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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: ) CSR 5334-E ) TCI Cablevision of Oakland County, Inc. ) Royal Oak, MI (MI0835) ) Huntington Woods, MI (MI0830) Petition for Determination of ) Clawson, MI (MI0828) Effective Competition ) MEMORANDUM OPINION AND ORDER Adopted: February 3, 1999 Released: February 5, 1999 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. TCI Cablevision of Oakland County, Michigan ("TCI") has filed a Petition for Special Relief seeking a determination of effective competition. TCI asserts that it is subject to local exchange carrier ("LEC") effective competition in Royal Oak, Huntington Woods, and Clawson, Michigan (the "Affected Communities") because of the presence of Ameritech New Media's ("Ameritech") cable service in each city. This petition is unopposed. For the reasons discussed below, TCI's petition is granted. 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. TCI asserts that it is subject to LEC effective competition in the Affected Communities where it currently serves nearly 20,000 subscribers. With regard to the LEC affiliation requirement, TCI asserts that Ameritech is a competing franchised cable operator affiliated with the Ameritech Corporation, which is an incumbent local exchange carrier serving Michigan and other mid-western states. 4. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, TCI asserts that Ameritech is now providing service to subscribers in the Affected Communities. To substantiate its claim, TCI states that Ameritech has approximately 15,000 subscribers and its cable plant buildout in the Affected Communities is 100% complete. TCI states that Ameritech has heavily marketed the availability of its cable service through newspaper ads, direct mail solicitations, and telemarketing efforts. TCI asserts there are no regulatory, technical, or other impediments to households taking service from Ameritech. 5. TCI also asserts that Ameritech offers comparable programming in the Affected Communities. Specifically, TCI provides Ameritech's channel line-up which demonstrates that Ameritech offers over 80 channels, 9 of which are local television broadcasting signals. TCI offers nearly 100 channels of programming, 11 of which are local broadcast signals, in the Affected Communities. 6. Finally, TCI states that it has made several pricing and marketing changes in response to increased competition from Ameritech. TCI notes that it: (1) lowered its rates approximately 10% in the Affected Communities; (2) expanded its analog channel line-up to include additional premium channels; (3) offers the first converter box free and all remotes for free in Royal Oak and Clawson; and (4) moved the Disney Channel from a premium to a basic service in each of the Affected Communities. III. ANALYSIS 7. In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition as defined in the Communications Act. The cable operator bears the burden of rebutting the presumption that such effective competition does not exist and so must provide evidence sufficient to demonstrate that effective competition, as defined by Section 76.905 of the Commission's rules, is present in the franchise area. TCI has met this burden. 8. With regard to the first part of the LEC effective competition test, which requires that the alleged competitive service be provided by a LEC, its affiliate, or any multi-channel video programming distributor ("MVPD") using the facilities of such LEC or its affiliate, we find that TCI has provided sufficient evidence demonstrating that Ameritech is an MVPD affiliated with a LEC. The Ameritech Corporation is a LEC as defined by the Communications Act, and Ameritech meets the Commission's definition of MVPD. Therefore, we find that TCI satisfies the affiliation prong of the LEC effective competition test. TCI is unaffiliated with both Ameritech New Media and the Ameritech Corporation. 9. We also find that TCI has submitted sufficient evidence to show that the programming of Ameritech is comparable to the programming of TCI. The channel information for Ameritech submitted by TCI establishes that Ameritech offers over 80 channels of programming, including 9 local broadcast channels. This satisfies the Commission's programming comparability criterion. 10. In addition, we find that based on the information before us, Ameritech is franchised to serve the Affected Communities and is offering service in TCI's franchise areas sufficient to demonstrate the presence of effective competition. Ameritech has completely overbuilt TCI's systems in each of the Affected Communities and is now competing for customers with TCI in these areas. We find that Ameritech's recruitment of thousands of subscribers to be a clear indicator that Ameritech is physically able to offer service in the Affected Communities. 11. We note that Ameritech's extensive marketing efforts and the wide press coverage of Ameritech's construction activity in the local media ensure that potential subscribers are reasonably aware of the availability of Ameritech's service. Generally, subscribers in the Affected Communities are able to receive Ameritech's cable service for only a minimal additional investment and without encountering regulatory or technical obstacles. We also note that, to aggressively compete with Ameritech's service, TCI has lowered its rates, added new channels, and has offered equipment for free, all of which benefits subscribers in Affected Communities. Consistent with Congressional intent in adopting Section 623(l)(1)(d) of the Communications Act, under the circumstances presented herein, we find effective competition is present. IV. ORDERING CLAUSES 12. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by TCI Cablevision of Oakland County, Inc. challenging the certification of the Cities of Royal Oak, Huntington Woods, and Clawson, in Royal Oak, Huntington Woods, and Clawson, Michigan IS GRANTED. 13. IT IS FURTHER ORDERED that the certification of the Cities of Royal Oak, Huntington Woods, and Clawson, Michigan to regulate the basic cable rates of TCI in Royal Oak, Huntington Woods, and Clawson, Michigan IS REVOKED. 14. This action is taken pursuant to the interim rules adopted in Implementation of Cable Reform Provisions of the Telecommunications Act of 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. 15. 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