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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: ) ) Cablevision of the Midwest, Inc.) ) Middleburg Heights, OH ) CUID No. OH1023 ) Petition for Determination of ) CSR-5345-E Effective Competition ) MEMORANDUM OPINION AND ORDER Adopted: August 19, 1999 Released: August 24, 1999 By the Deputy Chief, Cable Services Bureau: I. INTRODUCTION 1. Cablevision of the Midwest, Inc., a subsidiary of V Cable, Inc. ("Cablevision") filed a Petition for Special Relief asserting that it is subject to effective competition in Middleburg Heights, Ohio because of the presence of Ameritech New Media, a competing cable service provider. The petition is unopposed. 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. 3. 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(1)(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. A finding that a cable system is subject to effective competition precludes regulation of its cable rates by the local franchising authority. Section 623(1)(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 then 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 4. Cablevision asserts that it is subject to LEC effective competition in its Middleburg Heights, Ohio franchise area. With regard to the LEC affiliation requirement, Cablevision asserts that Ameritech New Media is a competing franchised cable operator wholly-owned by Ameritech, which is a holding company with several subsidiaries engaged in the provision of local exchange service. According to Cablevision, one of Ameritech's telephone subsidiaries, Ohio Bell, operates as a local exchange carrier in Ohio and provides local exchange service in Middleburg Heights. 5. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Cablevision asserts that Ameritech New Media was awarded a 15 year franchise to provide cable television service in Middleburg Heights. Cablevision states that Ameritech New Media's cable service is available to about half of the city's homes and that the entire city would be wired by the end of 1998. Cablevision asserts that in those areas of Middleburg Heights already wired by Ameritech New Media, potential subscribers can obtain service by contacting the company by telephone, 24 hours a day. Cablevision also asserts that some of its subscribers have discontinued service and switched to Ameritech New Media. Thus, Cablevision asserts that Ameritech New Media is physically able to, and in fact is, offering service to Middleburg Heights residents. Moreover, Cablevision states that because Ameritech New Media has a cable franchise for Middleburg Heights, there are no regulatory impediments to households taking its cable service. 6. Cablevision asserts that potential subscribers in the franchise area are reasonably aware that they may purchase Ameritech New Media's service. Cablevision submits sample marketing materials, promotional materials, and advertisements that Ameritech New Media has distributed throughout Middleburg Heights for purposes of promoting its services. Cablevision also notes that Ameritech New Media's promotional materials include offerings of discounted service, free groceries, and free gift certificates. In addition, Cablevision states that Ameritech relies upon door-to-door sales efforts in order to increase awareness of its service. 7. Cablevision states that Ameritech New Media offers comparable programming to Middleburg Heights subscribers. Specifically, Cablevision provides Ameritech New Media's channel line-up which demonstrates that Ameritech New Media offers subscribers more than 80 channels of programming, of which 11 are local television broadcasting signals. Cablevision also asserts that Ameritech New Media's channel line-up presently replicates a number of programming services Cablevision offers to its subscribers, including network affiliates of local broadcast stations and satellite-delivered cable programming networks, such as A&E, CNN and the Discovery Channel. III. ANALYSIS 8. 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 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. Cablevision has met this burden. 9. 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 multichannel video programming distributor ("MVPD") using the facilities of such a LEC or its affiliate), we find that Cablevision has provided sufficient evidence demonstrating that Ameritech New Media is a MVPD wholly owned by a LEC. Ameritech is a LEC as defined by the Communications Act, and Ameritech New Media meets the Commission's definition of a MVPD. Therefore, we find that Ameritech New Media meets the affiliation prong of the LEC effective competition test. 10. We also find that Cablevision has submitted sufficient evidence to show that the programming of Ameritech New Media is comparable to Cablevision's programming. The channel information for Ameritech New Media submitted by Cablevision establishes that Ameritech New Media offers more than 80 channels of programming, including 11 local broadcast channels. 11. We find that Cablevision has submitted sufficient evidence demonstrating that Ameritech New Media is offering service in Cablevision's franchise area. Cablevision has provided evidence that Ameritech New Media's cable television service is available in Middleburg Heights and will be offered through the City pursuant to the franchise agreement that Ameritech New Media signed with Middleburg Heights. Cablevision also reports that some of its subscribers have switched to Ameritech New Media's cable service. Thus, we find that Ameritech New Media is physically able to offer service to Middleburg Heights residents. 12. We note that Ameritech New Media's marketing efforts, including advertisements, door-to-door solicitations, distribution of promotional materials, as well as local press coverage of Ameritech New Media's construction and service offerings, ensure that potential subscribers are reasonably aware of the availability of Ameritech New Media's service. In those areas wired and marketed by Ameritech New Media, potential subscribers can contact the company 24 hours a day to activate service. Moreover, those subscribers are able to receive Ameritech New Media's cable service for little or no additional investment and without encountering regulatory or technical obstacles. Consistent with Congressional intent in adopting Section 623(1)(1)(D) of the Communications Act, and under the circumstances presented to us in this matter, we find "effective competition" to be present. IV. ORDERING CLAUSES 13. Accordingly, IT IS ORDERED that the Petition for Special Relief seeking a determination of effective competition by Cablevision of the Midwest, Inc. IS GRANTED. 14. IT IS FURTHER ORDERED that the certification of the City of Middleburg Heights to regulate the basic cable rates of Cablevision of the Midwest, Inc. in Middleburg Heights, Ohio IS REVOKED. 15. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau