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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: ) ) Mountain Cable Company d/b/a ) Adelphia Cable Communications ) ) Multi-Channel TV Cable Company d/b/a ) Adelphia Cable Communications ) ) ) Better TV d/b/a ) Adelphia Cable Communications ) ) ) Petitions for Revocation of the Certification of ) the Vermont Public Service Board ) to Regulate Basic Cable Service Rates ) MEMORANDUM OPINION AND ORDER Adopted: August 30, 1999 Released: September 2, 1999 By the Deputy Chief, Cable Services Bureau: I. INTRODUCTION 1. Mountain Cable Company d/b/a Adelphia Cable Communications, Multi-Channel TV Cable Company d/b/a Adelphia Cable Communications and Better TV d/b/a Adelphia Cable Communications ("Adelphia") have filed nine petitions for revocation challenging the certification of the Vermont Public Service Board (the "State") to regulate Adelphia's basic cable service and associated equipment rates in ten franchise areas. Adelphia alleges that its cable systems are subject to effective competition. The Vermont Department of Public Service (the "Department") filed comments to the petition, and Adelphia filed a reply. Because all nine petitions relate to the same subject matter and the same parties, we see good cause to resolve them in the instant consolidated Order. 2. Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications Act"), allows franchising authorities to become certified to regulate the basic cable service rates of cable operators which are not subject to effective competition. For purposes of the initial request for certification, a franchising authority may rely on the presumption that cable operators within its jurisdiction are not subject to effective competition, unless the franchising authority has actual knowledge to the contrary. Such certification becomes effective thirty days from the date of filing, unless the Commission finds that the franchising authority does not meet the statutory certification requirements. Cable operators may file petitions for reconsideration of the franchising authority's certification within thirty days from the date such certification becomes effective. Rate regulation is automatically stayed pending review of a timely filed petition for reconsideration alleging effective competition. After the 30-day deadline for filing petitions for reconsideration has elapsed, cable operators may challenge the franchising authority's certification by filing a petition for revocation. However, regardless of its grounds, a petition for revocation does not automatically trigger a stay of the franchising authority's power to regulate basic rates. 3. Cable operators filing petitions for revocation on the grounds of effective competition must prove that they face competition under one of the four tests set forth in Section 76.905(b) of the Commission's rules. One basis upon which a cable operator may be deemed subject to effective competition is the competing provider test. Under the competing provider test, a cable system is subject to effective competition if the franchise area is: (1) served by at least two unaffiliated multichannel video programming distributors ("MVPDs") each of which offers comparable programming to at least 50 percent of the households in the franchise area; and (2) the number of households subscribing to multichannel video programming other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area. A second basis by which a cable system will be deemed subject to effective competition is if fewer than 30 percent of the households in the system's franchise area subscribe to the system's service. A finding of effective competition exempts a cable operator from rate regulation. II. SUMMARY OF PLEADINGS 4. Adelphia seeks revocation of the State's certification to regulate the operator's basic cable service rates on the basis of effective competition. Adelphia argues that it is subject to effective competition under the competing provider test due to the availability of direct-to-home satellite service providers (collectively the "DBS" providers) and other MVPDs serving the franchise areas. Adelphia claims that both prongs of the competing provider effective competition test are satisfied because the various DBS providers each offer comparable programming to at least 50 percent of the households in the franchise area and the subscriber base of MVPDs, other than to itself, the largest MVPD, in the aggregate, exceeds 15 percent of the households in each of the franchise areas. 5. The first prong of the competing provider test requires that at least two unaffiliated MVPDs each offer comparable programming to at least 50 percent of the households in the franchise area. Adelphia maintains that several DBS providers offer comparable programming to at least 50 percent of the households in all of the franchise areas. Adelphia states that the Commission has recognized that DBS is available nationwide and has presumed that DBS providers satisfy the 50 percent threshold. Thus, Adelphia maintains that it satisfies the 50 percent availability requirement of the first prong of the competing provider test. 6. The first prong of the competing provider test also requires that at least two competing providers offer comparable programming, defined as at least twelve channels of video programming, including at least one channel of nonbroadcast service programming. Adelphia states that DBS providers such as the DISH Network and DirecTV have already been found to offer comparable programming in accordance with Commission rules. Adelphia provides programming lineups indicating that the DISH network offers over 50 video channels, and DirecTV offers over 150 channels. Each DBS provider offers numerous nonbroadcast service channels. 7. The second prong of the competing provider test requires that at least 15 percent of the households in the franchise area be subscribers to an MVPD other than the largest MVPD. Adelphia asserts that it is the largest MVPD serving each of the franchise areas. Using household data for the franchise areas based on the 1990 Census, and the DBS subscriber information supplied by SkyTRENDS, Adelphia maintains that the DBS providers have collectively achieved at least a 15 percent penetration among households in the franchise areas. 8. In its comments, the Department contends that Adelphia's petitions for a finding of effective competition do not strictly meet the requirements of the Commission's regulations due to shortcomings and errors in the petitions. Nonetheless, the Department believes that the errors and shortcomings are unlikely to impact the ultimate conclusion that Adelphia is subject to effective competition in the franchise areas. The Department contends that Adelphia's petitions should have provided the number of households subscribing to Adelphia to demonstrate Adelphia is the largest MVPD in the franchise areas. 9. In addition, the Department argues that Adelphia's filings should not rely on 1990 census data because more recent household data is available. The Department submits household data that it maintains is more current and reliable than the 1990 census household counts. Further, the Department maintains that the DBS subscriber information used by Adelphia is inconsistent with the Commission's rules because it includes both residential and commercial accounts. The Department maintains that the definition of "household" in the U.S. Census does not include non-residential units. The Department suggests that the Commission require DBS providers (and other MVPDs) to furnish cable operators their subscriber numbers in a manner consistent with the Commission definition of households. Finally, the Department maintains that for three of the franchise areas, Adelphia incorrectly calculated households and subscribers by including data from communities outside of the specified franchise area. Notwithstanding the inclusion of commercial subscribers, the Department maintains that a finding of effective competition may be appropriate because the percentage of households subscribing to MVPDs other than Adelphia in the franchise areas is so high that excluding commercial accounts may not have a meaningful impact on the end result. Using updated household data, the Department makes its own calculation of the percentage of households subscribing to MVPDs other than Adelphia. For each franchise area, the Department's calculation of competing MVPD penetration percent exceeds the fifteen percent threshold established by the competing provider test. 10. In reply, Adelphia acknowledges that some towns were inadvertently included in the wrong franchise areas, and presents updated calculations to correct these mistakes. Adelphia, however, maintains that correcting the household count for these franchise areas does not alter its showing that the competing MVPD penetration in all the franchise areas exceeds the fifteen percent threshold requirement. Regarding the Department's contention that Adelphia did not identify the largest MVPD in each franchise area, Adelphia provides its subscriber count, and maintains it is the largest MVPD in six of the franchise areas because its subscribership exceeds the aggregate total of the DBS providers. As to the remaining four franchise areas, Adelphia maintains that it is unable to determine the largest MVPD because SkyTRENDS information is released only in aggregate form. Nonetheless Adelphia argues that even if it is not the largest MVPD in these franchise areas, its own penetration rate exceeds the fifteen percent threshold of subscribers to an MVPD other than the largest in three of the franchise areas. Regarding the franchise area represented by CPG Docket Number Authorization 5665, Adelphia argues that effective competition can be demonstrated under either the competing provider test, or the low penetration test. 11. Adelphia acknowledges that the Department's methodology for updating the 1990 Census information appears to be reliable with one exception. Adelphia argues that the Department's 1999 household estimate projects household that will exist at the end of 1999. Based upon the Department's methodology, Adelphia calculates a household estimate for each franchise area which it believes is current through June 30, 1999. Adelphia uses its updated household estimates and recalculated competing provider penetrations. For all franchise areas, Adelphia's estimate exceeds fifteen percent. Adelphia notes that in either case, using the Department's or its household estimates, the calculations demonstrate that Adelphia is subject to effective competition. 12. Adelphia concedes that its DBS subscriber totals may include some commercial numbers since the data provided by SkyTRENDS does not separate out commercial accounts. Adelphia maintains that its attempts to obtain residential-only subscriber counts directly from both individual DBS providers and also from SkyTRENDS have been unsuccessful. Adelphia believes that a reasonable estimate can be made of the number of commercial subscribers included in SkyTRENDS estimates based upon its own commercial subscribership as a model. Adelphia calculates a 2.06 percent commercial subscriber rate in the franchise area represented by CPG Docket number 5247, which it argues is the area that is most heavily populated and has the highest level of commercial subscribership of all of Adelphia's franchise areas in Vermont. Adelphia contends that this percentage is appropriate because it assumes the finding most adverse to effective competition. Based upon its calculations using adjustments for DBS subscribership and its updated household numbers, Adelphia calculates that the fifteen percent penetration requirement is met in all of the franchise areas. Adelphia argues that in light of the overwhelming penetration of competing MVPDs, even using the adjusted MVPD subscriber numbers and updated household estimates, it is unquestionably subject to effective competition. III. DISCUSSION 13. 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. We find that Adelphia has met this burden, and is subject to effective competition in all of the franchise areas. 14. Pursuant to the competing provider effective competition test, the cable operator has the burden of showing that at least two competitors each offers comparable programming to 50 percent of the households in a franchise area and that at least 15 percent of the households in the area subscribe to MVPDs other than the largest. We note that, with regard to the 15 percent subscribership requirement, the number of subscribers of MVPDs other than the largest that offer service in the franchise area will be aggregated. 15. With respect to the first prong of the competing provider test, we find that the programming of DBS providers such as DirecTV and the DISH Network satisfies the Commission's programming comparability criterion. DBS service is presumed to be technically available due to its nationwide satellite footprint, and presumed to be actually available if households in a franchise area are made reasonably aware that the service is available. Adelphia has provided evidence of the advertising of DBS service in the local media serving each of the franchise areas. With respect to the issue of program comparability, we find that the programming of DBS providers is comparable. We note that these providers satisfy the Commission's program comparability criterion because they offer at least 12 channels of video programming, including at least one non-broadcast channel. We find, therefore, that Adelphia has satisfied the first prong of the competing provider test. 16. The second prong of the competing provider test requires that the number of households subscribing to MVPDs other than the largest exceed 15 percent of the households in a franchise area. Adelphia concedes that the updated household information submitted by the Department were obtained through the use of a methodology for updating the 1990 Census information which appears to be reliable. Updated household numbers are acceptable if they are more reliable than the current census data. Accordingly, we use the Department's household numbers in our analysis. 17. We find that Adelphia has introduced data indicating that it is the largest MVPD in six of the franchise areas, the franchise areas represented by CPG Docket Number Authorizations 4834, 5247, 5677, 5847 (Young's), 5886 and 6003. Similarly, Adelphia presents DBS subscriber information which it believes reasonably accounts for the inclusion of commercial accounts in the data reported by SkyTRENDS. We find that Adelphia has provided evidence that includes the Department's household calculations and the lower DBS subscriber information, which demonstrates that penetration of subscribers to MVPDs other than the largest (Adelphia) exceeds fifteen percent in these six franchise areas. Thus, we find that Adelphia is subject to effective competition in these franchise areas. 18. Regarding the three franchise areas, CPG Docket Number Authorizations 5774, 5830 and 5847 (1st Carolina), Adelphia's failure to produce data indicating with certainty which MVPD is the largest does not preclude a determination that MVPDs other than the largest serve at least 15 percent of the households in the area. In these franchise areas, both Adelphia and the combined subscriber totals of DBS providers serve over fifteen percent of the households. Thus, if it is assumed that Adelphia is the largest MVPD, using the DBS subscriber numbers, at least fifteen percent of the households are served by alternative MVPDs. Conversely, assuming Adelphia is not the largest MVPD, counting Adelphia's customers towards the number of households in the franchise area subscribing to an MVPD other than the largest, a total exceeding fifteen percent of the households is reached in all three franchise areas. Therefore, we find that Adelphia is also subject to effective competition in these franchise areas. 19. Regarding the franchise area represented by CPG Docket Number Authorization 5665, because it is not clearly discernable that the number of households subscribing to MVPD service other than the largest exceeds fifteen percent, we find Adelphia has met its burden by satisfying the low penetration test for effective competition. Adelphia has submitted sufficient information demonstrating that its system serves less than thirty percent of the total number of households in the franchise area. Adelphia's percentage of the residential MVPD market is 11.35 percent based upon a calculation using the evidence presented by Adelphia of 362 subscribers in the franchise area, and the Department's estimation of 3189 households. Therefore, we find that Adelphia's system is subject to low penetration effective competition in this franchise area. IV. ORDERING CLAUSES 20. Accordingly, IT IS ORDERED that the petitions for revocation filed by Mountain Cable Company d/b/a Adelphia Cable Communications, Multi-Channel TV Cable Company d/b/a Adelphia Cable Communications and Better TV d/b/a Adelphia Cable Communications challenging the certification of the Vermont Public Service Board to regulate basic cable service rates in Mountain Cable Company CPG Docket Number Authorizations 5247, 5665, 5830, 5847 (1st Carolina), 5847 (Young's), 5774, 5677, 5886, Multi- Channel TV Cable Company CPG Docket Number Authorization 6003, and Better TV CPG Docket Number Authorization 4843 ARE GRANTED. 21. IT IS FURTHER ORDERED that the certification granted to the Vermont Public Service Board to regulate Mountain Cable Company d/b/a Adelphia Cable Communications, Multi-Channel TV Cable Company d/b/a Adelphia Cable Communications and Better TV d/b/a Adelphia Cable Communications basic cable service and equipment rates IS REVOKED. 22. This action is taken pursuant to delegated authority pursuant to Section 0.321 of the Commission's Rules. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau APPENDIX A Communities in Each CPG Docket Authorization CPG Docket Number Authorization 4834 Village & Town of Bennignton VT0025 Village of North Bennignton VT0092 Town of Shaftsbury VT0026 Town of Pownal VT0156 Village of Old Bennignton VT0091 Town of Woodford VT0157 CPG Docket Number Authorization 5247 City of Burlington VT0001 Town of Rutland VT0067 Village of Essex Jct. VT0002 Town of Colchester VT0105 Town of Middlebury VT0003 Town of Braintree VT0106 City of So. Middlebury VT0004 Town of Essex VT0118 Town of Williston VT0005 Town of Berlin VT0120 City of Winooski VT0006 East Middlebury VT0121 City of Montpelier VT0007 Town of Mendon VT0137 Village of Randolph VT0008 Town of St. George VT0158 Village of Waterbury VT0009 Town of Mendon VT0172 Town of Bethel VT0010 Town of Middlesex VT0176 Town of Brandon VT0011 Town of Weybridge VT0177 Town of Proctor VT0012 Town of Duxbury VT0190 Town of Rochester VT0013 Township of Duxbury VT0191 City of Rutland VT0014 Township of Moretown VT0192 Town of Wallingford VT0015 Town of Moretown VT0193 Town of West Rutland VT0016 CPG Docket Number Authorization 5655 Town of Calais VT0206 Town of Woodbury VT0210 Town of East Montpelier VT0207 Town of Worcester VT0211 CPG Docket Number Authorization 5677 Town of Clarendon VT0222 CPG Docket Number Authorization 5774 Town of Brandon VT0011 Village of Forest Dale VT0231 CPG Docket Number Authorization 5847 (Young's) Village of Bellows Falls VT0022 Town of West Pawlett VT0123 Town of Grafton VT0031 East Dorset VT0136 Town of Weston VT0032 Town of Plymouth VT0150 Town of Arlington VT0033 Town of Sunderland VT0159 Town of Williston VT0036 Bromley VT0165 Pawlet VT0038 Bomoseen VT0166 Town of Stratton VT0052 Town of Chittenden VT0167 Town of Pittsford VT0063 West Arlington VT0169 Village of Poultney VT0064 Town of Tyson VT0182 Town of Winhall VT0065 Village of Cambridgeport VT0183 Town of Fair Haven VT0069 Town of Athens VT0184 Town of Castleton VT0070 South Dorset VT0185 Hydeville VT0073 Township of East Arlington VT0186 City of Proctorsville VT0081 Township of Manchester VT0187 Town of Cavendish VT0082 Bondville VT0252 East Poultney VT0089 Town of Dorset VT0253 Village of Saxtons River VT0102 Manchester Center VT0254 Town of Rockinghan VT0113 CPG Docket Number Authorization 5847 (1st Carolina) Village of Bellows Falls VT0022 Town of Mendon VT0137 Town of Weston VT0032 Town of Woodstock VT0163 Town of Ludlow VT0046 Town of Mendon VT0172 Town of Windsor VT0056 Town of Sherburne VT0173 Village of Chester VT0057 Town of Bridgewater VT0174 Village of Perkinsville VT0058 Taftville VT0175 Town of Reading VT0059 Town of South Woodstock VT0180 Town of Springfield VT0061 Village of Chester Depot VT0181 Village of Woodstock VT0062 Bridgewater Corners VT0233 Town of Weathersfield VT0080 BridgewaterCenters VT0234 Town of Londonderry VT0088 North Springfield VT0235 Village of Saxtons River VT0102 West Bridgewater VT0236 Town of Rockinham VT0113 CPG Docket Number Authorization 5886 Village of Bristol VT0028 Town of Barton VT0237 Town of Derby VT0040 Town of Brighton VT0238 Derby Line VT0041 Town of Brownington VT0239 Town of Orleans VT0045 Town of Charleston VT0240 Derby Center VT0099 Town of Coventry VT0241 Town of Shelburne VT0152 Town of Glover VT0242 Town of Charlotte VT0153 Town of Irasburg VT0243 Town of Ferrisburg VT0054 Town of Jay VT0244 City of Vergennes VT0055 Town of Lincoln VT0245 Town of Hinesburg VT0178 Town of Monkton VT0246 City of Newport VT0202 Town of Morgan VT0247 Town of Derby VT0203 Town of New Haven VT0248 Town of Newport VT0204 Town of Troy VT0249 Huntington VT0223 Town of Westfield VT0250 Starksboro VT0224 CPG Docket Number Authorization 6003 Village of Bellows Fall VT0022 Town of Rockingham VT0113 Town of Brattleboro VT0027 Town of Guilford VT0227 Village of N. Westminster VT0077 Town of Vernon VT0232 Village of Saxtons River VT0102