******************************************************** 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: ) CSR 5136-E ) Time Warner Entertainment Co., L.P.) Honolulu, HI et. al. ) Petition for Determination ) Effective Competition ) MEMORANDUM OPINION AND ORDER Adopted: January 25, 1999 Released: January 26, 1999 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Time Warner Entertainment Company, L.P. d/b/a Oceanic Cablevision ("Time Warner"), filed a petition with the Commission asserting that it is subject to local exchange carrier ("LEC") effective competition in Honolulu, Hawaii and other Oahu communities from GTE Media Ventures, Inc., d/b/a Oahu Wireless Cable Co. ("GTE"), a wireless cable operator serving the island of Oahu, Hawaii. This petition, although unopposed, was recently amended to provide the Commission with new information. 2. Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications Act") allows franchising authorities to become certified to regulate basic cable service rates of cable operators which are not subject to effective competition. For purposes of the initial request for certification, local franchising authorities may rely on a presumption that cable operators within their jurisdiction are not subject to effective competition unless they have actual knowledge to the contrary. Certification becomes effective 30 days from the date of filing unless the Commission finds that the authority does not meet the statutory certification requirements. In Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996 ("Cable Act Reform Order"), the Commission instructed cable operators believing themselves subject to local exchange carrier ("LEC") effective competition under Section 623(l)(1)(D) of the Communications Act to file a petition for determination of effective competition pursuant to Section 76.7 of the Commission's rules. Section 623(l)(1)(D) of the Communications Act provides that a cable operator is subject to effective competition where: 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 direct-to-home 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 programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. II. THE PLEADINGS 3. Time Warner explains that it provides cable service to Honolulu and Oahu residents pursuant to three cable franchises: one from the State of Hawaii to provide cable service to all civilian areas on Oahu; one from the United States Navy to provide cable service to naval bases and installations on Oahu; and one from the United States Army to provide cable service to Army bases and installments on Oahu. Time Warner argues that it is subject to LEC effective competition in Honolulu, Hawaii and in these other franchise areas from GTE, a wireless cable operator serving those same communities. 4. With regard to the LEC affiliation requirement, Time Warner contends that GTE Media Ventures is a competing wireless cable operator wholly owned by GTE, a local exchange carrier serving telephone customers in Hawaii and other parts of the United States. GTE makes available 22 channels of video programming on its wireless cable system. 5. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Time Warner asserts that GTE is physically able to deliver service to potential subscribers in Honolulu and other Oahu communities. Time Warner explains that GTE provides wireless cable service to Oahu through the use of an MMDS transmitter located at Palehua Ridge on the Waianae Range. According to Time Warner, GTE's MMDS transmitter's 35-mile presumptive service boundary covers all of its franchise areas. Time Warner also asserts that most of Oahu can technically receive service from GTE, including those in its franchise areas. To prove that service is indeed available, Time Warner obtained subscriber counts from GTE showing that 2891 households (purportedly all within Time Warner's franchise areas) currently subscribe to the competing wireless cable system. Finally, Time Warner contends that no regulatory, technical or other impediments exist to the receipt of GTE's service in Honolulu. 6. Time Warner asserts that potential subscribers in its franchise areas are reasonably aware that they may purchase multichannel video service from GTE. Time Warner provides marketing materials from GTE which have been distributed in its franchise areas. These materials include GTE's channel guide as well as flyers promoting the wireless service. Newspaper articles discussing GTE's venture are also attached to Time Warner's petition to show that potential subscribers have been made aware of the competing wireless cable service. Time Warner makes the assumption that many of GTE's current subscribers have made their neighbors aware that they are subscribing to the wireless service and that such neighbors may purchase the service as well. 7. Time Warner asserts that GTE offers programming comparable to that offered by Time Warner in Honolulu and other Oahu communities. Time Warner provides GTE's channel line-up which demonstrates that GTE's most basic service consists of 22 channels of video programming, including seven local television broadcast signals. 8. On December 10, 1998, Time Warner filed a supplement to its petition. Time Warner states that GTE has recently switched over to a digital form of transmission and is now providing over 100 channels of programming to subscribers, including 9 local television station signals, in the three relevant franchise areas. Time Warner also asserts that GTE has increased its marketing efforts in Oahu to alert potential subscribers of the availability of its digital service. Time Warner attempts to demonstrate, by reference to numerous newspaper ads and articles, that Oahu residents are reasonably aware of GTE's service. One of these newspapers, the Honolulu Star-Bulletin, is the major daily newspaper on the island and has a daily Oahu circulation of 67,362. Finally, Time Warner claims that GTE's marketing plan is working because 1,368 Oahu residents are now subscribing to GTE's digital wireless cable service. III. ANALYSIS 9. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition. The cable operator bears the burden of rebutting the presumption that effective competition does not exist with evidence that effective competition, as defined by Section 76.905 of the Commission's rules, is present within the franchise area. Time Warner has failed to meet this burden. While Time Warner partially satisfies the LEC test for effective competition by demonstrating that GTE is a LEC affiliate that provides comparable programming, Time Warner fails to fully establish that GTE "offers" service as contemplated by the statute and our rules. 10. With regard to the first part of the LEC test, which requires that the alleged competitive service be provided by a LEC or its affiliate (or any multi-channel video programming distributor using the facilities of such LEC or its affiliate), Time Warner has provided sufficient evidence demonstrating that GTE is LEC- affiliated under the Commission's interim rules. Additionally, we find that Time Warner is unaffiliated with GTE. 11. We also find that Time Warner has submitted sufficient evidence demonstrating that GTE provides programming comparable to Time Warner's channel line-up in Honolulu and other Oahu communities. GTE's channel line-up consists of over 100 channels of video programming, including 9 local television broadcast channels, which satisfies the programming comparability criterion. 12. As to the requirement that the LEC competitor "offer" service, Time Warner has not met its burden. While it appears that prospective subscribers have been made reasonably aware of GTE's service through direct mail campaigns, newspaper advertisements, and other marketing efforts, it is still unclear who has knowledge of the competitive service. For example, although Time Warner claims that the marketing materials were distributed to residents of the communities in question, there is no evidence in the record defining the scope of the direct mail campaign. Specifically, there is no information concerning how many subscribers in Honolulu and Oahu, if any, were actually sent mailings. Moreover, it is unclear in which of Time Warner's three franchise areas potential subscribers received mailings from GTE. We also do not agree with Time Warner that word-of-mouth is an effective method of publicizing the availability of GTE's competing service. Such a method of communication is difficult to prove and easily manipulated. 13. As a general matter, we note that evidence presented by cable operators regarding the number and location of subscribers to the competing service shows that the competitor is physically able to deliver service. Such evidence, in most cases, can also reflect the degree subscribers are reasonably aware of the competing service since they are, in fact, receiving it. However, in this instance, the GTE subscriber figures submitted by Time Warner does not persuade us that consumers in Honolulu and elsewhere generally are knowledgeable about GTE's service. Specifically, the GTE subscriber count that Time Warner includes as an attachment to its Petition is broken down according to zip code, and does not clearly specify by community unit or another more understandable identifier, which areas can currently receive GTE's service. In fact, some of the areas listed in the subscriber count are not the same as those communities designated for deregulation by Time Warner in the text of the Petition. Even more perplexing is the differences in subscriber counts presented by Time Warner in its initial petition, where the operator has attested that there are over 2800 GTE subscribers in its franchise areas, compared with its supplemental pleading, which states that GTE has 1,368 subscribers in the same franchise areas. These data differences not only make it difficult to determine where GTE's subscribers are located, but given GTE's apparent loss of over 1,300 subscribers during the past year, call into question whether GTE's service is actually competitive. All of these factors leads us to conclude that Time Warner has not provided sufficient evidence showing that Honolulu and Oahu residents are reasonably aware of the availability of GTE's service. 14. Time Warner also has not clearly established that all of the communities subject to the petition are technically able to receive wireless cable service from GTE. A line-of-sight plot map generated by Time Warner, and a similar map developed separately by the Commission, indicates that the communities of Kahaluu, Maunalua, Kailua, and Kaneohe, on Oahu's Eastern shore, are currently impeded from receiving service from GTE because they are "shadowed", meaning that they would have difficulty receiving GTE's signal because they are blocked by terrain and do not have line-of-sight with the transmitter. Moreover, it is difficult to determine where some of the communities in question are located, such as Enchanted Hills or Oahu Central, since Time Warner did not include a detailed map in their petition indicating where they currently provide cable service. Without such information in this particular case, we cannot determine whether potential subscribers are technically able to receive GTE's competing service throughout Time Warner's franchise areas. 15. We find that Time Warner has failed to submit clear and convincing evidence demonstrating that its cable system serving Honolulu, Hawaii and other Oahu communities is subject to LEC effective competition from GTE. Time Warner' petition is denied. IV. ORDERING CLAUSES 16. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by Time Warner Entertainment Co., L.P., d/b/a Oceanic Cablevision, challenging the certification of the local franchising authorities in Oahu, Hawaii IS DENIED. 17. This action is taken pursuant to the interim rules adopted in Implementation of Cable Reform Provisions of the Telecommunications Act of 1996, 11 FCC Rcd 5937 (1996), and is without prejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of Proposed Rulemaking contained therein. 18. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION Deborah A. Lathen Chief, Cable Services Bureau