**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CSR-5516-R                   |
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| ARMSTRONG COMMUNICATIONS, INC.   | ) |                              |
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| MOUNT PLEASANT TOWNSHIP, PA      | * |                              |
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| Petition for Special Relief      | * |                              |
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**MEMORANDUM OPINION AND ORDER**

**Adopted: January 18, 2001 Released: January 19, 2001**

By the Deputy Chief, Cable Services Bureau:

# introduction

1.  Mount Pleasant Township, Pennsylvania ("Township") has filed a
    petition for special relief requesting that the Commission direct
    Armstrong Utilities, Inc. ("Armstrong"), a franchised cable operator
    serving the Township, to charge uniform rates for its basic and
    cable programming service throughout the Township and to make whole
    those subscribers who have paid a higher rate for the same service.
    The Township cites to section 623(d) of the Communications Act of
    1934, as amended, and section 76.984 of the Commission's rules.[^1]
    Armstrong opposes the petition, arguing that it is subject to
    effective competition from a local exchange carrier ("LEC") and,
    therefore, exempt from any uniform rate requirement. The Township
    filed reply comments disagreeing with Armstrong's position. Citizens
    Cable Communications, Inc. ("Citizens Cable"), which provides cable
    service to parts of the Township, filed an *ex parte* presentation
    in support of the Township's position but outside the comment
    period. Armstrong opposed the Citizens Cable filing, and Citizens
    Cable replied.

# The Pleadings

1.  Section 76.984 of the Commission's rules provides that, where a
    cable operator is not subject to effective competition:

> \(a\) The rates charged by cable operators for basic service, cable
> programming service, and associated equipment and installation shall
> be provided pursuant to a rate structure that is uniform throughout
> each franchise area in which cable service is provided.

The Township alleges that Armstrong has not sought a determination of
effective competition but, nonetheless, charges a lower basic service
tier ("BST") rate in the Villages of Norvelt, Mammoth, Calumet, United,
and Weltytown (collectively "Villages"), where a franchised LEC
affiliate offers service, than it charges in the remaining parts of its
Township franchise area. The Township also claims that Armstrong offers
a cable programming service tier ("CPST") for an additional charge in
the remaining parts of the Township, although Armstrong's combined
BST/CPST line-up is the same as the channel line-up offered to
subscribers in the Villages for the BST rate.

2.  Armstrong does not dispute that it has cut its rates in portions of
    its franchise area.[^2] It defends its action by arguing that the
    uniform rates requirement is inapplicable because it faces effective
    competition under the local exchange carrier or "LEC" test for
    effective competition in section 76.905(b)(4) of the Commission's
    rules.[^3] According to Armstrong, Citizens Cable, an affiliate of
    local exchange carrier Citizens Telephone Company, holds a franchise
    to construct and operate a cable system throughout the Township,[^4]
    offers a comparable service consisting of approximately 63 channels
    of service, including approximately 50 channels of nonbroadcast
    service,[^5] is providing this service in a portion of Armstrong's
    franchise area, and is continuing to expand its system.[^6]
    Armstrong relies on information in a 1996 newspaper article
    describing Citizens Cable's plans to provide cable, long distance,
    and internet service along with local telephone service and its
    capability of serving 900 subscribers at that time.[^7] Armstrong
    also claims that an advance determination of effective competition
    is not required before it can respond to competition, because it is
    not subject to rate regulation under the statutory exemption for
    small systems in section 623(m) of the Communications Act[^8] and
    the Township is not certified to regulate its rates. The Township
    disagrees that Armstrong can use this proceeding to assert its claim
    to effective competition and argues on the merits that Citizens
    Cable's limited plant, service to only a limited section of
    Armstrong's franchise area, and fewer than 200 subscribers, compared
    with Armstrong's 3,700 subscribers, does not satisfy the definition
    of effective competition from a local exchange carrier or its
    affiliate.[^9]

3.  Citizens Cable supports the Township's petition, asserting that it
    does not provide effective competition to Armstrong under the test
    for competition from a LEC, because its Mount Pleasant Township
    service area does not substantially overlap Armstrong's.[^10] It
    argues that a LEC competitor must serve close to 50% of the
    households in the franchise area in order to trigger an effective
    competition finding. While acknowledging its right to serve the
    entire Township, it states that it currently has constructed only
    17.34 miles of cable within the Township, is currently capable of
    serving only 800 potential subscribers out of a total of 4500
    Township homes, and has no intention of expanding its service area
    until Armstrong ceases what Citizens Cable characterizes as
    predatory pricing practices. It points out that its franchise does
    not mandate a roll-out schedule, and states that it has not marketed
    to customers outside its limited service area,[^11] or made
    representations either to the Township or to potential customers as
    to any further roll-out of its services. [^12] According to Citizens
    Cable, Armstrong offers its lower price to approximately 1,852 of
    its 3,724 subscribers,[^13] including some areas where Citizens
    Cable does not offer service.[^14] Armstrong opposes this pleading
    as unauthorized and out of time, and argues on the merits that
    passage of 800 homes, equaling 18% of the market, is
    substantial.[^15] If this is insufficient to satisfy the effective
    competition test in the Township, Armstrong fears that Citizens
    Cable will be able to concentrate its attention on the more
    profitable areas within the Township, and Armstrong will be unable
    to respond competitively. In reply, Citizens Cable again states it
    has suspended its plans to expand its cable service and is reluctant
    to expand if Armstrong can respond competitively through selective
    rate adjustments.[^16]

# Discussion

4.  We will exercise our discretion to accept the Citizens Cable
    presentation. As a competitor of Armstrong's, Citizens Cable is an
    interested person in the proceeding.[^17] Although its presentation
    was filed outside the time frame for responding to the Township's
    petition for special relief established by section 76.7 of the
    Commission's rules,[^18] the presentation has provided information
    relevant to the issues raised by the Township's petition and has not
    caused delay.

5.  We disagree with the Township's and Citizens Cable's assertions that
    Armstrong was required to seek an advance determination of effective
    competition from the Commission, and that its failure to do so
    precludes consideration of effective competition in this proceeding.
    The Commission provided in the *Cable Act Reform Order* that cable
    operators must obtain a determination of effective competition from
    the Commission in the context of the termination of rate
    regulation.[^19] Cable operators could not unilaterally end
    regulation of their rates. In the instant case, there is no issue of
    terminating rate regulation. The Township has not disputed
    Armstrong's claim that it falls within the definition of "a small
    cable operator" exempt from local rate regulation pursuant to
    section 632(m) of the Communications Act of 1934, as amended,[^20]
    and has not asserted jurisdiction to regulate Armstrong's rates.

6.  As the Township points out and Armstrong acknowledges, however, even
    if Armstrong's rates are not regulated, the prohibition against
    non-uniform rates in section 623(d) of the Act and section 76.984 of
    the Commission's rules applies unless Armstrong is subject to
    effective competition.[^21] Thus, determining whether Armstrong is
    subject to effective competition is a prerequisite for determining
    the Commission's jurisdiction over the Township's uniform rate
    complaint,[^22] and Armstrong can respond to the complaint with a
    demonstration that it is subject to effective competition as defined
    in section 623(l) of the Communications Act and section 76.905 of
    the Commission's rules or that a waiver is warranted.[^23]

7.  The LEC test on which Armstrong relies provides that a cable system
    is subject to effective competition when:[^24]

> A local exchange 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.

Section 76.905(e) of the Commission's rules provides that service of a
multichannel video programming distributor will be deemed offered:[^25]

> \(1\) When the multichannel video programming distributor is
> physically able to deliver service to potential subscribers, with the
> addition of no or only minimal additional investment by the
> distributor, in order for an individual subscriber to receive service;
> and
>
> \(2\) When no regulatory, technical or other impediments to households
> taking service exist, and potential subscribers in the franchise area
> are reasonably aware that they may purchase the services of the
> multichannel video programming distributor.

The Commission explained in the *Cable Act Reform Order* that to support
a finding of effective competition under the LEC test, an incumbent
cable operator must show that the LEC is technically and actually able
to provide service that substantially overlaps the incumbent cable
operator's in the franchise area.[^26] Planned as well as actual service
can be considered when the likelihood of impending competition
throughout a substantial part of the incumbent cable operator's service
area is established, the competitive service is commercially available,
and potential subscribers in the franchise area served by the incumbent
are reasonably aware that the service is either actually available to
them or will be available within a reasonable time.[^27] The incumbent
cable operator must show that the LEC intends to build-out its cable
system within a reasonable period of time if it has not already done so,
that no regulatory, technical or other impediments to household service
exist, that the LEC is marketing its services so that potential
customers are aware that the LEC's services may be purchased, that the
LEC has actually begun to provide services, the extent of such services,
the ease with which service may be expanded and the expected date for
completion of construction in the franchise area. If the LEC has not
shown its intention to offer service that substantially overlaps the
incumbent cable operator's service, the Commission will entertain a
request for waiver showing that the extent of the LEC's presence is
sufficient to have a direct impact on the cable operator's services
throughout its service area, and particularly on the price.[^28]

8.  On the basis of the record as a whole, we find that Armstrong is
    subject to effective competition under the LEC test in Mount
    Pleasant Township. The record establishes that Citizens Cable's
    parent, Citizens Telephone Company of Kecksburg, is a rural
    telephone company with a franchise authorizing it to provide cable
    service throughout Mount Pleasant Township. At the time Armstrong
    began charging non-uniform rates, Citizens Cable had constructed
    plant, was selling service, and had received local newspaper
    publicity for its plans to continue its expansion. It provides a
    comparable programming service of 62 broadcast and non-broadcast
    video channels, including premium channels. Although the Township
    and Citizens Cable question whether the extent of Citizens Cable's
    operation in the Township is sufficient to satisfy the requirement
    that a LEC competitor's facilities substantially overlap the
    incumbent's in the franchise area, and Citizens Cable expresses its
    reluctance to further expand if faced with price competition from
    Armstrong and states it does not market outside its current service
    area,[^29] Citizens Cable has built 17.34 miles of plant in what
    appears to be the more densely populated part of the Township,
    passing 800 homes or 18% of the market,[^30] and it has
    subscribers.[^31] The impact of Citizens Cable's presence has
    resulted in reduced rates to approximately 1,852 or almost 50% of
    Armstrong's 3,724 subscribers[^32] and 2.3 times the number of homes
    passed by Citizens Cable. The LEC test does not specify any minimum
    amount of service to be offered by the LEC or include any
    penetration standards. It does require that the offering be
    substantially more than *de minimis*.[^33] The extent of the service
    actually available from Citizens Cable in this case, its franchise
    for the whole franchise area, and the extent of Armstrong's
    competitive response justify a finding in this case of effective
    competition.

9.  Section 76.984(c)(1) provides that the uniform rate requirement is
    not applicable to a cable operator in any geographic area in which
    it is subject to effective competition. In light of our
    determination that effective competition is present in Mount
    Pleasant Township, the uniform rate requirement is not applicable
    there.[^34]

10. Accordingly, IT IS ORDERED that the Petition for Special Relief
    filed by the Mount Pleasant Township, Pennsylvania on February 4,
    2000, IS DISMISSED.

    FEDERAL COMMUNICATIONS COMMISSION

    William H. Johnson

    Deputy Chief, Cable Services Bureau

[^1]: 47 U.S.C. § 543(d); 47 C.F.R. § 76.984.

[^2]: Armstrong Opposition at 5.

[^3]: 47 C.F.R. § 76.905(b)(4); 47 U.S.C. § 543(d); 47 C.F.R. § 76.984.

[^4]: Armstrong Opposition, Exhibit A, Citizens Cable Franchise.

[^5]: *Id*., Exhibit C, Citizens Cable Channel Line-up.

[^6]: *Id*., Opposition at 2.

[^7]: *Id*., Exhibit B.

[^8]: 47 U.S.C. § 543(m).

[^9]: Township Reply at 11 & n.15.

[^10]: Citizens Cable *Ex Parte* Presentation at 3-4.

[^11]: Citizens Cable Reply at 4.

[^12]: Citizens Cable *Ex Parte* Presentation at 4.

[^13]: *Id*. 4 n.7.

[^14]: Citizens Cable states that it does not now serve the Villages of
    Mammoth and Weltytown. *Id*. at 4.

[^15]: Armstrong Opposition to *Ex Parte* Presentation at 3.

[^16]: Citizens Cable Reply at 4-5.

[^17]: *See* Citizens Cable Reply at 2.

[^18]: 47 C.F.R. § 76.7(b) (comments or oppositions are to be filed
    within 20 days of the petition). Reliance on the Commission's *ex
    parte* rules, as Citizens Cable does in this proceeding, does not
    establish status as an interested person or obviate the need to
    comply with the Commission's procedural requirements governing
    participation.

[^19]: Implementation of Cable Act Reform Provisions of the
    Telecommunications Act of 1996, Report and Order, 14 FCC Rcd 5296,
    5311-13 paras. 28-30 (1999) ("*Cable Act Reform Order*").

[^20]: 47 U.S.C. § 543(m).

[^21]: 47 U.S.C. § 543(d); 47 C.F.R. § 76.984(c)(1).

[^22]: *See* *Beach Cable, Inc. v. Jones Spacelink, Ltd.*, 11 FCC Rcd
    10390, 10391 (Cab. Serv. Bur. 1996).

[^23]: The uniform rate requirement does not prohibit the establishment
    by cable operators of reasonable categories of service and customers
    with separate rates and terms and conditions of service within a
    franchise area. 47 C.F.R. § 76.984(b). Armstrong has not claimed
    that its rate structure falls within this provision.

[^24]: 47 C.F.R. § 76.905(b)(4).

[^25]: 47 C.F.R. § 905(e).

[^26]: 14 FCC Rcd at 5303 para. 10, 5305 para. 13.

[^27]: *Id.* at 5303 para. 11.

[^28]: *Id.* at 5305 para. 13.

[^29]: We take note of the availability of information about Citizens
    Cable's rates and service on the website for Citizens Telephone
    Company of Kecksburg.

[^30]: Citizens Cable *Ex Parte* Presentation at 4; Reply to Opposition
    to *Ex Parte* Presentation at 3 n.3.

[^31]: Township Reply Comments at 11 n.15.

[^32]: Citizens Cable *Ex Parte* Presentation at 4 n.7.

[^33]: *See* *Cable Act Reform Order*, 14 FCC Rcd at 5302-04 paras.
    10-11.

[^34]: Citizens Cable also alleges that Armstrong is engaging in
    predatory pricing through its non-uniform pricing and asks that the
    uniform rate requirement be enforced for this reason. Citizens Cable
    *Ex Parte* Presentation at 5-6. Section 623(d) of the Communications
    Act, 47 U.S.C. § 543(d), exempts bulk discounts to multiple dwelling
    units from the uniform rate requirement but provides that cable
    systems not subject to effective competition may not charge
    predatory prices to a multiple dwelling unit. It does not provide
    for broader Commission review of allegations of predatory pricing.
    Section 76.984 on which Citizens Cable relies implements this
    statutory provision. It does not provide for the broader antitrust
    review of Armstrong's rates that Citizens Cable seeks.