Federal Communications Commission DA 09-285

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
Comcast Cable Communications, LLC, on behalf of subsidiaries and affiliates
Petitions for Determination of Effective Competition in 107 Franchise Areas in New Jersey / )
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) / CSR 7588-E
CSR 7589-E
CSR 7590-E
CSR 7591-E
CSR 7592-E
CSR 7800-E
CSR 7801-E
CSR 7803-E
CSR 7804-E
CSR 7805-E
CSR 7818-E
CSR 7865-E
CSR 7866-E
CSR 7867-E
CSR 7868-E
CSR 7869-E
CSR 7870-E
CSR 7872-E
CSR 7877-E
CSR 7885-E

MEMORANDUM OPINION AND ORDER

Adopted: February 18, 2009 Released: February 19, 2009

By the Senior Deputy Chief, Policy Division, Media Bureau:

I.  introduction and Background

1.  Comcast Cable Communications, LLC, on behalf of subsidiaries and affiliates, hereinafter referred to as “Petitioner,” has filed with the Commission a petition pursuant to Sections 76.7, 76.905(b)(1), 76.905(b)(2), 76.905(b)(4) and 76.907 of the Commission’s rules for determinations that Petitioner is subject to effective competition in those franchise areas listed on the Attachments hereto. Petitioner alleges that its cable systems serving those franchise areas listed in Attachment A hereto and hereinafter referred to as the “Attachment A Communities” are subject to effective competition pursuant to Section 623(1)(1)(B) of the Communications Act of 1934, as amended (“Communications Act”)[1] and the Commission’s implementing rules,[2] and are therefore exempt from cable rate regulation in the Communities because of the competing service provided by two direct broadcast satellite (“DBS”) providers, DIRECTV, Inc. (“DIRECTV”) and Dish Network (“Dish”). Petitioner also claims to be exempt from cable rate regulation in the three Communities listed on Attachment B, hereinafter referred to as the “Attachment B Communities,” because the Petitioner serves fewer than 30 percent of the households in those Communities. Petitioner finally claims that it is exempt from cable rate regulation in the Communities listed on Attachment C, hereinafter referred to as the “Attachment C Communities,” because of the competing service provided by Verizon New Jersey, Inc., hereinafter referred to as “Competitor.”

2.  All the petitions are opposed by the Division of Rate Counsel (the “DRC”) of the Department of the Public Advocate of the Board of Public Utilities of the State of New Jersey (the “BPU”). In addition, individual oppositions were filed by the Townships of Lumberton and Mount Holly, two Communities in CSR 7877-E. The Township of Lumberton makes specific arguments against the Petition in CSR 7877-E;[3] the Township of Mount Holly generally states its support for the DRC’s arguments.[4] Petitioner filed a reply to every opposition but the Township of Mount Holly’s.

3.  Petitioner has requested permission to withdraw one Community in CSR 7872-E (Lyndhurst, NJ0297) and one in CSR 7885-E (Fairfield, NJ0186) from consideration herein without prejudice to their later re-submission.[5] The DRC does not object, and we grant Petitioner’s request.

4.  In the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition,[6] as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules.[7] The cable operator bears the burden of rebutting the presumption that effective competition does not exist with evidence that effective competition is present within the relevant franchise area.[8] For the reasons set forth below, we grant the petitions based on our finding that Petitioner is subject to effective competition in the Communities listed on Attachments A, B, and C.

II.  DISCUSSION

A.  The Competing Provider Test

5.  Section 623(l)(1)(B) of the Communications Act provides that a cable operator is subject to effective competition if the franchise area is (a) served by at least two unaffiliated multi-channel video programming distributors (“MVPDs”) each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and (b) the number of households subscribing to programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the households in the franchise area;[9] this test is otherwise referred to as the “competing provider” test.

6.  The first prong of this test has three elements: the franchise area must be “served by” at least two unaffiliated MVPDs who offer at least “50 percent” of the households in the franchise area “comparable programming.”[10]

7.  Turning to the first prong, it is undisputed that the Attachment A Communities are “served by” both DBS providers, DIRECTV and Dish, and that these two MVPD providers are unaffiliated with Petitioner or with each other. A franchise area is considered “served by” an MVPD if that MVPD’s service is both technically and actually available in the franchise area. DBS service is presumed to be technically available due to its nationwide satellite footprint, and presumed to be actually available if households in the franchise area are made reasonably aware of the service's availability.[11] The Commission has held that a party may use evidence of penetration rates in the franchise area (the second prong of the competing provider test discussed below) coupled with the ubiquity of DBS services to show that consumers are reasonably aware of the availability of DBS service.[12] Petitioner’s assertion that both DIRECTV and Dish offer service to at least “50 percent” of the households in the Attachment A Communities because of their national satellite footprint is undisputed.[13]

8.  The “comparable programming” element of the first prong is satisfied if a competing MVPD provider offers at least 12 channels of video programming, including at least one channel of nonbroadcast service programming[14] and is supported in the petitions with copies of channel lineups for both DIRECTV and Dish.[15] In CSR 7877-E, the Township of Lumberton (NJ 0389), through its Mayor, makes an argument that we interpret as going to whether the DBS providers’ programming is comparable to Petitioner’s. The Mayor alleges that many of that Township’s residents enjoy watching Philadelphia sports teams.[16] The Mayor appears to believe that those teams can be seen only on Petitioner’s cable service, and are not available on the DBS providers’ services. The Mayor claims that Petitioner therefore has a “monopoly or something approaching a monopoly on the broadcast of the majority of local professional sports games in the Philadelphia market.”[17] The Mayor concludes that, therefore, Petitioner lacks effective competition in Lumberton.[18]

9.  We find that the Township of Lumberton’s argument lacks merit. As noted in the preceding paragraph, all that is necessary for the programming to be “comparable” is that it offer at least 12 channels of video programming, including at least one channel of nonbroadcast service programming. The presence or absence of any kind of program content, even popular local sports, is not material. It also appears that local sports are available to households in Lumberton in some packages offered by the DBS providers.[19] Accordingly, we cannot give weight to the Township of Lumberton’s allegations and we find the DBS providers’ programming to be comparable to Petitioner’s. Accordingly we conclude that the first prong of the competing provider test is satisfied, both in Lumberton and the other Attachment A Communities.

10.  The second prong of the competing provider test requires that the number of households subscribing to MVPDs, other than the largest MVPD, exceed 15 percent of the households in a franchise area. Petitioner asserts, without objection from the DRC, that it is the largest MVPD in all the Attachment A Communities.[20] Petitioner sought to determine the competing provider penetration in the Attachment A Communities by purchasing a subscriber tracking report from the Satellite Broadcasting and Communications Association (“SBCA”) that identified the number of subscribers attributable to the DBS providers within the Attachment A Communities on a five-digit zip code basis.[21]

11.  The aggregate DBS subscriber penetration levels that were calculated using Census 2000 household data[22] (and, in one Community, a 2006 Census estimate[23]) as reflected in Attachment A, indicate that the number of households subscribing to programming services offered by MVPDs, other than the largest MVPD, exceeds 15 percent of the households in the Attachment A Communities. This evidence, if unrefuted, satisfies the second prong of the competing provider test for each of the Attachment A Communities.[24]

1.  The DRC’s Objections

12.  The DRC makes several objections to Petitioner’s calculations. Some objections apply to how Petitioner calculated the numerators of its ratios, and others to their denominators. Some apply to all the Attachment A Communities, and others only to individual ones.

General Objections

13.  Timeliness of Data. The DRC objects that Petitioner’s calculations use DBS subscriber numbers from 2007 or 2008 and household data from 2000 (and, in one case, 2006). The DRC argues that the Census-derived household data is stale and that Petitioner’s subscribership and household data should be contemporaneous with each other and the date on which the Petition that contains it is filed.[25] We disagree with the DRC. The use of the most recent Census count of “households,” while allowing for the use of more recent and equally or more reliable household counts, is a practice that we authorized early in litigation about effective competition.[26] Petitioner submitted such data (the most recent available Census data) here and that sustained its initial burden of proof about household numbers in each Attachment A Community. We have also stated that we will accept more recent household numbers that are at least as reliable as Census numbers,[27] but the DRC has submitted no such numbers here. In many decisions, including involving the State of New Jersey, we have found competing provider effective competition to exist based on household and DBS subscribership data that are several years apart in time.[28] Accordingly, we conclude that the DRC’s general allegations about the timeliness of the data submitted by Petitioner reveal no flaw in the petitions.

14.  We also dismiss the DRC’s advocacy of a “complete when filed” rule, which apparently would prohibit late-filed updates to Petitioner’s data, and which the DRC advocates in the course of its argument that Petitioner’s data is stale.[29] In previous proceedings, the DRC advocated such a rule as a procedural one, and we adopt the analysis by which we declined to follow it in those proceedings.[30] In addition, no updates to the data in the petitions were necessary, so the petitions herein were complete when filed.

15.  Cancellations. The DRC objects that Petitioner’s estimates of DBS subscribership do not account for cancellations of DBS service after the dates on which SBCA estimated subscribership and before each Petition was filed.[31] Attached to the DRC’s comments are publications that, the DRC says, show “a steady decline in satellite subscribership in 2007.”[32] We find no merit in the DRC’s objection, which we recently rejected in another proceeding.[33] The available evidence shows that DBS subscribership, as a percentage of subscription to all MVPD services, generally has increased over time (that is, new subscriptions have outnumbered cancellations).[34] Indeed, the very publications the DRC attaches to its Comments state that DBS subscriber numbers grew steadily in absolute terms, and did not decline, in 2007.[35] Accordingly, we decline the DRC’s request that we fault Petitioner for not making post-Petition updates of cancellations of DBS service.

16.  Requests for Petitioner’s “Analysis and Work Papers.” The DRC objects that Petitioner’s filings did not include “the analysis and work papers that underlie and support its calculation of satellite penetration percentage.”[36] Without the analysis and papers, the DRC says, it cannot examine, verify, and challenge the underlying numbers from which Petitioner’s household and DBS subscriber numbers were derived.[37] We have rejected this objection before[38] and we affirm that rejection, but here the DRC cites for the first time several Court of Appeals decisions. The decisions reversed regulatory agencies, including this Commission, for not allowing interested parties to examine calculations the agencies made and used as the bases for new regulations.[39] The DRC argues that, as in those cases, it would be reversible error for the Commission to rule on the present petitions without allowing it to examine all the analysis and work papers Petitioner used in preparing its case.

17.  What Petitioner filed herein are all the numbers of DBS subscribers and households, the calculations by which Petitioner used those numbers to estimate DBS subscribership in the Attachment A Communities, and detailed statements by Media Business Corporation (“MBC”) and SBCA describing how they derived the numbers that Petitioner used. These appear to be all the numbers of households and DBS subscribers with which Petitioner estimated competing provider effective competition. We have accepted these statements and kinds of numbers in scores of earlier competing provider effective competition decisions. The DRC reveals no significant omission, technical flaw or analytical unsoundness in either the numbers, their derivation, or the calculations made with them; and gives no indication of what additional “underlying data,” assuming that there are any, would have added in substance to the record before the Bureau.

18.  The Court of Appeals decisions cited by the DRC are inapposite on several grounds. First, those decisions found that regulators had failed to comply with the notice-and-comment requirements of Section 5 of the Administrative Procedure Act.[40] That Section applies only to rulemakings, however, and this proceeding is an adjudication, to which Section 5 is inapplicable. Second, the calculations that the courts reversed the regulators for not making available were calculations by the regulatory agencies themselves.[41] The information and analysis that the DRC seeks here, however, are by Petitioner or its independent contractors (MBC and SBCA). Third, the calculations involved in the decisions that the DRC cites led to new regulations or changes in existing regulations.[42] As noted in the preceding paragraph, the information that the DRC seeks here is of the same kind, and the calculations are by the same formulas, that we have used in scores of previous effective competition decisions.[43] The DRC gives us no reason to suspect them.

19.  We agree wholeheartedly that the data on which we base our decisions should be made available for analysis by commenting parties. Petitioner has made that data available, in the Exhibits to its Petitions. The DRC has simply asked for more, without any specific indication that more exists, would reveal an error, or would otherwise be helpful to efficient, pro-consumer regulation.