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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: ) ) Pegasus Cable Television of San German, ) CSR-5420-A Inc. and MCT Cablevision, Limited ) Partnership ) ) For Modification of the Puerto Rico ) ADI ) FIRST REPORT AND ORDER Adopted: October 26, 1999 Released: October 28, 1999 By the Chief, Consumer Protection and Competition Division, Cable Services Bureau: I. INTRODUCTION 1. Pegasus Cable Television of San German, Inc. and MCT Cablevision, Limited Partnership (collectively "Pegasus"), filed the above-captioned petition for special relief seeking to modify the Puerto Rico Area of Dominant Influence ("ADI") relative to Television Broadcast Station WZDE (Ch. 52), Carolina, Puerto Rico ("WZDE"). Specifically, Pegasus requests that WZDE be excluded, for purposes of the cable television mandatory broadcast signal carriage rules, from the communities (or "municipios") served by Pegasus. An opposition to this petition was filed on behalf of R y F Broadcasting, Inc., permittee of WZDE, to which Pegasus has replied. II. BACKGROUND 2. Pursuant to Section 614 of the Communications Act and implementing rules adopted by the Commission in Implementation of the Cable Television Consumer Protection and Competition Act of 1992, Broadcast Signal Carriage Issues ("Must Carry Order"), commercial television broadcast stations are entitled to assert mandatory carriage rights on cable systems located within the station's market. A station's market for this purpose is its "area of dominant influence," or ADI, as defined by the Arbitron audience research organization. An ADI is a geographic market designation that defines each television market exclusive of others, based on measured viewing patterns. Essentially, each county in the United States is allocated to a market based on which home-market stations receive a preponderance of total viewing hours in the county. For purposes of this calculation, both over-the-air and cable television viewing are included. 3. Under the Act, however, the Commission is also directed to consider changes in market areas. Section 614(h)(l)(C) provides that the Commission may: with respect to a particular television broadcast station, include additional communities within its television market or exclude communities from such station's television market to better effectuate the purposes of this section. In considering such requests, the 1992 Cable Act provides that: the Commission shall afford particular attention to the value of localism by taking into account such factors as - (I) whether the station, or other stations located in the same area, have been historically carried on the cable system or systems within such community; (II) whether the television station provides coverage or other local service to such community; (III) whether any other television station that is eligible to be carried by a cable system in such community in fulfillment of the requirements of this section provides new coverage of issues of concern to such community or provides carriage or coverage of sporting and other events of interest to the community; and (IV) evidence of viewing patterns in cable and noncable households within the areas served by the cable system or systems in such community. 4. The legislative history of this provision indicates that: where the presumption in favor of ADI carriage would result in cable subscribers losing access to local stations because they are outside the ADI in which a local cable system operates, the FCC may make an adjustment to include or exclude particular communities from a television station's market consistent with Congress' objective to ensure that television stations be carried in the areas in which they serve and which form their economic market. * * * * [This subsection] establishes certain criteria which the Commission shall consider in acting on requests to modify the geographic area in which stations have signal carriage rights. These factors are not intended to be exclusive, but may be used to demonstrate that a community is part of a particular station's market. 5. The Commission provided guidance in its Must Carry Order to aid decision- making in these matters, as follows: For example, the historical carriage of the station could be illustrated by the submission of documents listing the cable system's channel line-up (e.g., rate cards) for a period of years. To show that the station provides coverage or other local service to the cable community (factor 2), parties may demonstrate that the station places at least a Grade B coverage contour over the cable community or is located close to the community in terms of mileage. Coverage of news or other programming of interest to the community could be demon- strated by program logs or other descriptions of local program offerings. The final factor concerns viewing patterns in the cable community in cable and noncable homes. Audience data clearly provide appropriate evidence about this factor. In this regard, we note that surveys such as those used to demonstrate significantly viewed status could be useful. However, since this factor requires us to evaluate viewing on a community basis for cable and noncable homes, and significantly viewed surveys typically measure viewing only in noncable households, such surveys may need to be supplemented with additional data concerning viewing in cable homes. 6. As for deletions of communities from a station's market, the legislative history of this provision indicates that: The provisions of [this subsection] reflect a recognition that the Commission may conclude that a community within a station's ADI may be so far removed from the station that it cannot be deemed part of the station's market. It is not the Committee's intention that these provisions be used by cable systems to manipulate their carriage obligations to avoid compliance with the objectives of this section. Further, this section is not intended to permit a cable system to discriminate among several stations licensed to the same community. Unless a cable system can point to particularized evidence that its community is not part of one station's market, it should not be permitted to single out individual stations serving the same area and request that the cable system's community be deleted from the station's television market. 7. In adopting rules to implement this provision, the Commission indicated that requested changes should be considered on a community-by-community basis rather than on a county-by-county basis, and that they should be treated as specific to particular stations rather than applicable in common to all stations in the market. The rules further provide, in accordance with the requirements of the 1992 Cable Act, that a station not be deleted from carriage during the pendency of an ADI change request. III. THE PLEADINGS 8. In support of its request, Pegasus states that while the entire island of Puerto Rico is considered to be one television market, none of the communities served by Pegasus are located in WZDE's local television market. Pegasus states that application of the four market modification factors supports exclusion of its communities. First, Pegasus indicates that WZDE has no history of carriage on its system. Pegasus argues that although the Commission has given little weight to historical carriage where a station began broadcasting only recently, it should give substantial weight in this instance. It points out that while WZDE began broadcasting on June 15, 1998, it actually had nearly nine years within which to establish a history of carriage since it was granted a construction permit on August 9, 1989. Pegasus maintains that where a station fails to build within a reasonable amount of time, the Commission has traditionally held that it loses certain rights. For instance, Pegasus states that Section 76.5(e) of the Commission's rules requires the termination of a station's 35-mile specified within 18 months after initial grant of its construction permit if it is not in operation by that date. Moreover, Pegasus states that the termination of WZDE's specified zone would limit its network nonduplication rights and sports blackout rights under Sections 76.92 and 76.67. Pegasus argues that the Commission has traditionally used a station's specified zone as one of the indicators of that station's service area. Since WZDE has lost its network nonduplication and sports blackout rights, Pegasus asserts that it should likewise lose its right to demand carriage. 9. In any event, Pegasus states that it is unlikely that it would have carried WZDE even if it had begun broadcasting in a timely manner. Pegasus states that the community of Carolina, to which WZDE is licensed, is located on the east end of the island near San Juan and Pegasus does not carry any of the 11 stations licensed to San Juan, Carolina, or other nearby communities, but only stations licensed to communities on the west end of the island. 10. Second, Pegasus states that WZDE's Grade B contour does not encompass the communities it serves. Pegasus points out that on April 4, 1998, WZDE requested a reduction in its effective radiated power, which was subsequently granted. As a result, Pegasus states that WZDE's Grade B contour falls approximately 25 miles short of the nearest of the system communities. Pegasus argues that if it were WZDE's intention to provide local service to western Puerto Rico, the station would clearly need to increase its effective radiated power, not reduce it. Therefore, Pegasus maintains, the station's application to reduce its power is evidence that WZDE has decided not to serve western Puerto Rico. In addition, Pegasus states that WZDE is geographically distant from the subject communities with the station's city of license and transmitter site approximately 80 and 85 miles distant, respectively. Pegasus maintain that such distances far exceed distances in other decisions in which the Bureau has granted exclusion. Pegasus concludes that WZDE's lack of Grade B coverage and its geographic distance make it highly unlikely that it has any measurable viewership in the subject communities. 11. Third, Pegasus states that not only does WZDE not publish a local programming guide, but the cable system manager was informed by WZDE that the station's programming will not contain any community service announcements, no local activities and no other programming of relevance to Pegasus's subscribers. Pegasus argues that because WZDE's programming has no local ties, it does not meet the local needs and viewers of the communities which Pegasus serves. In any event, Pegasus states that other stations which is currently carries provide more focused programming. Pegasus argues that more than one-half of the programming of stations WQHA, WELU and W63BF is produced by churches or other religious organizations located in western Puerto Rico. In addition, it states that WOLE's program schedule includes more than seven hours of local religious, political and business programming each week. Finally, Pegasus states that its headend is located within the Grade B contours of all of the nine local stations it carries. 12. Finally, Pegasus points out that the Commission has already determined that the economic market served by the Pegasus system is a different economic market from that served by WZDE. Pegasus states that in proceedings to establish boundaries for personal communications service ("PCS"), the Commission decided that Puerto Rico should be divided in two to reflect the island's mountainous geography and the fact that the mountains have created two distinct trade areas. Pegasus argues that the economic and geographic separation of Pegasus from the San Juan/Carolina region explains why it carries no broadcast stations from that area. Pegasus states that the Commission's reliance on economic and geographic separation of this type was recently affirmed by the Second Circuit Court of Appeals. Pegasus maintains that this factor further supports the conclusion that its system communities do not belong in WZDE's television market. 13. In opposition, WZDE argues that because Puerto Rico is considered to be one television market, it is entitled to carriage on cable systems serving communities on the island. WZDE maintains that its failure to commence broadcasting earlier merely reinforces the foundation for the Commission's must carry rules which states that, historically, newly-fledged television stations have had an uphill battle in seeking carriage on cable systems. Indeed, WZDE states that it has had to file eight must carry complaints against island cable systems which ignored its requests for carriage. WZDE asserts that it faces numerous hurdles in developing a viable broadcast service, not the least of which is attaining carriage on island cable system in a mountainous terrain. Therefore, WZDE argues, its lack of historic carriage should not be of importance because it "could tend to defeat the underlying purposes of the carriage requirements . . .[and] would, in effect, prevent weaker or newer stations that cable systems had previously declined to carry, from ever being carried." WZDE states that the Commission's records will reflect that it was not on-the-air for a substantial portion of 1998 primarily due to damage from Hurricane Georges. WZDE states that although it has had a rocky beginning, carriage on island cable systems is essential to its survival and it is committed to operating a first-rate television station. To that end, WZDE indicates that it is taking steps to upgrade by establishing a digital television facility. Therefore, it maintains, it is premature to emasculate its market area when it has only recently commenced broadcasting and is in the process of upgrading and improving its facility. 14. In reply, Pegasus states that WZDE fails to address any of the arguments raised in the petition, nor does it dispute any of factors presented which overwhelmingly argue for the requested modification. Pegasus states that WZDE's only argument was to plead that as a new UHF station it should be given the opportunity to upgrade and improve its facilities before any market modification takes places. However, Pegasus points out that WZDE provides no explanation as to how its upgrade to a digital television facility might provide better Grade B coverage or other local service to Pegasus's service area. IV. DISCUSSION 15. We grant Pegasus' modification request. Based on geography and other relevant information, we believe that the cable communities herein are sufficiently removed from WZDE that the communities ought not be deemed part of the station's market for mandatory carriage purposes. As an initial matter, we note that, according to the legislative history of the 1992 Cable Act, the use of ADI market areas is intended "to ensure that television stations be carried in the areas which they service and which form their economic market." Changes may be sought and granted by the Commission "to better effectuate the purposes" of the mandatory carriage requirements. The market change process incorporated into the Communications Act, however, is not intended to be a process whereby cable operators may seek relief from the mandatory signal carriage obligations apart from the question of whether a change in the market area involved is warranted. When viewed against this backdrop, and considering all of the relevant factual circumstances in the record, we believe that Pegasus' deletion petition appears to be a legitimate request to redraw ADI boundaries to make them congruous with market realities. Pegasus' actions do not reflect an intention to avoid its signal carriage responsibilities under the 1992 Cable Act and the Commission's rules, nor do they evidence a pattern of discriminatory conduct against the station. A. Historic Carriage 16. WZDE began operations in 1998 after a lengthy delay of almost ten years. Given the statutory directive, consideration must be given to this factor, bearing in mind that the objective of the Section 614(h) process is to "better effectuate the purposes" of the broadcast signal carriage scheme. Because WZDE only began to provide service in 1998, we will give its lack of historic carriage little weight. We do give considerable weight, however, to the fact that Pegasus has no history of carrying the television broadcast stations licensed to the eastern portion of the island where WZDE originates. Pegasus' failure to carry these other similarly-situated stations demonstrates a lack of a nexus between itself and the subject communities. B. Grade B Coverage/Local Service 17. A station's local service to cable communities is one of the relevant factors to consider in this particular case that is not influenced by the type or age of the station involved or historical carriage. Service may be measured through geographic means: by examining the distance between the station and the cable communities subject to the deletion request and taking into account natural phenomena such as waterways, mountains and valleys which tend to separate communities. A station's broadcast of local programming, which has a distinct nexus to the cable communities, is also evidence of local service. Finally, a station's Grade A or Grade B contour coverage is an additional indicator of local service and we will weigh the presence or absence of such technical coverage accordingly. In the instant case, WZDE cites no examples of any programming specifically directed to the subject communities. Further, the cable communities involved lie outside of WZDE's predicted Grade B contour and are, on average, approximately 80 miles from WZDE's city of license. C. Carriage of Other Stations 18. We also believe that Pegasus' carriage of other local television stations provides support for the action requested. Where a cable operator is seeking to delete a station's mandatory carriage rights in certain communities, the issue of local coverage by other stations becomes a factor to which we will give greater weight than in cases where a party is seeking to add communities. In this case, the stations carried by Pegasus have a closer nexus to the cable system than does WZDE. D. Viewership 19. Pegasus also has argued that WZDE has no audience in the subject cable communities. WZDE has presented no evidence to rebut this. Moreover, the A.C. Nielsen 1997 County/Coverage Survey does not even list WZDE. This dearth of viewership is of evidentiary significance when combined with the lack of both historical carriage and Grade B coverage. Summary 20. We have carefully considered each statutory factor in the context of the circumstances presented here. Given the evidence as to the lack of Grade B coverage, the lack of viewership, and the lack of local programming, we conclude that it is logical and consistent with the objective of Section 614 of the Communications Act to delete Pegasus' cable communities from WZDE's market for mandatory carriage purposes. V. ORDERING CLAUSES 21. Accordingly, IT IS ORDERED, pursuant to Section 614(h)(1)(C) of the Communications Act of 1934, as amended (47 U.S.C. 534(h)(1)(C)) and Section 76.59 of the Commission's rules (47 C.F.R. 76.59), that the petition for special relief filed by Pegasus Cable Television of San German, Inc. and MCT Cablevision, Limited Partnership IS GRANTED. 22. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION Deborah Klein, Chief Consumer Protection and Competition Division Cable Services Bureau