******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 M.L. Cable Corporation d/b/a/) Cable Television Company of ) Greater San Juan ) ) Application for Review ) of Petition for Reconsideration ) ) MEMORANDUM OPINION AND ORDER Adopted: October 23, 1998 Released: November 10, 1998 By the Commission: I. INTRODUCTION 1. Century M.L. Cable Corporation d/b/a Cable Television Company of Greater San Juan ("Century"), operator of cable systems serving certain communities located in Puerto Rico, has filed an application for review of an order, Century M.L. Cable Corporation & Century M.L. Cable Venture ("Order"), released by the Cable Services Bureau ("Bureau") which granted, in part, and denied, in part, the petition for reconsideration of the certification of the Puerto Rico Telecommunications Regulatory Board ("Board") to regulate basic cable rates. The application for review raises issues relating to the Bureau's denial of Century's petition for reconsideration of the certification of the Board to regulate basic cable rates in certain communities. Century requests that the Bureau reverse its decision with respect to the communities of Bayamon, Carolina, Guaynabo, San Juan, and Trujillo Alto, Puerto Rico based upon the presence of effective competition. The Board filed an opposition to the application for review. Century filed a reply. II. BACKGROUND 2. On August 11, 1997, Century filed with the Commission a petition for reconsideration of the Board's certification to regulate basic cable rates based upon the presence of low penetration effective competition. Century operates two cable systems each of which serves a single franchise area of Puerto Rico, namely, its San Juan system and its Toa Alta system. The Order granted Century's petition with respect to Century's Toa Alta system and revoked the Board's certification to regulate rates in that portion of the franchise area. The Order denied Century's petition with respect to its San Juan cable system, finding that the requirements of the low penetration effective competition test had not been met in that portion of the franchise area. 3. Section 623(1)(1)(A) of the Communications Act provides that a cable operator is subject to low penetration effective competition if "fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system." In the Order, Century introduced evidence to show that its penetration rate in the communities served by its San Juan system was 29.25 percent. Century calculated its penetration rate by applying a "household growth rate" to the 1990 Census population figures for Puerto Rico. The household growth factor was derived from the comparison of Puerto Rico's population growth to its household growth during the period 1980 to 1990. In its opposition, the Board argued that Century's methodology was unreliable because Century used figures from a period of relative prosperity for Puerto Rico and that Century used population growth figures for the island as a whole rather than the individual communities served by its San Juan system. As an alternative, the Board introduced its own methodology which was based upon the most recent data available from the Census Bureau for each community served by the San Juan system and the average household population density which blended housing units among multidwelling units and single family houses. The Bureau's calculations resulted in a penetration rate of 32.52 percent for Century's San Juan cable system. The Bureau concluded that the Board's methodology was a more reasonable one because it was based upon more recent Census data and it was based upon population data from each of the communities served by Century's San Juan system. III. DISCUSSION 4. Century argues that the Bureau's Order should be reversed because it conflicts with the evidence presented in its petition for reconsideration. Century maintains that it relied on population data from the period 1980 to 1990 rather than 1996 Census population estimates to derive a household-to- population growth rate because the 1980-90 period represents a consistent pattern of growth for Puerto Rico dating back to 1970. Century asserts that this consistent historic pattern of growth rebuts the Board's argument that data from the 1980-90 period is unrepresentative of population growth in Puerto Rico. 5. In its opposition, the Board maintains that Century's methodology for calculating its household growth rate is flawed because Century compared the population growth rate in Puerto Rico as a whole for the period 1980-90. The Board further maintains that its methodology is more reasonable because it relied upon the 1996 Census population estimates for each community served by Century's San Juan system and divided them by the population-per-household for each of those communities. The Board contends that this methodology reflected changes in population growth on an individual community basis and accounted for the blend in housing units among multi-dwelling units and single family houses in each community. In addition, the Board states that Century's reference to data from the period between 1970 and 1980 is of no probative value in determining the presence of existing effective competition. 6. 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. For purposes of the initial request for certification, franchising authorities may rely upon the presumption that cable operators are not subject to effective competition, unless the franchising authority has actual knowledge to the contrary. Certification becomes effective 30 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 30 days from the date such certification becomes effective. The Board was certified to regulate basic cable service rates in Puerto Rico on July 12, 1997. 7. The low penetration effective competition test requires cable operators to prove the existence of effective competition using the most recent household and subscriber data for the authorized area in the franchise. With respect to household data, the Commission has stated that cable operators may rely upon data from the 1990 Census and, if they so choose, may submit more recent household data. Where a cable operator chooses to submit updated household data, it must provide documentation of the source of such data and an adequate explanation and basis for its use in calculating household growth. With respect to subscriber data, the Commission has stated that cable operators must rely on subscriber data as of the date of certification of the local franchising authority to regulate basic cable rates. In cases where both the operator and the franchising authority submit updated household data, it is the cable operator's burden to demonstrate that its updated data are more accurate and reliable than the updated data submitted by the franchising authority. 8. In its petition for reconsideration, Century's updated household data were calculated on the basis of population growth for Puerto Rico as a whole which yielded a penetration rate of less than 30 percent for the communities served by its San Juan system. The Board's updated household data were calculated on the basis of 1996 Census estimates for each of the communities served by Century's San Juan system. Century did not meet its burden of demonstrating that its data are more accurate and reliable than the Board's data. Accordingly, we uphold the Bureau's finding that the Board's methodology for calculating updated household data was a more reasonable approach. 9. Century argues that the Bureau's Order conflicts with a subsequent Bureau decision which upheld a methodology to update household data which is similar to the methodology employed by Century. In Pegasus, the cable operator relied upon household data from the period 1980-1990 by comparing the population growth in each community served by the cable system in question to the household growth for the same period. The cable operator then used 1996 Census estimates to determine the growth in the number of households in those communities. In Pegasus, the Bureau found that the cable operator "provided updated household data based on 1990 Census data from each community in the franchise area which it then used to calculate a household growth ratio. [The cable operator] arrived at an estimate of current households by applying the household growth ratio to Census estimates for the period 1990 to 1996. We find the methodology employed by [the cable operator] to update the Communities' household data is reasonable in determining current household data." 10. In this case, we find that Century's reliance upon the Pegasus decision is misplaced. Century did not rely upon household data "from each community in the franchise area" but rather the household data from Puerto Rico as a whole. When we consider the merits of island-wide data as compared to community- specific data, we cannot conclude that the use of island-wide data should be deemed more reasonable. We therefore uphold the Bureau's Order which favored the Board's methodology based upon community-specific data. IV. ORDERING CLAUSE 11. Accordingly, IT IS ORDERED, pursuant to Section 1.115 of the Commission's rules, 47 C.F.R. 1.115, that the application for review filed by Century M.L. Cable Corporation, IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary