**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+---------------------------------+
| In the Matter of                 | ) | File Number EB-07-SE-352        |
|                                  |   |                                 |
| Oceanic Time Warner Cable,       | ) | NAL/Acct. No. 200832100074      |
|                                  |   |                                 |
| a subsidiary of Time Warner      | ) | FRN 0018049841                  |
| Cable, Inc.                      |   |                                 |
|                                  | ) |                                 |
|                                  |   |                                 |
|                                  | ) |                                 |
|                                  |   |                                 |
|                                  | ) |                                 |
+----------------------------------+---+---------------------------------+

##  {#section .unnumbered}

## NOTICE OF APPARENT LIABILITY FOR FORFEITURE {#notice-of-apparent-liability-for-forfeiture .unnumbered}

**Adopted: August 22, 2008 Released: August 22, 2008**

By the Chief, Enforcement Bureau:

# INTRODUCTION

1.  In this *Notice of Apparent Liability for Forfeiture* ("*NAL*"), we
    find that Oceanic Time Warner Cable ("Oceanic"), a subsidiary of
    Time Warner Cable, Inc. (collectively, "TWC") apparently willfully
    violated Section 76.1603(c) of the Commission\'s Rules
    ("Rules").[^1] Specifically, Oceanic failed to provide the requisite
    thirty (30) day advanced written notice to the Hawaii Department of
    Commerce and Consumer Affairs, Cable Television Division, which
    serves as the local franchise authority ("LFA") for the State of
    Hawaii, before implementing a service change caused by the migration
    of certain channels to its Switched Digital Video ("SDV") platform
    on September 24, 2007. We conclude, pursuant to Section 503(b) of
    the Communications Act of 1934, as amended ("Act"),[^2] that Oceanic
    is apparently liable for a forfeiture in the amount of seven
    thousand five hundred dollars (\$7,500).

# BACKGROUND

2.  On November 8, 2007, the Spectrum Enforcement Division of the
    Enforcement Bureau ("Bureau") issued a Letter of Inquiry ("LOI")[^3]
    to TWC based on complaints that the company had moved certain cable
    channels, which previously had been accessible to subscribers using
    CableCARD-equipped unidirectional digital cable products ("UDCPs"),
    including digital cable ready sets, to an SDV platform. CableCARDs
    permit the reception of secured digital cable services without the
    addition of a set-top box. Specifically, one complainant alleged
    that Oceanic had deployed SDV in late September 2007 and moved a
    large number of channels to an SDV platform, including popular high
    definition sports and entertainment channels.[^4] According to the
    complaints, however, TWC's implementation of SDV necessarily
    required customers using a CableCARD to obtain additional equipment,
    *i.e.*, a set top box, from the cable company to continue to receive
    all cable channels available to them prior to the change to the
    two-way SDV platform.[^5] The LOI sought information on a number of
    issues, including whether the company had complied with Section
    76.1603 of the Commission's Rules by providing written notice to
    local franchising authorities at least thirty (30) days before
    implementing any rate or service change.

3.  TWC responded to the LOI on November 30, 2007.[^6] In its LOI
    Response, TWC does not claim that Oceanic notified the relevant LFA
    of its plans to move certain channels to an SDV platform. Rather,
    TWC states, among other things, that the notification provisions of
    Section 76.1603 do not apply because the "provision of SDV services
    does not involve a change in rates or service packages."[^7]
    Specifically, TWC states that its "decision to begin transmitting
    certain channels using SDV technology does not constitute a 'rate or
    service change' for which TWC is required to give specific advance
    notice to franchising authorities pursuant to Section 76.1603(c) of
    the Commission's rules."[^8] TWC contends that it offers the same
    service tiers to subscribers at the same prices before and after
    deployment of SDV technology -- customers simply need a set top box
    to view any two-way services.[^9] Moreover, according to TWC, "any
    customer needing a set-top box to receive the same channels received
    before the activation of SDV, can obtain such a box without an
    upgrade or downgrade charge"[^10] (which is usually required when
    customers make changes to their service). TWC further notes that it
    has taken steps to keep subscribers apprised of its plans with
    respect to its SDV deployment,[^11] and notes that Oceanic took
    additional steps to mitigate the impact of its movement of channels
    to SDV technology by offering subscribers with CableCARDs an
    opportunity to lease an interactive set-top box for two years for
    the same monthly charge as a CableCARD.[^12]

4.  TWC further contends that the only applicable notice requirement is
    Section 76.1622 of the Commission Rules, which requires that cable
    operators provide annual equipment compatibility notices to advise
    consumers that "some models of TV receivers ... may not be able to
    receive all of the channels offered by the cable system when
    connected directly to the cable system."[^13] According to TWC, it
    complied with Section 76.1622 in its June 2007 annual equipment
    compatibility notice, which specifically informs subscribers that
    "due to device limitations, devices using CableCARD technology only
    receive what is known as 'one-way' cable services, and such devices
    will not receive 'two-way' cable services, such as TWC's electronic
    program guide, Pay-Per-View, Video-on-Demand *or switched digital
    video services.*"[^14]

# DISCUSSION

> **A. Oceanic Apparently Violated Section 76.1603(c) By Failing To
> Provide Proper Notice to the Hawaii LFA**

5.  Based on the record before us, we find that Oceanic apparently
    willfully violated Section 76.1603(c) by failing to provide the
    Hawaii Department of Commerce and Consumer Affairs, Cable Television
    Division,[^15] thirty (30) days advance notice prior to its movement
    of certain channels to a SDV platform on September 24, 2007.[^16]

6.  We disagree with TWC's assertion that its subsequent movement of
    linear channels to an SDV platform did not involve a change in rates
    or service subject to Section 76.1603's notice requirements.

7.  Section 76.1603(c) of the Rules provides, in relevant part, as
    follows:

> \[C\]able systems shall give 30 days written notice to both
> subscribers and local franchising authorities before implementing any
> rate or service change. Such notice shall state the precise amount of
> any rate change and briefly explain in readily understandable fashion
> the cause of the rate change (e.g., inflation, change in external
> costs or the addition/deletion of channels). When the change involves
> the addition or deletion of channels, each channel added or deleted
> must be separately identified.[^17]

We find that migration of channels that were previously accessible with
a CableCARD-equipped UDCP to a switched digital platform that can only
be accessed with an operator-provided set-top box constitutes a change
in services for those customers that use CableCARDs without a set-top
box. Indeed, TWC's own notice to subscribers concedes this point by
contrasting "what is known as 'one-way' services" (provided using
CableCARD technology) with "'two-way' cable services" (which CableCARD
technology cannot provide).[^18] Based upon TWC's own characterization,
therefore, the migration to a switched digital platform can be likened
to the deletion of channels, in that subscribers who accessed those
channels with a CableCARD-equipped UDCP lost those channels unless they
took some action. Thus, Oceanic's actions triggered the obligation to
provide advance written notice to both customers and the appropriate
LFA.

8.  Oceanic's movement of programming to a SDV platform rendered
    inaccessible dozens of cable channels previously accessible on
    CableCARD-equipped UDCPs. Its offer to exchange each CableCARD for a
    digital cable box at no extra charge, and to discount the digital
    box in exchange for the CableCARD for a minimum of two years,[^19]
    does not negate the fact that CableCARD customers have experienced a
    service change. From the customer's perspective, on September 23,
    2007, a CableCARD-equipped UDCP without a set-top box received
    certain channels; on September 24, 2007, that same device received
    forty fewer channels. As the Commission stated in another case
    involving TWC, "it is the subscribers' perspective -- not that of
    the cable operator -- that is relevant in determining whether a
    change in programming services has occurred."[^20] We doubt that
    Oceanic's customers would view the loss of more than forty (40)
    channels \-- including popular high definition programming \-- as
    merely an "equipment compatibility" issue.[^21] Indeed, according to
    a channel listing from two months after Oceanic's migration of
    channels to an SDV platform, 135 of 248 Oceanic Time Warner's linear
    channels were unavailable to CableCARD users, including popular news
    and entertainment programming.[^22]

9.  TWC's interpretation of the Rules would have us find that cable
    operators apparently have no obligation to inform either their
    customers or LFAs about the movement of channels to a platform
    inaccessible to those customers without additional equipment. If we
    followed TWC's construction of the Rules to its logical conclusion,
    cable operators could, with nothing more than an annual equipment
    compatibility notice, move all their channels to such platforms
    without further notice to customers and local governing bodies, and
    thereby render CableCARDs entirely useless. Regardless of the
    consequences, cable operators would violate no FCC rule if they
    abruptly moved channels to an SDV platform with no notice to anyone.
    Such an interpretation defies both precedent and common sense.

10. As the Commission reiterated in its recent decision[^23] addressing
    the responsibilities of cable operators regarding the transition to
    digital broadcast television, cable operators must comply with
    certain notice requirements when they make changes in programming
    service, particularly ones that will affect the channels viewable by
    subscribers. In that decision, the Commission reminded operators
    that they must provide written notice to subscribers about
    transitions to all-digital systems, containing any information they
    need or actions they will have to take to continue receiving
    service.[^24] As the Commission has stated, previously, "it is
    crucial that local franchising authorities receive timely notice of
    a cable operator's change to programming services."[^25]

11. Therefore, for the reasons stated above, we find that Oceanic
    apparently violated Section 76.1603(c) by failing to provide at
    least thirty (30) days notice to the Hawaii LFA before moving
    certain linear channels to its SDV platform.[^26]

> **B. Forfeiture Calculation**

12. Under Section 503(b)(1)(B) of the Act, any person who is determined
    by the Commission to have willfully or repeatedly failed to comply
    with any provision of the Act or any rule, regulation, or order
    issued by the Commission shall be liable to the United States for a
    forfeiture penalty.[^27] To impose such a forfeiture penalty, the
    Commission must issue a notice of apparent liability and the person
    against whom such notice has been issued must have an opportunity to
    show, in writing, why no such forfeiture penalty should be
    imposed.[^28] The Commission will then issue a forfeiture if it
    finds by a preponderance of the evidence that the person has
    violated the Act or a Commission rule.[^29] As discussed below, we
    conclude that Oceanic is apparently liable for a forfeiture in the
    amount of seven thousand five hundred dollars (\$7,500) for its
    willful violation of Section 76.1603(c) of the Rules.

13. Under Section 503(b)(2)(A) and Section 1.80(b)(1) of the
    Commission's Rules,[^30] we may assess a cable television operator a
    forfeiture of up to \$32,000 for each violation or each day of a
    continuing violation, up to a statutory maximum forfeiture of
    \$325,000 for any single continuing violation. In exercising such
    authority, we are required to take into account "the nature,
    circumstances, extent, and gravity of the violation and, with
    respect to the violator, the degree of culpability, any history of
    prior offenses, ability to pay, and such other matters as justice
    may require."[^31]

14. The Commission's *Forfeiture Policy Statement*[^32] and Section 1.80
    of the Rules do not establish a specific base forfeiture for
    violation of Section 76.1603's notice requirements.[^33] Based on
    the totality of circumstances here and the Commission's past
    precedent,[^34] we find that \$7,500 is an appropriate base
    forfeiture for the failure to notify the Hawaii LFA of Oceanic's
    change in service. Accordingly, we conclude that Oceanic is
    apparently liable for a \$7,500 forfeiture for its willful violation
    of Section 76.1603(c) of the Rules.

# ordering clauses

15. Accordingly, **IT IS ORDERED** that, pursuant to Section 503(b) of
    the Act, and Section 1.80 of the Rules, Oceanic Time Warner Cable, a
    subsidiary of Time Warner Cable, Inc. is **NOTIFIED** of its
    **APPARENT LIABILITY FOR A FORFEITURE** in the amount of seven
    thousand five hundred dollars (\$7,500) for willful violation of
    Section 76.1603(c) of the Rules.

16. **IT IS FURTHER ORDERED** that, pursuant to Section 1.80 of the
    Rules, within thirty days of the release date of this Notice of
    Apparent Liability for Forfeiture, Oceanic **SHALL PAY** the full
    amount of the proposed forfeiture or **SHALL FILE** a written
    statement seeking reduction or cancellation of the proposed
    forfeiture.

17. Payment of the forfeiture must be made by check or similar
    instrument, payable to the order of the Federal Communications
    Commission. The payment must include the NAL/Account Number and FRN
    Number referenced above. Payment by check or money order may be
    mailed to Federal Communications Commission, P.O. Box 979088, St.
    Louis, MO 63197-9000. Payment by overnight mail may be sent to U.S.
    Bank -- Government Lockbox #979088, SL-MO-C2-GL, 1005 Convention
    Plaza, St. Louis, MO 63101. Payment by wire transfer may be made to
    ABA Number 021030004, receiving bank TREAS/NYC, and account
    number 27000001. For payment by credit card, an FCC Form 159
    (Remittance Advice) must be submitted. When completing the FCC Form
    159, enter the NAL/Account number in block number 23A (call
    sign/other ID), and enter the letters "FORF" in block number 24A
    (payment type code). Requests for full payment under an installment
    plan should be sent to: Chief Financial Officer \-- Financial
    Operations, 445 12th Street, S.W., Room 1-A625, Washington,
    D.C.  20554. Please contact the Financial Operations Group Help Desk
    at 1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
    regarding payment procedures. Oceanic will also send electronic
    notification on the date said payment is made to
    JoAnn.Lucanik@fcc.gov.

18. The response, if any, must be mailed to the Office of the Secretary,
    Federal Communications Commission, 445 12th Street, S.W.,
    Washington, D.C. 20554, ATTN: Enforcement Bureau -- Spectrum
    Enforcement Division, and must include the NAL/Acct. No. referenced
    in the caption. The response should also be e-mailed to JoAnn
    Lucanik, Deputy Chief, Spectrum Enforcement Division, Enforcement
    Bureau, FCC, at JoAnn.Lucanik@fcc.gov.

19. The Commission will not consider reducing or canceling a forfeiture
    in response to a claim of inability to pay unless the petitioner
    submits: (1) federal tax returns for the most recent three-year
    period; (2) financial statements prepared according to generally
    accepted accounting practices; or (3) some other reliable and
    objective documentation that accurately reflects the petitioner's
    current financial status. Any claim of inability to pay must
    specifically identify the basis for the claim by reference to the
    financial documentation submitted.

20. **IT IS FURTHER ORDERED** that a copy of this Notice of Apparent
    Liability for Forfeiture shall be sent by first class mail and
    certified mail return receipt requested to counsel for Time Warner,
    Inc.: Arthur H. Harding, Esq., Fleischman and Harding LLP, 1255 23rd
    Street, N.W., Eighth Floor, Washington, D.C. 20037 and Matthew A.
    Brill, Esq., Latham & Watkins LLP, 555 Eleventh Street, N.W., Suite
    1000, Washington, D.C. 20004-1304.

    FEDERAL COMMUNICATIONS COMMISSION

Kris Anne Monteith

Chief, Enforcement Bureau

[^1]: 47 C.F.R. § 76.1603(c).

[^2]: 47 U.S.C. § 503(b).

[^3]: *See* Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement
    Division, Enforcement Bureau, Federal Communications Commission to
    Mark Lawrence-Apfelbaum, Esq., Executive Vice President and General
    Counsel, Time Warner Cable, Inc. (Nov. 8, 2007) ("LOI").

[^4]: *See* Letter from Robert A. Flatt to Kevin J. Martin, Chairman,
    Federal Communications Commission dated Nov. 7, 2007 (available as a
    comment in CS Docket No. 97-08) ("*Flatt Complaint*").

[^5]: *Id*. at 1. *See also* Letter from Richard C. Brooks, Jr. to Kevin
    J. Martin, Chairman Federal Communications Commission dated Aug. 27,
    2008 (available as a comment in CS Docket No. 97-08) ("*Brooks
    Complaint*").

[^6]: *See* Letter from Arthur H. Harding, Fleischman and Harding LLP
    and Matthew A. Brill, Latham & Watkins LLP, Counsel for Time Warner
    Cable, to Kathryn S. Berthot, Chief, Spectrum Enforcement Division,
    Enforcement Bureau, Federal Communications Commission (Nov. 30,
    2007) ("LOI Response").

[^7]: *Id*. at 8.

[^8]: *Id*. at 9.

[^9]: *Id.*

[^10]: *Id*. at 10.

[^11]: *Id*. at 6. For instance, TWC points out that it provided
    announcements of its plans for deployment of SDV to potentially
    affected CableCARD customers in a number of its Divisions. For
    certain customers in its Hawaii Division, Oceanic provided 30
    day-advanced notice, dated August 20, 2007, about the planned
    deployment of SDV scheduled for September 24, 2007.

[^12]: *Id*. at 4.

[^13]: 47 C.F.R. § 76.1622(b)(1).

[^14]: LOI Response at 8 (emphasis added), and Attachment 4.

[^15]: The Cable Television Division of the Hawaii Department of
    Commerce and Consumer Affairs regulates franchised wireline cable
    operators within the State of Hawaii. *See*
    http://hawaii.gov/dcca/areas/catv/ (visited Aug. 21, 2008).

[^16]: The record indicates that Oceanic implemented SDV in certain
    cable systems in its Hawaii Division on September 24, 2007 and on
    November 6, 2007. Our ruling here pertains only to the
    implementation of SDV on September 24, 2007.

[^17]: 47 C.F.R. § 76.1603(c).

[^18]: LOI Response at 8, and Attachment 4.

[^19]: Oceanic's August 20, 2007 notice to CableCARD customers stated
    that customers could exchange their CableCARDS for a digital cable
    box(es) at no extra charge and could schedule a free visit by
    contacting the Customer Care Center. The notice further stated that
    discounting the digital box(es) in exchange for the CableCARD(s)
    would continue for a minimum of two years. *See* LOI Response,
    Attachment 1.

[^20]: *Time Warner Cable, a Division of Time Warner Entertainment
    Company, L.P.,* Order on Reconsideration, 21 FCC Rcd 9016, 9020 ¶ 15
    (Media Bur. 2006) ("*Time Warner Order on Reconsideration*"),
    *consent decree adopted,* Order, 21 FCC Rcd 11229 (Media Bur. 2006).
    We note that the Consent Decree adopted in that case contained an
    admission by TWC that "its discontinuation of its carriage of the
    NFL Network without notification of its subscribers violated Section
    76.1603." *Id.* at 11229 ¶ 2; *see also id.* at 11233 ¶ 14. The
    Consent Decree, however, also states that it "does not constitute an
    adjudication on the merits or a factual or legal finding or
    determination regarding compliance or noncompliance with the
    requirements of the Act or the Rules and the Commission's orders."
    *Id.*

[^21]: We understand that many television sets equipped to utilize
    CableCARDs can display high-definition television programming. Thus,
    the unavailability of HD channels to CableCARD users has particular
    significance.

[^22]: *Flatt Complaint*, Attachment 1 ("Digital Channel Lineup-Kona").
    That channel listing also indicated that at least two broadcast
    stations, including the local NBC affiliate, were unavailable to
    CableCARD users. TWC has stated that this listing was an error and
    has been corrected. LOI Response at 10. The current channel lineup
    listed on Oceanic's website now indicates that more than 100 linear
    programming channels (excluding pay-per-view, on-demand, and audio
    channels) remain unavailable to such subscribers.

[^23]: *See Carriage of Digital Television Broadcast Signals: Amendment
    to Part 76 of the Commission's Rules*, Third Report and Order and
    Third Further Notice of Proposed Rulemaking, 22 FCC Rcd 21064 at ¶
    38 & n. 121 (2007). Although this decision came after Oceanic's
    September 24, 2007 movement of channels to its SDV platform, the
    Commission was merely reminding cable operators of existing law, not
    changing its interpretation of the Rules. *Id.*

[^24]: *Id*. at ¶ 38.

[^25]: *Time Warner Order on Reconsideration,* 21 FCC Rcd at 9027 ¶ 30.

[^26]: To the extent that Section 76.1622 of our Rules applies in this
    context, we would not find TWC to be in violation of the requirement
    that cable operators at least annually provide subscribers the
    relevant equipment compatibility notices. Also, though we do not
    address here whether Oceanic's movement of channels to a SDV
    platform is consistent with the Commission's "plug and play"
    policies, we note that this movement might further discourage
    consumers from the use of CableCARDs as an alternative to
    TWC-supplied set top boxes. *See Implementation of Section 304 of
    the Telecommunications Act of 1996: Commercial Availability of
    Navigation Devices*, Report and Order, 13 FCC Rcd 14775, 14786-7, ¶¶
    28-32 (1998) ("Manufacturers will have substantial incentive to
    develop and distribute new products in response to consumer demands
    for equipment and features, provided that the MVPD system for which
    the equipment is designed is accessible."). *See also* 47 C.F.R. §§
    76.1201, 1202, 1204(c). We will consider those concerns and
    complaints separately. *See e.g*., *Flatt Complaint* at 1-2; *Brooks
    Complaint* at 2-3.

[^27]: 47 U.S.C. § 503(b)(1)(B); 47 C.F.R. § 1.80(a)(1).

[^28]: 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).

[^29]: *See, e.g.,* *SBC Communications*, *Inc.,* Forfeiture Order, 17
    FCC Rcd 7589, 7591 (2002).

[^30]: 47 U.S.C. § 503(b)(2)(A), 47 C.F.R. § 1.80(b)(1). The Commission
    has repeatedly amended Section 1.80(b)(1) of the Rules to increase
    the maximum forfeiture amounts, in accordance with the inflation
    adjustment requirements contained in the Debt Collection Improvement
    Act of 1996, 28 U.S.C. § 2461. Most recently, the Commission raised
    the maximum forfeitures applicable to cable operators, broadcast
    licensees, and applicants for such authority from \$32,500 to
    \$37,500 for a single violation, and from \$325,000 to \$375,000 for
    continuing violation. *See* Inflation Adjustment of Maximum
    Forfeiture Penalties, 73 Fed. Reg. 44663, 44664 (July 31, 2008). The
    new forfeiture limits take effect September 2, 2008 and do not apply
    to this case.

[^31]: 47 U.S.C. § 503(b)(2)(E). *See also* 47 C.F.R. § 1.80(b)(4), Note
    to paragraph (b)(4): Section II. Adjustment Criteria for Section 503
    Forfeitures.

[^32]: *See The Commission's Forfeiture Policy Statement and Amendment
    of Section 1.80 of the Rules to Incorporate the Forfeiture
    Guidelines,* Report and Order, 12 FCC Rcd 17087, 17115 (1997)
    ("*Forfeiture Policy Statement*"), *recon. denied*, 15 FCC Rcd 303
    (1999).

[^33]: The Bureau has substantial discretion, however, in proposing
    forfeitures. *See, e.g., InPhonic, Inc.,* Order of Forfeiture and
    Further Notice of Apparent Liability, 22 FCC Rcd 8689, 8699 (2007);
    *Globcom, Inc. d/b/a Globcom Global Commun.,* Order of Forfeiture,
    21 FCC Rcd 4710, 4723-24 (2006). We may apply the base forfeiture
    amounts described in the *Forfeiture Policy Statement* and the
    Commission's rules, or we may depart from them altogether as the
    circumstances demand. *See* 47 C.F.R. §1.80(b)(4) ("The Commission
    and its staff *may* use these guidelines in particular cases \[,
    and\] *retain the discretion* to issue a higher or lower forfeiture
    than provided in the guidelines, to issue no forfeiture at all, or
    to apply alternative or additional sanctions as permitted by the
    statute.") (emphasis added).

[^34]: *See, e.g., Northland Cable Television, Inc.*, Memorandum Opinion
    and Order and Notice of Apparent Liability for Forfeiture, 23 FCC
    Rcd 7865 (Media Bur. 2008) (proposing \$20,000 forfeiture for
    apparent violations of Section 76.1603 and other rules); *Northland
    Cable Television, Inc.,* Memorandum Opinion and Order and Notice of
    Apparent Liability for Forfeiture, 23 FCC Rcd 7872 (Media Bur. 2008)
    (same).