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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: ) ) CENTURY CABLE OF NORTHERN ) CALIFORNIA INC. ) CUID No. CA0024 ) Petition for Revocation of the Certification of) the City of San Buenaventura, California) to Regulate Basic Cable Service Rates) MEMORANDUM OPINION AND ORDER Adopted: December 15, 1998 Released: December 16, 1998 By the Chief, Cable Services Bureau: INTRODUCTION 1. Century Cable of Northern California Inc. ("Century") filed a petition for revocation challenging the certification of the City of San Buenaventura, California ("City") to regulate Century's basic cable service and associated equipment rates. The City filed an opposition, and Century filed a reply. The City also filed a supplement to its opposition to which Century replied. 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. 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. 3. Cable operators filing petitions for revocation on the grounds of effective competition must prove that they face competition under one of the four tests set forth in Section 76.905(b) of the Commission's rules. One basis upon which a cable operator may be deemed subject to effective competition is the competing provider test. Under the competing provider test, a cable system is subject to effective competition if the franchise area is (1) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable programming to at least 50 percent of the households in the franchise area; and 2) the number of households subscribing to multichannel video programming other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area. A finding of effective competition exempts a cable operator from rate regulation. SUMMARY OF PLEADINGS 4. Century seeks revocation of the City's certification to regulate the operator's basic cable service rates on the basis of effective competition. Century argues that it is subject to effective competition under the competing provider test due to the availability of direct broadcast satellite ("DBS") service and the presence of Avenue TV Cable Service, Inc. ("Avenue"), an unaffiliated franchised cable operator serving the City. 5. Century contends that at least two unaffiliated multichannel video programming distributors ("MVPDs") offer comparable programming to at least 50% of the households (i.e., occupied housing units) in the City. Century asserts that DBS, for one, is available in the City. Century notes that the Bureau has held that DBS providers offering nationwide service are presumed to satisfy the 50% threshold of the competing provider test. In addition, Century states that it offers cable service to more than 50% of the households in the City. Century states that, according to the 1990 Census, there are 35,408 households (i.e., occupied housing units) in the City and 37,343 housing units (i.e, occupied and unoccupied housing units). Century claims that it currently offers service to (i.e., passes with cable) 25,348 housing units which, according to Century's calculations, equates to 24,081 households, or 68% of the total 35,408 households in the City. Century maintains, therefore, that due to the availability of its cable service and DBS, two MVPDS offer comparable programming to more than 50% of the households in the City. 6. Century argues that the number of households in the City receiving multichannel video programming from an MVPD other than the largest MVPD, Century, is greater than 15% of the total households in the City. Specifically, Century asserts that Avenue, another franchised cable operator serving the City, has 10,650 subscribers. Century contends that Avenue's subscriber base constitutes approximately 30% of the total number of households in the City (10,650 ö 35,408 = 30%). Century further maintains that Avenue "offers" service in the City within the meaning of Commission rules. Century states that the subscription of more than 10,650 customers to Avenue's service demonstrates that Avenue is physically able to deliver service. Century also explains that both it and Avenue have been granted non-exclusive franchises to operate cable systems within the City limits. Century contends that Avenue's offering of cable service to 10,650 customers pursuant to a franchise grant from the City demonstrates that no regulatory, technical or other impediments to households taking Avenue's service exist. Century also asserts that potential subscribers are reasonably aware that the may purchase Avenue's service as evidenced by Avenue's subscriber base. In addition, Century submits examples of Avenue's advertisements which have appeared in local newspapers. Century states that Avenue offers programming comparable to that offered by Century and provides a copy of Avenue's current channel line-up which shows that Avenue offers 74 channels of programming, including numerous nonbroadcast programming services. 7. In opposition, the City argues that regardless of the number of subscribers allegedly served by Avenue, Century does not face effective competition in its franchise area because Century and Avenue serve different franchise areas. The City states that the areas served by Century and Avenue do not overlap, and that while both cable operators serve the City, no subscriber can obtain service from more than one cable operator. The City contends that Century and Avenue, operating side-by-side, have redefined their franchise areas to cover different parts of the City. The City asserts that cable operators must demonstrate effective competition within their respective franchise areas. The City contends that because Century and Avenue serve different franchise areas within the City, Century's use of City-wide data, such as its inclusion of Avenue's subscribership in the calculation of the 15% penetration requirement, does not support Century's claim that it faces effective competition in its own franchise area. 8. The City asserts that cable franchise applicants are required by ordinance to provide the City with "[a] map specifically showing and delineating the proposed service area or areas within which the applicant proposes to provide CATV services and for which a franchise is requested." The City includes with its Opposition maps submitted pursuant to this requirement by both Century and Avenue in 1983, the year the cable operators' current franchises were granted. The City states that Avenue's and Century's city maps contain identical boundary lines that divide the City into two separate franchise areas. The City contends that these boundary lines provide written evidence of franchise area redefinition. The City notes that Avenue's map is marked with a boundary line labeled "Boundry [sic] of Construction" and that Century, in its map entitled "Century Cable of No. Calif. System Coverage," defines its franchise area along the same boundary as does Avenue. The City argues that these maps demonstrate that the two cable operators in their applications acknowledge the division of the City into separate franchise areas. 9. In addition to the 1983 maps, the City points to three other maps submitted by Avenue which the City contends more explicitly show the limitation of Avenue's franchise area. The City states that a 1998 map shows Avenue occupying essentially the same territory it served 15 years earlier, in 1983. The City notes that the legend to this map labels the dividing line between Avenue and Century "Franchise Boundary" and displays a line with "Avenue TV Cable" on one side and "Century Cable" on the other. The City further asserts that a 1990 map submitted by Avenue describes the boundary line as the "Franchise Divide" and again shows Avenue on one side of the line and Century on the other. The City argues that these maps graphically illustrate that Avenue's franchise area does not extend to parts of the City served by Century and that the two cable operators recognize this division. In fact, the City argues that since 1971, the City has been served by two cable companies with distinct franchise areas that do not overlap. 10. The City contends that the fact that both Century and Avenue recently sought to refer a potential subscriber to the other operator is further evidence that the two cable operators regard themselves as serving two separate franchise areas. The City argues that the lines of demarcation between the two franchise areas preclude Century and Avenue from competing with each other. The City warns that if the Commission grants Century's petition, despite the absence of any real competitive choice for subscribers in the City, the result would be a rate overcharge to Century's customers. 11. The City also argues that Century's petition to revoke the City's certification is procedurally defective. The City contends that, under the Commission's rules, a cable operator is required to first petition the City for a change in regulatory status due to the presence of effective competition and then, only after exhausting this recourse, may the cable operator seek review of the City's decision at the Commission through a petition for revocation. The City states that Century did not petition the City prior to seeking relief from the Commission. The City argues that Century's failure to follow Commission procedures warrants denial of the petition. 12. In reply, Century contends that it has satisfied competing provider test for effective competition. Century asserts that it has met this standard by demonstrating that it and DBS offer comparable programming to more than 50% of the households in the City, and that the number of households subscribing to the cable service of Avenue, the smaller of the two franchised operators, exceeds 15% of the households in the City. Century states that the Bureau has previously found that "[t]he competing provider test does not require that the Commission find actual head-to-head competition. Instead, petitioning cable operators must show that the penetration, passage and comparable programming standards enacted by Congress have been satisfied." 13. Century argues that the City has not met its burden of proving that Century has redefined its franchise area to encompass less than the entire City. Century asserts that both it and Avenue have non- exclusive city-wide franchises. Century states that the two operators were granted franchise renewals in 1983 which cover the operation of cable television systems "within the City limits of the City of San Buenaventura." Century maintains that the plain language of the renewals does not limit either operator's service area within the City in any way. Century contends that the City could have set forth specific franchise area limitations in the operators' renewals but did not do so. Century explains that as part of the 1983 renewal process, the operators submitted maps showing the areas for which a franchise was requested. Century asserts that these maps showed the entire City and that the accompanying cover documents stated that the maps show "the current service area and location of [either Century's or Avenue's] facilities," "with such extensions as may be made thereto." Century argues that the 1983 maps and related documentation indicated the current state of each operator's system construction and reserved the operators' rights to make periodic extensions to their cable plant. Century asserts that in keeping with the nature of the maps as factual indications of current plant coverage, Avenue entitled its map "Boundry [sic] of Construction" and Century entitled its map "Century Cable of No. Calif. System Coverage." Century argues that the City is attempting to distort the plain purpose of the maps by arguing that, rather than delineating the current state of construction, both operators were carving up the City into discrete franchise areas. Century argues that the fact that neither cable operator has yet built out the entire City does not prove that the operators have redefined their franchise areas to encompass less than the entire City. 14. As to the maps submitted by Avenue in 1990 and 1998, Century contends that the purpose of those maps was to inform the City of the current state of construction of Avenue's cable plant. Century argues that the 1983 franchise renewals, not the 1990 and 1998 construction maps, govern the location of each operator's franchise area. Century asserts that despite Avenue's notations on the 1990 and 1998 maps of a "franchise boundary" or "franchise divide," neither Century's nor Avenue's 1983 franchise renewals limit either cable operators' service areas within the City limits. Moreover, Century contends that even if Avenue was attempting to limit its franchise area, Century has never expressed any intention to limit its own franchise area and is entitled, pursuant to its 1983 franchise renewal, to build in any portion of the City, including those areas presently served by Avenue. 15. Century argues that the facts in this case differ from those in other cases in which the Bureau has found that the cable operator redefined its franchise area. Century asserts that in contrast to cases finding franchise area redefinition, Century has not entered into an agreement with a third party to restrict its right to overbuild the other cable system in the franchise area, nor does the relevant franchise language (contained in the 1983 renewals) indicate any sort of geographic limitations on Century's and Avenue's franchise areas within the City. 16. Century contends that the instant case is indistinguishable from the Daniels Cablevision reconsideration decision in which the Bureau affirmed its grant of the cable operator's petition for revocation. In that case, the Bureau failed to find that the cable operator had redefined its franchise area despite the local franchising authority's arguments that the operator did not face head-to-head competition in its franchise area, did not build out the entire franchise area, and had referred a potential customer to another operator. Century also argues that the Bureau in Daniels dismissed the procedural argument that cable operators must make an effective competition showing to the local franchising authority before bringing the case to the Commission. 17. In a supplement to its opposition, the City submits hundreds of transcribed telephone complaints and subscriber letters concerning Century's rates and services. According to the City, these documents indicate that subscribers believe they do not have access to competitive sources of comparable video programming. The City argues that these complaints provide additional evidence that Century is not subject to effective competition and that the cable operators have limited their franchise areas. The City asserts that even if Century actually faces competition, its subscribers are not "reasonably aware" of an alternative video programming service provider. 18. Century argues that the City's supplement is not relevant to the issue of whether Century has affirmatively redefined its franchise area to cover only a portion of the City. Century reiterates that it was granted a franchise renewal in 1983 covering the entire area within City limits and that Century has never expressed any intention to limit its franchise. Century argues that none of the subscriber feedback has any relevance to the fact that Century is authorized to provide cable service throughout the City and has never indicated that it has fully completed constructing its cable plant in the City. Century argues that "[t]he fact that Century's current subscribers, located in an area that Avenue has so far chosen not to overbuild, state that they cannot currently order service from Avenue simply adds nothing of relevance to the record." Century further contends that the subscriber complaints have no bearing on the issue of whether subscribers in the franchise area are reasonably aware that they may purchase the services of an MVPD. Century states that it has demonstrated that Avenue regularly advertises in the local newspaper (the Ventura County Star) and that such advertising efforts have been successful as Avenue serves at least 10,650 subscribers in the City. Century adds that its subscribers are free to order DBS service which is nationally advertised. Century asserts, therefore, that its subscribers at least are aware of the availability of DBS as a competitive alternative. ANALYSIS 19. We find that Century has affirmatively redefined its franchise area to include only the area that it serves within the City of San Buenaventura. We further conclude that the penetration and passage information presented by Century does not demonstrate that it is subject to effective competition in its redefined franchise area. 20. Generally, a franchise area is defined as the area a system operator is authorized to serve in its franchise. Thus, demonstrations of effective competition must be made using household and subscriber data for the authorized area in the franchise. The Commission has also stated that a more restricted definition of a franchise area may be appropriate under limited circumstances, such as when an operator, "through its own conduct, self-defined the areas to be served to such an extent that this redefined area accurately portrays the operator's 'franchise area.'" The franchising authority has the burden of showing that the operator has made an "affirmative decision. . . to restrict service. . . ." However, as the Commission cautioned, the fact that a franchise area had not yet been filled out entirely by system construction by the operator would not by itself be evidence that the service area had been redefined. 21. The record in this proceeding indicates that Century has made an affirmative decision to restrict its cable service to the portion of San Buenaventura that is not served by Avenue. A comparison of the maps filed with the City as part of the franchise renewal process in 1983, by both Century and Avenue, to a map filed with the City by Avenue in 1998 reveals that in the 15 year period since Century's renewal, the cable operator has not expanded its service area. Century, in fact, acknowledges that its current subscribers are located in an area not served by Avenue. In addition, there is no evidence in the record to suggest that Century has extended its cable service area, in any way, since its franchise was renewed in 1983. Nevertheless, Century argues that the plain language of the franchise renewal permits Century to build in any portion of the City, including those areas served by Avenue. Despite the ability under the renewal to expand to "the City limits," it appears that Century's service area has remained static for the past 15 years, encompassing only a portion of the City. Century contends that it has never expressed any intention to restrict its franchise area. Century's refusal, over a 15 year period, to extend the boundaries of its service area evinces a resolve to restrict its franchise area. The City argues that maps with identical boundary lines filed by the two cable operators plainly show that the City is divided into separate franchise areas. In an effort to rebut this assertion, Century claims that the 1983 maps filed by Century and Avenue are simply factual indications of "current plant coverage" and that Avenue's 1998 map shows the "current state" of system construction. We find it significant that the "current" service area has not changed in 15 years. Century argues that the fact that it has not yet built out its entire franchise does not, by itself, prove that Century has redefined its franchise area. But Century has not indicated, either through its pleadings or through its conduct over the past 15 years, that it has any intention to ever fill out its franchise area. We conclude, therefore, that Century, through its own conduct, has self-defined its franchise area to include only a portion of the City which is not served by Avenue. 22. Century argues that its actions are indistinguishable from those of the cable operator in Daniels. We believe that the facts of this case are distinguishable from those presented in Daniels. In Daniels, the local franchising authority argued, as does the City here, that a lack of head-to-head competition in the franchise area and a failure to build out the entire franchise warranted a finding of franchise area redefinition-- arguments which the Bureau rejected in Daniels as a stand-alone basis for a finding of franchise area redefinition. The important difference between the two cases, however, is that in Daniels the cable operator, while not expanding into its competitor's service area, did, in fact, submit evidence demonstrating that it had substantially expanded its cable system and service area since receiving its franchise. In the instant proceeding, Century has submitted no evidence that it continues to expand its service area or that it has not affirmatively redefined its franchise area. Instead, Century relies on the assertion that it has never indicated that it considers its franchise area to be less than the entire City of San Buenaventura. While the burden of proof rests with the local franchising authority arguing franchise area redefinition, a cable operator that does not counter evidence of franchise area redefinition with record evidence of its own is at risk of the Commission determining, as we have here, that the local franchising authority has satisfied its burden of proof on this issue. We are faced with a record which fails to contradict the City's evidence that Century has not expanded its service area since receiving its franchise extension in 1983. Accordingly, we find that Century has affirmatively redefined its franchise area consistent with its current service area. ORDERING CLAUSES 23. Accordingly, IT IS ORDERED that the petition for revocation filed by Century Cable of Northern California Inc. challenging the certification of the City of San Buenaventura, California to regulate basic cable service rates IS DENIED. 24. This action is taken pursuant to delegated authority pursuant to Section 0.321 of the Commission's Rules. FEDERAL COMMUNICATIONS COMMISSION Deborah Lathen Chief, Cable Services Bureau