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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 5098-E ) Time Warner Cable ) Orlando, FL et. al. ) Petition for Determination ) Effective Competition ) MEMORANDUM OPINION AND ORDER Adopted: August 17, 1999 Released: August 19, 1999 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Time Warner Cable ("Time Warner"), filed a petition with the Commission asserting that it is subject to local exchange carrier ("LEC") effective competition in Orlando, Florida and surrounding communities from BellSouth Wireless Cable Inc. ("BellSouth"), a multichannel multipoint distribution service ("MMDS" or "wireless cable") operator serving Orlando and 56 other central Florida franchise areas (the "Affected Communities"). An opposition was filed by Volusia County, a local franchising authority certified to regulated the basic service rates of Time Warner. Time Warner filed a reply to this opposition. Time Warner then filed a supplement to its petition. 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 states that it provides cable service to the Affected Communities pursuant to several cable franchises. Time Warner argues that it is subject to LEC effective competition in the Affected Communities from BellSouth, an MMDS operator serving those same areas. 4. With regard to the LEC affiliation requirement, Time Warner contends that BellSouth is a competing MMDS operator, a wholly owned affiliate of BellSouth Corp, a local exchange carrier serving telephone customers in Florida and other parts of the southern United States. BellSouth makes available on its system 33 channels of broadcast and satellite delivered cable programming. 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 BellSouth is physically able to deliver service to potential subscribers in Orlando and the other Affected Communities. Time Warner explains that BellSouth provides wireless cable service in central Florida through the use of two MMDS transmitters: one located in Orlando and the other located near Daytona Beach. According to Time Warner, BellSouth's MMDS transmitter's 35-mile presumptive service boundary covers each of the Affected Communities. Time Warner asserts that potential subscribers in the franchise areas can technically receive service from BSE. To show that service is actually available, Time Warner provides line-of-sight surveys allegedly demonstrating that there are no obstacles impeding potential subscribers from receiving service. To buttress its assertion, Time Warner states that BellSouth has 4,680 subscribers according to MMDS count documents and 11,800 subscribers according to 1996 Federal Copyright filings. Finally, Time Warner contends that there are no other regulatory, technical or other impediments exist to the receipt of BellSouth's service in the Affected Communities. 6. Time Warner asserts that potential subscribers in its franchise areas are reasonably aware that they may purchase MMDS service as a result of BellSouth's marketing efforts. Time Warner provides marketing materials from BellSouth, including channel guides, advertisements, and flyers, which have been distributed in the Affected Communities. Time Warner asserts that individuals must have been made aware of BellSouth's service because the company has thousands of subscribers. 7. Time Warner asserts that BSE offers programming comparable to that offered by Time Warner in the Affected Communities. Time Warner provides BSE's channel line-up showing that BSE's video service consists of 33 channels of video programming, including 7 local television broadcast signals. Time Warner provides between 46-74 channels of programming, 15 of which are local broadcast stations, on its various cable systems serving the Affected Communities. 8. In opposition, Volusia County states that MMDS count documents provided by Time Warner in its petition show that there are relatively few BellSouth subscribers in the County. Volusia County states that this showing does not amount to "effective competition" that would justify exempting Time Warner from rate regulation. 9. In reply, Time Warner argues that the new effective competition test does not include a percentage pass or penetration test. Time Warner asserts that as long as BellSouth is physically able to provide wireless cable service to subscribers in a particular community served by Time Warner, and regardless of the actual numbers of subscribers which actually receive such service, such community must be considered to be subject to effective competition. 10. In its supplement, Time Warner asks that its earlier request be limited to only those communities within Orange County, Florida, excluding such franchise areas as Volusia County, and many others. Time Warner states that it intends to prepare and file new effective competition showings for all the other communities at a future date. Time Warner has included, as a new exhibit, a shadow map illustrating that BellSouth's wireless cable service is technically and actually available to subscribers within all of the incorporated communities. Time Warner adds that at most, there are isolated limited pockets of poor reception located in sparsely populated areas of unincorporated Orange County near Apopka; the only other portions of Orange County unable to receive BellSouth's service are located over large lakes which are not inhabited. Time Warner also states that BellSouth has expanded its marketing efforts since it first filed its petition in 1997; BellSouth now advertises the availability of its MMDS video service on its website, on television and radio, and through full page advertisements in the leading local newspaper, the Orlando Sentinel. As for the comparable programming prong of the effective competition analysis, Time Warner states that BellSouth's MMDS system now provides over 100 video programming channels, including 11 broadcast station signals. III. ANALYSIS 11. 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 effective competition does not exist and 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. Time Warner has met this burden and its petition will be granted. 12. With regard to the first part of the LEC effective competition test, which requires that the alleged competitive service be provided by a LEC or its affiliate (or any multi-channel video programming distributor ("MVPD") using the facilities of such LEC or its affiliate), we find that Time Warner has provided sufficient evidence demonstrating that BellSouth Wireless Cable Inc. is a wholly-owned subsidiary of BellSouth Corp., which is unquestionably a LEC. We find that Time Warner satisfies the affiliation prong of the LEC effective competition test. We also find that Time Warner is unaffiliated with BellSouth or BellSouth Wireless Cable Inc. 13. We also find that Time Warner has submitted sufficient evidence demonstrating that BellSouth provides comparable programming. In a LEC effective competition setting, a competing MVPD is said to offer comparable programming when at least 12 channels of programming, some of which are television broadcasting signals, are present. The channel line-up for BellSouth submitted by Time Warner establishes that BellSouth offers 100 channels of programming, including 11 over-the-air broadcast signals. This is sufficient to satisfy the Commission's programming comparability criterion. 14. The LEC effective competition test requires that competitive service be offered directly to subscribers in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area. In enacting the LEC effective competition test, Congress indicated that the Commission should apply its preexisting definition of the term "offer" to the LEC effective competition test. This definition provides that service is offered: (1) When the multichannel video programming distributor is physically able to deliver service to potential subscribers, with the addition of no or only minimal additional investment by the distributor, in order for an individual subscriber to receive service; and (2) When no regulatory, technical or other impediments to households taking service exist, and potential subscribers in the franchise area are reasonably aware that they may purchase the services of the multichannel video programming distributor. 15. Based on the information before us, we find that BellSouth is offering service in all of the Orange County Communities. Time Warner has submitted evidence that BellSouth's transmitters are in place and physically able to offer service. In order to provide service, BSE need only install an MMDS antenna on, or near, a subscriber's home. A Time Warner generated line-of-sight/shadow plot map, which is the proper evidentiary tool to determine MMDS availability in LEC effective competition cases, indicates that the relevant franchise areas lie within the MMDS transmitter's line-of-sight, with no geological barriers inhibiting reception. 16. With regard to the Orange County franchise areas, we conclude that no regulatory, technical or other impediments prevent potential subscribers from receiving BellSouth's service. We find that potential subscribers in Orange County are reasonably aware that they may receive competing video service because of BellSouth's advertising and marketing campaign. The fact that BellSouth has a substantial number of subscribers in the franchise areas supports this finding. IV. ORDERING CLAUSES 17. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by Time Warner challenging the certification of the local franchising authorities in Orange County, Florida IS GRANTED. The franchising authorities' certifications to regulate rates are rescinded. 18. 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). 19. 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