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Federal Communications Commission
  Federal Communications CommissionDA 13-2289Before theFederal Communications CommissionWashington, D.C. 20554 In the Matter of Time Warner Cable Inc.Petition for Determination of Effective Competition in The Island of Hawaii in the State of Hawaii ))))))) MB Docket No. 12-8 CSR 8562-EMB Docket No. 12-16 CSR 8579-E MEMORANDUM OPINION AND ORDER Adopted: November 25, 2013Released: December 3, 2013 By the Senior Deputy Chief, Policy Division, Media Bureau: I.INTRODUCTION ANDBACKGROUND 1.Time Warner Cable Inc. (“Time Warner” or “the Company”) filed with the Commission a petition pursuant to Sections 76.7, 76.905(b)(2) and 76.907 of the Commission’s rules for a determination that the Company is subject to effective competition on the Island of Hawaii (“the Big Island”) in the State of Hawaii. Time Warneralleges that its cable system serving the Big Island is subject to effective competition pursuant to Section 623(l)(1)(B) of the Communications Act of 1934, as amended (“Communications Act”), 1 and the Commission’s implementing rules, 2 and is therefore exempt from cable rate regulation there. The competition on which the Company relies is the direct broadcast satellite (“DBS”) service provided by DIRECTV, Inc. (“DIRECTV”), and DISH Network (“DISH”). 2.The cable franchise authority for the State of Hawaii, the Department of Commerce and Consumer Affairs (“the State”), filed an opposition to the petition. 3 Time Warner filed a reply (“Reply”), which contained significant new factualallegations. The State then filed a letter that responded to the Company’s new factual allegations. 4 Time Warner filed its own responsive letter. 5 Filings in excess of the usual three are allowed only on a showing of extraordinary circumstances. 6 We find that extraordinary circumstances exist, justifying both letters. The letters were necessary to explore complex facts that emerged late in this proceeding, and each letter responded to the immediately preceding filing  by adding new material facts and observations to the record. 7  3.In the absence of a demonstration to the contrary, cable systems are presumed not to be 1 See 47 U.S.C. § 543(l)(1)(B). 2 47 C.F.R. § 76.905(b)(2). 3 Opposition of the State of Hawaii to Petitions for Special Relief (“Opposition”). 4 Letter from Bruce A. Olcott, Esq., Squire Sanders (US) LLP, counsel for the State, to Marlene H. Dortch, Commission Secretary (March 23, 2012) (“State Letter”). The Letter included a request that it be included despite exceeding the usual number of pleadings allowed by 47 C.F.R. § 76.7. 5 Letter from Craig A. Gilley, Esq., Edwards Wildman Palmer LLP, counsel for Time Warner, to Marlene H. Dortch, Commission Secretary (April 23, 2012) (“Time Warner Letter”). 6 47 C.F.R. § 76.7(d). 7 See, e.g. , County of New Hanover, North Carolina , 24 FCC Rcd 10130, 10132, ¶ 9 (2009).   Federal Communications CommissionDA 13-2289 2subject to effective competition, 8 as that term is defined by Section 623(l) of the Communications Act and Section 76.905 of the Commission’s rules. 9 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. 10 For the reasons set forth below, we grant the petition based on our finding that Time Warner is subject to effective competition on the Big Island. II.DISCUSSIONA.Introduction 4.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. 11 This test is referred to as the “competing provider” test. B.The Franchise Area Issue 5.The petition asserted that the Big Island consists of one franchise area. 12 The State’s opposition alleged that it consists of two, East Hawaii (Hilo) and West Hawaii (Kona). 13 Time Warner’s reply admitted that the State is correct, although the parties may be combining the two areas into one  presently. 14 Accordingly, we will measure the presence of competing provider effective competition in two franchise areas, East Hawaii and West Hawaii. C.The First Part of the Competing Provider Test 6.The first part of the competing provider test has three elements: the franchise area must  be “served by” at least two unaffiliated MVPDs who offer “comparable programming” to at least “50  percent” of the households in the franchise area. 15   The parties do not dispute, and we agree, that the DBS  providers are unaffiliated with each other and with Time Warner, and that the programming of the DBS  providers is “comparable” to Time Warner’s. 16 7.The parties dispute other matters, however. First, they disagree whether the DBS  providers offer service to at least “50 percent” of the households on the Big Island. Time Warner’s  petition points to the DBS providers’ national satellite footprint and to the Commission’s presumption that DBS service has universal reach. 17 The State asserts, to the contrary, that DBS service is 8 47 C.F.R. § 76.906. 9 See 47 U.S.C. § 543(l)(1); 47 C.F.R. § 76.905(b). 10 See 47 C.F.R. §§ 76.906-.907(b). 11 47 U.S.C. § 543(l)(1)(B);  seealso 47 C.F.R. § 76.905(b)(2). 12 See, e.g. , Petition at 1 n.2. 13 Opposition at 3, 12-14. 14 Reply at 3. 15 47 C.F.R. § 76.905(b)(2)(i). 16 See, e.g. , Petition at 5-6. 17 See Petition at 3;  see also Implementation of Section of the Cable Television Consumer Protection &Competition  Act of 1992 , 8 FCC Rcd 5631, 5658-61, ¶¶ 31-32 (1993)(“  Report &Order  ”), on reconsideration, 9 FCC Rcd 4316, 4321-22, ¶¶ 8-10 (1994) (“  Reconsideration Order  ”), reversed in part on other grounds, Time Warner Entertainment (continued....)  Federal Communications CommissionDA 13-2289 3significantly less available on the Big Island than in the continental United States (“CONUS”). The State claims that the Big Island’s disadvantages are the “relatively low elevation angle between the DBS  providers’ satellites and the Island of Hawaii” and the westward shadows of the several volcanoes that form the Big Island and block lines of sight between homes in West Hawaii and DBS satellites near the CONUS. The State claims that these factors impair DBS reception for many residences in West Hawaii. 18  These claims are generalities. They are not detailed factual evidence that rebuts our presumption that DBS service has nationwide reach and therefore is offered to at least 50 percent of the households on the Big Island’s franchise areas. 19  8.In addition, factual evidence belies the State’s characterization of DBS service in West Hawaii. Of the 12 zip codes in West Hawaii, all but two have more than 100 DBS subscribers. Several zip codes in West Hawaii have several hundred DBS subscribers, which is more than most East Hawaii zip codes have. 20 Also, although the State is correct that 64 percent of the Big Island’s DBS subscribers live in East Hawaii, 21 that means that 36 percent of them live in supposedly inaccessible West Hawaii. DBS subscribershipin West Hawaii, while lower than that in East Hawaii, is not so much lower as to indicate that DBS does not reach half the households in West Hawaii. 22 The numbers just stated are convincing, objective evidence that the factors noted by the State do not prevent DBS service from being offered on a wide scale in West Hawaii. We conclude that the DBS providers offer service to at least 50  percent of the households not only in East Hawaii, but also in West Hawaii.9.Second, the parties dispute whether the Big Island is “served by” the DBS providers. A franchise area is considered “served by” an MVPD if its 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. 23  10.The State disputes that DBS service is actually available on the Big Island. 24 The State claims that households there are not reasonably aware of DBS’s availability. 25 In support of this argument, the State makes the same assertions that we found unconvincing in the previous paragraphs. We find the assertions unconvincing, and the contrary evidence convincing, about actual availability. In (...continued from previous page) Co., L.P. v. FCC  , 56 F.3d 151 (D.C. Cir. 1995), cert. denied, 516 U.S. 1112 (1996);  Reexamination of the Effective Competition Standard for the Regulation of Cable Television Basic Service Rates , 6 FCC Rcd 4545, 4554, ¶ 42 n.52 (1991). 18 Opposition at 5-6. 19  Accord  , Cablevision Systems East Hampton Corp. , 24 FCC Rcd10846, 10847, ¶ 6 (2009); Cablevision Systems Westchester Corp., 24 FCC Rcd 872, 876, ¶ 15 (2009); Cablevision of Paterson , 17 FCC Rcd 17239, 17242, ¶ 6, n.22 (2002). 20 Reply at Exs. D, G. 21 See Opposition at 6 n.17;  see also Attachment A hereto.   22  Nor is East Hawaii’s 64% figure strikingly or very disproportionately large. East Hawaii contains 61% of the Big Island’s population. Reply at 5. 23 See Report & Order, 8 FCC Rcd at 5654-57, ¶¶ 27-29;  Reconsideration Order  , 9 FCC Rcd at 4321, ¶ 8; Petition at 3-4. 24 The State does not, in so many words, dispute that DBS service is technically available on the Big Island. To the extent that it does claim technical unavailability, we disagree for the reasons stated elsewhere about offering to at least 50% andactual availability. 25 Opposition at 6-10.  Federal Communications CommissionDA 13-2289 4addition, the State points to the absence from the Petition of evidence that the DBS providers use direct mail or advertise in mass media that reach The Big Island. 26 The State notes the relatively large dishes needed to receive DBS service in Hawaii and the DBS providers marketing their service through “only a handful of stores” and using major retail stores very slightly. 27  11.We find these facts insignificant. That DBS dishes, advertising, and marketing on the Big Island aredifferent from those in the CONUS does not mean that DBS service is not actually available on the Big Island. 28 Advertising and other techniques used in the CONUS are not the only effective techniques. DIRECTV’s web page states unequivocally it serves Hawaii. 29 The State concedes that both DBS providers’ services are marketed in Hawaii. Moreover, the Commission has held that subscribership in a franchise area (the second part of the competing provider test discussed below) may show that consumers there are reasonably aware of its availability, 30 and the subscribers reflected in the subscribership numbers are obviously not the only Big Island residents who are aware of DBS service. All of the foregoing facts satisfy the standard, which is reasonable awareness, not universal or unanimous awareness. 31 Even if DBS service and its subscribers on the Big Island face challenges not present in the CONUS, that does not mean that DBS service is unavailable there or that residents are unaware of it. The strong weight of the evidence points to the conclusion that DBS service is technically and actually available in East and West Hawaii. Accordingly, we find that the first part of the competing provider test is satisfied there. D.The Second Part of the Competing Provider Test 12.The second part of the competing provider test requires that the number of households subscribing to MVPDs, other than the largest MVPD, exceeds 15 percent of the households in a franchise area. Time Warner asserts that it is the largest MVPD on the Big Island (and, we presume, in both East and West Hawaii). 32 The State does not dispute this assertion. The second part of the competing provider test thus requires Time Warner to calculate ratios, separately for East and West Hawaii, the numerator of which is the number of DBS subscribers in each area and the denominator of which is the number of households there. If a ratio exceeds 15 percent, then the second part of the test is satisfied.   26  Id. at 6-7. 27  Id. at 7-9, 11-12. 28 See Report &Order  , 8 FCC Rcd at 5656-57, ¶ 29 (italics added):“we do not believe that [reasonable] awareness necessarily depends on whether the marketing of the competitive service occurs on a local, as opposed to a national, level. Catalog companies, for example, make their services available to customers nationwide by means of 800 numbers. . . . Thus, potential subscribers may be made reasonably aware of the availability of a competing service, for example, through advertising in regional or local media, direct mail, or any other marketing outlet  .” 29 DIRECTV, Welcome to Answer Center  , http://support.directv.com/app/answers/detail/a_id/1923/~/is-directv-available-in-hawaii%3F (visited Feb. 29, 2012);  see also Reply at 7 n.21. Even if DISH did not offer service to the Big Island, DIRECTV and Time Warner would satisfy the competing provider test’s requirement of “at least two unaffiliated” MVPDs. 47 U.S.C. § 543(l)(1)(B)(i). 30  Mediacom Illinois LLC  ,21 FCC Rcd 1175, 1176, ¶ 3 (2006) (also stating that the nationwide growth of DBS service may show that consumers are reasonably aware of the availability of DBS service). 31  Adelphia Cable Commc’ns , 20 FCC Rcd 20487, 20488-89, ¶ 5 (2005); Century-TCI California, L.P. , 18 FCC Rcd 7049, 7051, ¶ 5 (2003); cf. Cox Commc’ns Kansas, LLC  , 26 FCC Rcd 2085, 2090, ¶ 22 (2011). 32 See Petition at 7; id. , Declaration of Bob Barlow, Regional Vice President of Operations for Time Warner Oceanic, at ¶ 3 (Dec. 6, 2011).
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