******************************************************** 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: ) ) Time Warner Communications, Inc.) ) Seminole, Florida ) CUID Nos. FL0048 ) FL0766 ) Petition for Determination of ) CSR-5385-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. Time Warner Entertainment-Advance/Newhouse Partnership d/b/a Time Warner Communications ("Time Warner") filed a Petition for Special Relief asserting that it is subject to effective competition in Seminole, Florida because of the presence of GTE Media Ventures ("GTE"), a competing cable service provider in that city. 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. Time Warner asserts that it is subject to LEC effective competition in its Seminole, Florida franchise areas. With regard to the LEC affiliation requirement, Time Warner asserts that GTE Media Ventures is a competing franchised cable operator wholly-owned by GTE Corporation, which operates as a local exchange carrier in Florida and provides local exchange service in Seminole. 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 was awarded a franchise to provide cable television service in Seminole. Time Warner states that GTE has wired a substantial portion of the City and is bound by its franchise agreement to complete construction within 3 years of breaking ground. Time Warner asserts that GTE is physically able to, and in fact is, offering service to Seminole residents. Moreover, Time Warner states that because GTE has a cable franchise for Seminole, there are no regulatory impediments to households taking its cable service. 6. Time Warner asserts that potential subscribers in the franchise areas are reasonably aware that they may purchase GTE 's service. Time Warner states that GTE has used direct mail, radio spots, and newspaper advertising for purposes of promoting its services. 7. Time Warner states that GTE offers comparable programming to Seminole subscribers. Specifically, Time Warner provides GTE's channel line-up which demonstrates that GTE offers subscribers 130 channels of programming, of which 12 are local television broadcasting signals. Time Warner also asserts that GTE's channel line-up presently replicates a number of programming services Time Warner offers to its subscribers. 8. Time Warner asserts that GTE's competitive presence in Seminole has already yielded tangible results. For example, Time Warner states that it has chosen not to implement a budgeted 4.9% rate increase in the City and anticipates rolling back its rates to meet the rates offered by GTE to city residents. III. ANALYSIS 9. 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. Time Warner has met this burden. 10. 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 Time Warner has provided sufficient evidence demonstrating that GTE Media Ventures is an MVPD wholly-owned by a LEC. GTE is a LEC as defined by the Communications Act, and GTE Media Ventures meets the Commission's definition of a MVPD. Therefore, we find that GTE meets the affiliation prong of the LEC effective competition test. 11. We also find that Time Warner has submitted sufficient evidence to show that the programming of GTE is comparable to Time Warner's programming. The channel information for GTE submitted by Time Warner establishes that GTE offers about 130 channels of programming, including 12 local broadcast channels. 12. Time Warner has submitted sufficient evidence demonstrating that GTE is offering service in Time Warner's franchise areas. Time Warner has provided evidence that GTE 's cable television service is available in a substantial portion of Seminole and will soon be offered throughout the City pursuant to the franchise agreement that GTE signed with Seminole. Thus, we find that GTE is physically able to offer service to Seminole residents. 13. We note that GTE's marketing efforts, including newspaper and radio advertisements and distribution of promotional materials ensure that potential subscribers are reasonably aware of the availability of GTE's service. In those areas wired and marketed by GTE, potential subscribers need only contact the company to activate service. Moreover, those subscribers are able to receive GTE 's cable service for little or no additional investment and without encountering regulatory or technical obstacles. Time Warner has also asserted that competition from GTE has had the important effect of restraining increases in cable rates. 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 14. Accordingly, IT IS ORDERED that the Petition for Special Relief seeking a determination of effective competition by Time Warner Communications, Inc. IS GRANTED. 15. IT IS FURTHER ORDERED that the certification of the City of Seminole, Florida to regulate the basic cable rates of Time Warner Communications. Inc. in Seminole IS REVOKED. 16. 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