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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 re: ) ) Falcon Telecable ) CUID No. UT0032 d/b/a Falcon Cable TV ) St. George, Utah ) ) Petition For Change In ) Regulatory Status ) MEMORANDUM OPINION AND ORDER Adopted: June 24, 1998 Released: June 29, 1998 By the Acting Chief, Cable Services Bureau: I. INTRODUCTION 1. Falcon Telecable d/b/a Falcon Cable TV ("Falcon") has filed with the Commission a petition for a change in regulatory status, pursuant to Section 76.915(f) of the Commission's rules, alleging that Falcon is subject to effective competition from competing service providers in the City of St. George, Utah (the "City"). Falcon alleges that its cable system serving the City is subject to effective competition, pursuant to certain provisions of the Communications Act of 1934, as amended, ("Communications Act"),  623, 47 U.S.C.  543 and the Commission's implementing rules. Falcon bases its allegation of the presence of effective competition in the City on the competing service provided by Ence Communications, Inc. d/b/a Clear Vision Cable ("Clear Vision"), an unaffiliated cable operator, and by SkyView Technologies ("SkyView"), an unaffiliated multichannel, multipoint distribution service ("MMDS") and direct broadcast satellite ("DBS") provider. No opposition was filed to this petition. II. BACKGROUND 2. Section 76.915(f) of the Commission's rules, pursuant to which Falcon filed this petition, provides that "where a local franchising authority has not been certified to regulate rates, a cable operator may petition the Commission for a change in its regulatory status." A successful petition for change in regulatory status will exempt a cable operator from rate regulation under the Commission's rules. The City however is certified to regulate cable rates. Thus we will resolve Falcon's petition pursuant to Section 76.914 of the Commission's rules which permits a cable operator to petition the Commission to revoke the certification of a local franchising authority. 3. Section 623(a)(4) of the Communications Act permits local franchising authorities to become certified to regulate the basic cable service and associated equipment rates of cable operators within their jurisdictions who are not subject to effective competition. Certification becomes effective 30 days from the date of the franchising authority's certification 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 30 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. Under Section 76.914 of the Commission's rules, 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. 4. Section 623(l)(1)(B) of the Communications Act provides that a cable operator is subject to effective competition if: the franchise area is- (i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and (ii) the number of households subscribing to programming services offered by multichannel video programming distributors other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition, as that term is defined by Section 76.905 of the Commission's rules. The cable operator bears the burden of rebutting the presumption that effective competition does not exist with evidence that effective competition is present within the relevant franchise area. III. SUMMARY OF PLEADINGS 5. Falcon alleges that its cable system serving the City is subject to competing provider effective competition and is therefore exempt from rate regulation under the Commission's rules. Falcon argues that both prongs of the competing provider effective competition test set forth in Section 623(1)(1)(B) of the Communications Act are satisfied because Falcon, Clear Vision and SkyView are unaffiliated multichannel video programming distributors ("MVPDs") each of which offers comparable programming to at least 50 percent of the households in the City. Falcon further argues that the total number of subscribers to programming services offered by MVPDs other than the largest MVPD in the City exceeds 15 percent of the households in the City. a. Household Service 1. Falcon 6. Falcon asserts that it satisfies the requirement of the competing provider test since it offers service to 50 percent of the households in the franchise area. Falcon states that according to Census data the City had 9,450 households and 11,766 housing units in 1990. In order to determine an estimate of the current number of households it serves in the City, Falcon divided the number of households in 1990 (9,450) by the number of housing units in that year (11,766) resulting in a "housing multiplier" (.803). Falcon then multiplied the housing multiplier (.803) by the number of housing units to which it currently offers service (20,175) and concluded that it currently offers service to 16,201 households in the City. Falcon further states that the difference between the estimate of households to which it currently offers service (16,201) and the number of households in 1990 according to Census data (9,450) can be attributed to intervening housing growth. 2. Clear Vision 7. Falcon states that Clear Vision has constructed its cable plant throughout a substantial portion of the City and that Clear Vision's service is technically available to residents of the City. Falcon further states that there are no regulatory or other impediments that encumber the service offered by Clear Vision because it is operating under a franchise awarded to the cable operator by the City in 1996. To show that Clear Vision's service meets the 50 percent household threshold for effective competition, Falcon multiplied the housing multiplier (.803) by the number of housing units currently offered service by Clear Vision (8,220) to estimate the number of households to which Clear Vision currently offers service (6,601). Falcon thus maintains that Clear Vision currently offers service to 6,601 households out of the 9,450 households reflected in the 1990 Census which satisfies the 50 percent household threshold of the first prong of the competing provider test. 3. SkyView 8. Falcon states that SkyView, a wireless cable operator, operates from three transmitter sites which blanket the City with video coverage. Falcon asserts that this fact demonstrates that the competing service offered by SkyView is technically available to residents of the City. Falcon notes that the Commission has determined that wireless cable is deemed to be offered anywhere within a 35-mile interference-free zone and that the City lies completely within 35 miles of SkyView's transmitter sites. Falcon provides a map of SkyView's transmitter sites which shows that the City lies within 35 miles of SkyView's transmitters. 9. Falcon asserts that there are no regulatory or other impediments that encumber the service offered by SkyView and that SkyView has been licensed by the Commission to offer service within its interference-free zone. Falcon further asserts that SkyView can serve subscribers with the minimal investment needed to install a rooftop antenna on or near a subscriber's home. Falcon further asserts that SkyView has launched a marketing campaign which includes marketing materials describing SkyView's rates for its MMDS service and for its DBS service. Falcon maintains that SkyView's marketing campaign has resulted in SkyView gaining 765 subscribers in the City and has made potential subscribers reasonably aware of the availability of SkyView's service. Falcon argues that SkyView's technical availability, regulatory status, and marketing campaign demonstrate that SkyView offers service to more than 50 percent of the households in the City. Falcon notes that, irrespective of SkyView's MMDS service, the Commission has stated that DBS service, which is also offered by SkyView, is deemed to be available nationwide. 4. Updated Data 10. Falcon also introduced evidence to show that it would still satisfy the 50 percent household requirement using updated 1995 population figures. Falcon shows that, according to 1995 population estimates, the City had a population of 64,770 persons with approximately 3.1 persons per household. By dividing the population by the number of persons per household, Falcon calculates that the City had 20,894 households in 1995. Falcon asserts that the number of households offered service by Falcon (16,201) satisfies the 50 percent threshold prong of the competing provider test using the City's 1995 population data. Falcon neither calculates the number of households to which Clear Vision offers service using 1995 population data nor suggests that Clear Vision offers service to 50 percent of current households. With regard to the second prong of the competing provider test discussed below, Falcon does not introduce evidence to show that the number of subscribers for both services exceeds 15 percent of 1995 households. b. Comparable Programming 11. Falcon asserts that the programming offered by Clear Vision and by SkyView is comparable to its own programming. Falcon states that it currently offers 43 channels of programming, including several channels of non-broadcast programming and several local television stations while SkyView offers 36 channels of programming, including several channels of non-broadcast stations and local television stations and Clear Vision offers 57 channels of programming, including several channels of non-broadcast programming and local television channels. Thus, while acknowledging that considerable growth has occurred in the City since 1990, Falcon asserts that at least two unaffiliated MVPDs each offers comparable programming to more than 50 percent of the households in the City. c. Number of Subscribers 12. With regard to the second prong of the competing provider effective competition test, Falcon states that the total number of households in the City subscribing to the smaller MVPDs, Clear Vision and SkyView, is 3,265. Falcon states that Clear Vision has 2,500 subscribers and that SkyView has 765 subscribers in the City. Falcon calculates that, based upon the 1990 Census data of 9,450 households, the number of households subscribing to MVPDs in the City other than Falcon exceeds 15 percent of households in the City in 1990. IV. DISCUSSION 13. Pursuant to the competing provider effective competition test, the cable operator must show that at least two competitors each offers comparable programming to 50 percent of the households in the area and that at least 15 percent of the households in the area subscribe to service from an alternative provider offering a comparable video programming service. We note that, with regard to the 15 percent subscribership requirement, the number of subscribers of all MVPDs that offer service in the franchise area will be aggregated. We further note that while the Commission has stated that 1990 Census data is an acceptable source of household data in establishing the 50 percent household requirement of the competing provider test, operators may submit updated household data if they so choose. More recent data can more closely determine whether the 50 percent threshold has been satisfied. 14. With regard to the 50 percent household requirement, Falcon introduced two sets of calculations, one based upon 1990 Census household data and the other based upon 1995 household data it obtained from the Utah Office of Planning and Budget. With respect to the 1990 household data, Falcon demonstrates that it currently offers service to 16,201 households which when compared with the 1990 Census data shows that it offers service to all of the 1990 households (9,450). We have previously stated that a discrepancy in the number of 1990 households and the number of households an operator currently offers service can be reasonably attributed to housing growth in the intervening years. With respect to the updated data, Falcon used 1995 population data to show that it offered service to approximately 77.5 percent of the households in the City in 1995 (16,201 out of 20,894 households). 15. In order to show that Falcon meets the 50 percent household requirement of the competing provider test, Falcon introduced both 1990 Census data and updated household data based upon 1995 population estimates. Falcon demonstrated that it satisfied the 50 percent household requirement with regard to both sets of data. With regard to its showing that Clear Vision meets the 50 percent household requirement, Falcon calculated the number of households to which Clear Vision offers service using the 1990 Census data but did not calculate such households using the updated household data. Thus Falcon demonstrated that Clear Vision meets the requirement with regard to only the 1990 Census data. If we update Clear Vision's household data by making our own calculations from the data Falcon introduced, we find that Clear Vision offers service to approximately 31.5 percent of the households in the City in 1995 (6,601 out of 20,894 households) and thus fails to meet the 50 percent household requirement of the competing provider test. 16. With regard to SkyView, Falcon offered evidence that SkyView meets the 50 percent threshold with its MMDS and DBS services. Falcon submits evidence to demonstrate that SkyView's MMDS service offers service to 50 percent of the households in the City within the meaning of Section 76.905(e) of the Commission's rules. Falcon states that "in addition to offering wireless cable service, SkyView markets DirectTV DBS service" to residents of the City." We note that the Commission has stated that MVPD service providers other than those offering 15 percent of subscribers service in the franchise area may be considered for purposes of meeting the 50 percent portion of the test and that in the absence of evidence to the contrary DBS service providers, which provide a nationwide service, are presumed to satisfy this requirement. Thus we conclude that the City is served by at least two MVPDs, Falcon and SkyView, each of which is offering service to at least 50 percent of the households in the City. 17. The competing provider test requires comparable programming among the competing MVPDs. We find that Falcon, Clear Vision and SkyView each meets the Commission's definition of "comparable programming" contained in Section 76.905(g) because their channel line-ups show that each offers "at least twelve channels of programming, including at least one channel of non-broadcast programming." 18. The second prong of the competing provider test requires that the number of households subscribing to MVPDs other than the largest MVPD exceeds 15 percent of the households in the franchise area. We noted above that the number of subscribers of all MVPDs offering service in the City will be aggregated when calculating the percentage of subscribers under the second prong of the test. Falcon shows that, using 1990 Census data, the percentage of households in the City subscribing to the programming services of Clear Vision and SkyView, respectively, is approximately 34.5 percent (3,265 subscribers of 9,450 households). Falcon has shown that the percentage of households in the City subscribing to the services of all MVPDs, other than the largest MVPD in the City, meets the 15 percent requirement of the competing provider test. 19. Falcon has introduced updated household data which shows that at least two unaffiliated MVPDs each offers comparable programming to at least 50 percent of the households in the City. Falcon has also shown that the number of households in the City subscribing to programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the households in the City. Thus, Falcon has met the requirements of the competing provider effective competition test. V. ORDERING CLAUSES 20. Accordingly, IT IS ORDERED that the Petition for Change in Regulatory Status filed by Falcon Telecable d/b/a/ Falcon Cable TV IS GRANTED. 21. IT IS FURTHER ORDERED that the certification granted to the City of St. George, Utah to regulate Falcon's basic cable rates IS REVOKED. 22. This action is taken pursuant to delegated authority under Section 0.321, 47 C.F.R.  0.321, of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau