonathan Marshall, May 30, 1997. See also Multichannel News, "PacBell Taking Cable's Best Subs in S.  c)KCalif. Has signed up 10,000 customers since launching cable services," Linda Haugsted, October 6, 1997 ("PBVS  c);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  c)advertising, we are doing a very controlled rollout; it is conservative by design. We have limited our  S-marketing to very specific demographics."X {O- c)<ԍBroadcasting & Cable, "Pac Bell's lowkey digital: Company is quietly building California wireless system," Jon Schlosser, October 6, 1997.  S- (#313.` ` Comcast's submission of a single PBVS installation invoice and subscriber bill, both of  c)lwhich are addressed to Santa Ana residents, do not demonstrate reasonable awareness in all of the  c)Communities. That certain specific subscribers are aware of PBVS because they are employees of the  c)company or were specifically targeted does not mean that subscribers in the Communities generally are  c)informed that there is an alternative video service provider to the cable operator. The cable operator must  c)submit evidence demonstrating that potential subscribers in the Communities, not only segments of the  c).population that may have been specifically targeted or handpicked for solicitation, are reasonably aware  c)that they may purchase services from a video provider other than the cable operator. Because evidence  c)of a broad awareness of the existence and availability of PBVS's service is lacking, we find that Comcast has failed to prove that PBVS "offers" service in the Communities.  S- (#14.` ` As a general matter, we note that evidence presented by cable operators regarding the  c)number and location of subscribers to the competing service shows that the competitor is physically able  c)\to deliver service. Such evidence, in most cases, can also reflect the degree subscribers are reasonably  c)=aware of the competing service since they are, in fact, receiving it. In this instance, Comcast asserts that"b,p(p(88"  S- c)"some Comcast subscribers have switched to PBVS."@X yOh-ԍComcast's petition at 6.@ Comcast does not provide any further information  c)concerning the number or location of subscribers who have allegedly switched to PBVS nor does Comcast  c)\provide any evidence to support its assertion. Given the lack of information concerning the scope of  c)"PBVS's direct mail campaign, the lack of evidence regarding the number and location of PBVS  c)subscribers in the Communities, as well as what appears to be PBVS's incremental marketing strategy,  c)that PBVS has some subscribers in the Communities does not demonstrate that subscribers throughout the Communities are reasonably aware of the availability of PBVS's service.  S- (##15.` ` We find that Comcast has failed to submit sufficient evidence demonstrating that its cable  c)system serving the abovecaptioned communities is subject to LEC effective competition from PBVS.  Sp- c)NComcast's petition is denied. Our determination is consistent with our recent decision in Charter  SJ - c)Communications Entertainment II, L.P. in which we denied that cable operator's claim that it faced  S$ -effective competition from PBVS in numerous communities in Los Angeles County, California.$ XX {O-ԍCharter Communications Entertainment II, L.P., CSR 5070E, DA 980766 (rel. April 22, 1998).  $;   S - $;  IV.ORDERING CLAUSES  S -  S - (#%16.` ` Accordingly, IT IS ORDERED that the Petition for Determination of Effective  c)Competition filed by Comcast Cablevision of Seal Beach, Inc., Comcast Cablevision of Santa Ana, Inc.,  c)Comcast Cablevision of Newport Beach, Inc., and Comcast Cablevision of North Orange, Inc., challenging  S -the certification of local franchising authorities in the abovecaptioned communities IS DENIED.  S- (#17.` ` This action is taken pursuant to the interim rules adopted in Implementation of Cable  S- c) Reform Provisions of the Telecommunications Act of 1996, 11 FCC Rcd 5937 (1996), and is without  c)prejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of  SH-Proposed Rulemaking contained therein.i HX {O-ԍCable Act Reform Order, 11 FCC Rcd at 59385945, 59615964.i  S- (#18.` ` This action is taken pursuant to delegated authority under Section 0.321 of the  S-Commission's rules, as amended.<!|X yO-ԍ47 C.F.R  0.321.< ` `  Ghh}FEDERAL COMMUNICATIONS COMMISSION ` `  Ghh}John E. Logan ` `  Ghh}Acting Chief, Cable Services Bureau  Xh- #Xj\  P6G;9XP#