******************************************************** 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: ) CSR 5198-E ) Marcus Cable Associates, L.P. ) Barron, WI ) CUID No. WI0015 Petition for Special Relief ) MEMORANDUM OPINION AND ORDER Adopted: April 30, 1998 Released: May 5, 1998 By the Acting Chief, Cable Services Bureau: I. INTRODUCTION 1. Marcus Cable Associates, L.P. d/b/a Marcus Cable ("Marcus") has filed a Petition for Special Relief seeking a determination of effective competition. Marcus asserts that it is subject to effective competition in Barron, Wisconsin because of the cable service of CTC Communications, Inc. in that City. This petition is unopposed. For the reasons discussed below, the Petition is granted. 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(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. A finding that a cable system is subject to effective competition precludes regulation of its cable rates by the local franchising authority. 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 4. Marcus asserts that it is subject to LEC effective competition in its Barron, Wisconsin franchise area. With regard to the LEC affiliation requirement, Marcus asserts that CTC Communications, Inc. d/b/a CTC TelCom ("CTC") is a competing franchised cable operator wholly owned by Chibardun Telephone Cooperative, Inc., ("CTCI") a local exchange carrier serving customers in Wisconsin. 5. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Marcus asserts that CTC has completed more than 75% of an overbuild of Barron and consequently, is physically able to provide cable service to the majority of the city of Barron. Marcus adds that CTC has heavily marketed the availability of its cable service through local media and other means. Marcus asserts there are no regulatory, technical, or other impediments to households in Barron taking service from CTC. 6. Marcus also asserts that CTC offers comparable programming to Barron subscribers. Specifically, Marcus provides CTC's channel line-up which demonstrates that CTC offers over 75 channels, of which at least 12 are local television broadcasting signals. Marcus offers 70 channels of programming in Barron, of which at least 10 are local television broadcast signals. 7. Finally, Marcus states that it has made several pricing and marketing changes in response to competition from CTC. Marcus notes that it recently: (1) added channels to its expanded basic tier with no rate increase; (2) added additional premium services such as HBO2 and HBO3 to the ala carte price for HBO and Showtime; and (3) upgraded its system by adding pay per view channels and an on-screen programming guide. 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. Marcus 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 multi-channel video programming distributor ("MVPD") using the facilities of such LEC or its affiliate), we find that Marcus has provided sufficient evidence demonstrating that CTC is an MVPD wholly owned by a LEC. CTCI is a LEC as defined by the Communications Act, and CTC meets the Commission's definition of MVPD. Therefore, we find that Marcus demonstrates that CTC satisfies the affiliation prong of the LEC effective competition test. Marcus is unaffiliated with both CTC and CTCI. 10. We also find that Marcus has submitted sufficient evidence to show that the programming of CTC is comparable to the programming which it provides. The channel information for CTC submitted by Marcus establishes that CTC offers more than 75 channels of programming, including 12 local broadcast channels. This offering satisfies the programming comparability criterion. 11. In addition, we find that based on the information before us, CTC is offering service in Marcus's franchise area sufficient to demonstrate the presence of effective competition. CTC has nearly completed its overbuild of Marcus's system in Barron and is now competing for customers with Marcus in the area at issue. We find that CTC's uncontroverted statement that it passes more than 50% of the households in the City of Barron and serves more than 15% of the households in the City is indicia that CTC is physically able to offer service in the cable community. 12. We note that CTC's extensive marketing efforts, including newspaper and radio advertisements, as well as the stories and editorials about CTC's construction and service offerings in the local newspapers ensure that potential subscribers are reasonably aware of the availability of CTC's service. In those areas wired and marketed by CTC, potential subscribers need only contact CTC to activate service. Moreover, those subscribers are able to receive CTC's cable service for little or no additional investment and without encountering regulatory or technical obstacles. We also note that Marcus has added new channels for the benefit of its subscribers. Consistent with Congressional intent in adopting Section 623(l)(1)(D) of the Communications Act, under the circumstances 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 filed by Marcus Cable Associates, L.P. IS GRANTED. 14. IT IS FURTHER ORDERED that the certification of the City of Barron to regulate the basic cable rates of Marcus Cable in Barron, Wisconsin IS REVOKED. 15. This action is taken pursuant to the interim rules adopted in Implementation of Cable Reform Provisions of the Telecommunications Act of 1996, and is without prejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of Proposed Rulemaking contained therein. 16. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION John E. Logan Acting Chief, Cable Services Bureau