Before the

Federal Communications Commission

Washington, D.C. 20554

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| In the Matter of:                | * | CSR-5924-E                   |
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| Time Warner Entertainment        | ) |                              |
| Company, L.P.                    | * |                              |
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| Time Warner Cable of Southeast   |   |                              |
| Wisconsin, L.P.                  | * |                              |
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| Century Venture Corporation      | ) |                              |
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| Petition for Determination of    | * |                              |
| Effective                        |   |                              |
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| Competition in City of           | * |                              |
| Brookfield, the Town of          | ) |                              |
| Brookfield, the City of          | * |                              |
| Cedarburg, and Certain Other     | * |                              |
| Wisconsin Communities            |   |                              |
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MEMORANDUM OPINION AND ORDER

**Adopted: June 27, 2003** **Released: July 2, 2003**

By the Deputy Chief, Policy Division, Media Bureau:

# introduction

1.  Time Warner Entertainment Company, L.P., Time Warner Cable of
    Southeast Wisconsin, L.P., and Century Venture Corporation d/b/a/
    Time Warner Cable (collectively "Time Warner") have filed with the
    Commission a petition pursuant to Section 76.7 of the Commission\'s
    rules for a determination of effective competition in eight
    Wisconsin communities (the "Communities").[^1] Time Warner alleges
    that its cable systems serving the Communities are subject to
    effective competition pursuant to Section 623(a) of the
    Communications Act of 1934, as amended (\"Communications Act\"), and
    Section 76.905(b)(2) of the Commission\'s rules, and seeks
    revocation of the City of Brookfield and the City of Mequon to
    regulate basic cable service rates.[^2] Time Warner claims the
    presence of effective competition in the Communities stems from the
    competing services provided by two direct broadcast satellite
    (\"DBS\") providers, DIRECTV, Inc. ("DIRECTV") and DISH Network
    ("DISH"). The City of Brookfield (the "City") and the Regional
    Telecommunications Commission filed oppositions to the petition and
    Time Warner filed a reply to the City of Brookfield's
    opposition.[^3]

# DISCUSSION

2.  In the absence of a demonstration to the contrary, cable systems are
    presumed not to be subject to effective competition,[^4] as that
    term is defined by Section 76.905 of the Commission\'s rules.[^5]
    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.
    Based on the record in this proceeding, Time Warner has met this
    burden.

3.  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 (\"MVPD\") 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 fifteen percent of the households in the franchise area.[^6]

4.  Turning to the first prong of the competing provider test, DBS
    service is presumed to be technically available due to its
    nationwide satellite footprint, and presumed to be actually
    available if households in a franchise area are made reasonably
    aware that the service is available.[^7] Time Warner has provided
    evidence of the advertising of DBS service in news media serving the
    Communities.[^8] We find that the programming of the DBS providers
    satisfies the Commission\'s program comparability criterion because
    the DBS providers offer more than 12 channels of video programming,
    including more than one non-broadcast channel.[^9] Time Warner has
    demonstrated that the Communities are served by at least two
    unaffiliated MVPDs, namely the two DBS providers, each of which
    offers comparable video programming to at least 50 percent of the
    households in the franchise areas. Time Warner has also demonstrated
    that the two DBS providers are physically able to offer MVPD service
    to subscribers in the Communities, that there exists no regulatory,
    technical, or other impediments to households within the Communities
    taking the services of the DBS providers, and that potential
    subscribers in the Communities have been made reasonably aware of
    the MVPD services of DIRECTV and DISH.[^10] Therefore, the first
    prong of the competing provider test is satisfied.

5.  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. Time
    Warner sought to determine the competing provider penetration in its
    franchise areas by purchasing a report from SkyTrends that
    identified the number of subscribers attributable to the DBS
    providers within the Communities on a five-digit zip code
    basis.[^11] Time Warner has used a formula that compares U.S. Census
    household data for the Communities and the relevant zip codes in
    order to derive an allocation to apply against the DBS subscriber
    count.[^12] Time Warner also reduces the estimated DBS subscriber
    count by 10 percent to reflect the possibility that some households
    have subscribed to both cable and DBS service and to take into
    account commercial or test accounts.[^13] Time Warner asserts that
    it is the largest MVPD in the Communities because Time Warner's
    subscribership exceeds the aggregate DBS subscribership for each
    franchise area.[^14]

6.  The City of Brookfield and the Regional Telecommunications
    Commission dispute the validity and accuracy of the data submitted
    by Time Warner in order to satisfy the second prong of the competing
    provider test. The Regional Telecommunications Commission argues
    that the methodology used by Time Warner in determining its
    statistics is questionable because zip codes spread over different
    communities and Time Warner needs to conduct a house-by-house survey
    in order to substantiate its claim.[^15] The City of Brookfield
    argues that Time Warner has not met its burden of demonstrating that
    the number of households subscribing to DBS exceeds 15 percent of
    the households in the franchise area.[^16]

7.  The City of Brookfield disputes that DBS providers have achieved a
    precise 15.94 percent penetration rate within the City because many
    DBS subscribers that Time Warner attributes to the City likely
    reside outside the City limits and yet are still included in the
    SkyTrends data.[^17] The City argues that Time Warner's methodology
    is flawed because there is no way to determine, with any reasonable
    degree of accuracy, the actual number of households within the
    franchise that subscribe to DBS.[^18] The City asserts that many DBS
    subscribers likely reside in Menomonee Falls located adjacent to and
    north of the City.[^19] According to the City, residential housing
    in Menomonee Falls is spread out and the penetration of DBS in
    Menomonee Falls is likely far higher than in the City.[^20] The City
    argues that SkyTrends data is not precise enough to verify that DBS
    subscribers reside in the City as opposed to other adjacent
    communities.[^21] The City claims that DBS penetration would be
    considerably greater outside the City limits where residents, such
    as those in Menomonee Falls, may not have the opportunity to
    subscribe to cable because Time Warner may not have extended service
    to that area.[^22] The City argues that because Time Warner relies
    on a calculated percentage of 15.94 percent, less than 1 percent
    above the minimum threshold, it is easily possible, if not probable,
    that DBS penetration in the City of Brookfield falls below 15
    percent.[^23]

8.  In reply, Time Warner asserts that it relied upon a
    Commission-approved methodology for calculating DBS penetration on a
    franchise-by-franchise basis using zip codes and information
    supplied by SkyTrends.[^24] Using this methodology, Time Warner
    asserts that it simply exercised its statutory right to seek a
    determination of effective competition pursuant to the competing
    provider test.[^25] Time Warner further asserts that when using DBS
    penetration as the basis for a showing under the competing provider
    test, there is no other solution but to rely on zip code penetration
    figures from SkyTrends.[^26] Time Warner argues that the Commission
    is aware that DBS providers will only divulge penetration figures
    through the SkyTrends clearinghouse and only on a zipcode-by-zipcode
    basis.[^27] Moreover, Time Warner asserts that because the competing
    provider test requires a franchise area analysis and because the
    boundaries of most franchise areas do not match up perfectly with
    zip codes, some methodology must be used to extrapolate the
    available zip code figures into useful franchise area figures.[^28]
    Time Warner asserts that this current subscriber penetration
    methodology must be accepted unless the City can present and defend
    an alternative, more accurate methodology.[^29]

9.  Time Warner also addresses the City's more specific point that
    higher DBS penetration in the adjacent community of Menomonee Falls
    likely inflates the City's penetration figure. According to Time
    Warner, the City of Brookfield and Menomonee Falls do not share the
    same zip codes.[^30] Time Warner asserts that none of the four zip
    codes for the City of Brookfield overlap Menomonee Falls.[^31]
    Accordingly, Time Warner contends that because the two towns do not
    share any of the same zip codes, there is no possibility for higher
    penetration figures in one community to skew penetration figures in
    another.[^32]

10. We agree with Time Warner that the Commission has consistently
    accepted SkyTrends data as reliable for purposes of effective
    competition determinations.[^33] Time Warner has demonstrated that
    the five digit zip code subscriber data it received from SkyTrends
    is specific to the eight Wisconsin Communities. The City of
    Brookfield and the Regional Telecommunications Commission have
    presented no evidence to call into question the validity of the
    SkyTrends report. Neither the City nor the Regional
    Telecommunications Commission has offered a different or a more
    accurate method to make this determination and, absent such a
    submission by the parties, we affirm that the SkyTrends data
    submitted by Time Warner is the best available source for
    determining DBS penetration in these cases. Accordingly, we accept
    as reliable the number of DBS subscribers in the Communities as
    indicated in Time Warner's petition.

11. Based upon the aggregate DIRECTV and DISH subscriber penetration
    levels as reflected in Attachment A, calculated using 2000 Census
    household data, we find that Time Warner has demonstrated that the
    number of households subscribing to programming services offered by
    MVPDs, other than the largest MVPD, exceeds 15 percent of the
    households in each of the Communities. Therefore, the second prong
    of the competing provider test is satisfied. Based on the foregoing,
    we conclude that Time Warner has submitted sufficient evidence
    demonstrating that its cable systems serving the Communities are
    subject to effective competition.

# ordering clauses

12. Accordingly, **IT IS ORDERED** that the petition for a determination
    of effective competition filed by Time Warner Entertainment Company,
    L.P., Time Warner Cable of Southeast Wisconsin, L.P., and Century
    Venture Corporation **IS GRANTED**.

13. **IT IS FURTHER ORDERED** that the certifications to regulate basic
    cable service in the City of Brookfield and the City of Mequon,
    Wisconsin **ARE REVOKED**.

14. This action is taken pursuant to authority delegated under Section
    0.283 of the Commission's rules.[^34]

    FEDERAL COMMUNICATIONS COMMISSION

    Steven A. Broeckaert

    Deputy Chief, Policy Division, Media Bureau

    **ATTACHMENT A**

    **CSR-5924-E**

    **COMMUNITIES SERVED BY**

    **TIME WARNER**

**2000 Estimated**

**Census DBS^‡^ Time Warner**

## Communities CUIDS CPR\* Households+ Subscribers+ Subscribers+  {#communities-cuids-cpr-households-subscribers-subscribers .unnumbered}

## Brookfield, City of WI0453 15.95 13,891 2215 9208  {#brookfield-city-of-wi0453-15.95-13891-2215-9208 .unnumbered}

Brookfield, Town of WI0343 16.29 2,762 450 1454

Cedarburg, City of WI0264 16.52 4,432 732 2726

Cedarburg, Town of WI0698 16.51 1,896 313 1105

Mequon, City of WI0540 19.96 7,861 1568 1454

Plymouth, City of WI0435 24.99 3,262 815 2415

Plymouth, Town of WI0430 25.00 1,092 273 546

Thiensville, Village WI0354 19.16 1,503 288 872

\*CPR = Percent of competitive DBS penetration rate.

^+^See Petition at Exhibits E, F, H.

^‡^DBS subscriber estimate includes 10% reduction.

[^1]: 47 C.F.R. § 76.7. The Communities are listed on Attachment A.

[^2]: 47 U.S.C. § 543(a); 47 C.F.R. § 76.905(b)(2).

[^3]: Three of the Regional Telecommunications Commission's members, the
    City of Brookfield, the City of Mequon and the Village of
    Thiensville, are parties to this proceeding.

[^4]: 47 C.F.R. § 76.906.

[^5]: 47 C.F.R. § 76.905.

[^6]: 47 U.S.C. § 543(1)(1)(B); *see also* 47 C.F.R. § 76.905(b)(2).

[^7]: *See* *MediaOne of Georgia*, 12 FCC Rcd 19406 (1997).

[^8]: Petition at 4 and Exhibit A.

[^9]: *See* 47 C.F.R. § 76.905(g). *See also* Petition at 5 and Exhibits
    B, C, and D. Exhibit B contains the nationwide channel lineup of
    DISH and Exhibit C contains DIRECTV's channel lineup. Exhibit D
    includes the channel lineups for Time Warner's cable systems serving
    the Communities.

[^10]: Petition at 3-4.

[^11]: *Id.* at 7 and Exhibit G.

[^12]: *Id*. at 7 and Exhibits F, G, H; *see also Charter Communications
    Properties, LLC* , 17 FCC Rcd 4617, 4619 (2002). Time Warner also
    asserts that its allocation method is reasonable considering that
    Wisconsin's state-wide penetration rate is 24.24 percent. Petition
    at Exhibit I (SkyTrends report on DBS subscribers by State). Thus,
    Time Warner contends that a detailed analysis of zip code areas that
    may fall outside the franchise boundary is unnecessary. Time Warner
    states that it is now accepted that DBS subscribers no longer reside
    predominantly in rural areas. Petition at n.28.

[^13]: Petition at 8. According to documentation previously provided to
    the Commission, SkyTrend's zip code subscriber numbers are inflated
    by roughly ten percent "due to dual receivers, and limited
    commercial and test accounts." *See* *Charter Communications,* 17
    FCC Rcd 15491, 15493 n.13 (2002). Since then, SkyTrends has revised
    its inflation estimate from ten to fifteen percent. However, when
    Time Warner filed its petition, the ten percent figure used was the
    standard percentage and we find its use acceptable in this case.

[^14]: Petition at 6-7 and Exhibits E and H. Time Warner compares
    Exhibit E, Time Warner Subscribership Summary and Exhibit H, Column
    F, "DTH Subs Allocated to Franchise Area." Although Time Warner
    states that it is the largest MVPD in each of the Communities, it is
    not possible to ascertain whether this is true for the City of
    Mequon because the aggregate DBS subscribership figure is larger
    than the number of Time Warner subscribers for that franchise area.
    We are, nevertheless, able to determine that Time Warner is subject
    to effective competition in Mequon. Assuming that one of the DBS
    providers is the largest MVPD in that franchise area, Time Warner's
    Mequon subscribership by itself exceeds the 15 percent threshold of
    the second prong of the competing provider test (1,454 Time Warner
    Mequon subscribers ÷ 7,861 Mequon Census 2000 households = 18.50%).

[^15]: The Regional Telecommunications Commission makes other arguments
    in its opposition that are not directly related to this proceeding.
    Such arguments include Time Warner's alleged refusal to allow access
    to its high speed internet network to other internet system
    providers and the refusal to allow use of non-Time Warner converter
    boxes. This is not the proper forum to address these issues. This
    proceeding is narrowing tailored to address Time Warner's assertion
    that it is subject to effective competition because it meets the
    criteria set forth in the competing provider test.

[^16]: The City of Brookfield Opposition at 2.

[^17]: *Id.*

[^18]: *Id*. The City takes issue with the allocation figure of 53% that
    Time Warner derives when it divides the total Census 2000 Brookfield
    households (13,891) by the total five-digit zip code households in
    the City - 26,437 - (from SkyTrends) by using a previously-approved
    five-digit allocation methodology. *See* Petition at Exhibit H. The
    City argues that this methodology is flawed because it does not
    accurately determine the number of households within a franchise
    area that subscribe to DBS.

[^19]: *Id.*

[^20]: *Id.* at 3.

[^21]: *Id.*

[^22]: *Id.*

[^23]: *Id.* at 4.

[^24]: Time Warner Reply at 2; *see e.g. Charter Communications
    Properties, LLC* , 17 FCC Rcd 4617, 4618 (2002).

[^25]: Time Warner Reply at 2.

[^26]: *Id.* at 3.

[^27]: *Id.*

[^28]: *Id.*

[^29]: *Id.* at 4.

[^30]: *Id.* and Exhibit 1. Time Warner states Menomonee Falls's zip
    codes are 53051 and 53052. Time Warner asserts that these two zip
    codes do not cover any of Brookfield and, therefore, were not
    included in Time Warner's DBS penetration analysis for Brookfield.
    *Id.*

[^31]: *Id.* and Exhibit 1.

[^32]: *Id.* Time Warner also argues that even if Menomonee Falls shared
    zip codes with the City, Menomonee Falls does not have significantly
    higher DBS penetration figures that would explain an artificial
    inflation of the City's penetration figures. *Id.* Time Warner
    states that, according to SkyTrends, Menomonee Fall's zip code 53051
    has 13,535 households and 2,363 DBS subscribers and zip code 53052
    has 238 households and 3 DBS subscribers, totaling 13,773 households
    and 2,366 DBS subscribers. Using the five-digit zip code allocation
    formula, Time Warner asserts that Menomonee Falls has a slightly
    lower DBS penetration than Brookfield (15.46% vs. 15.94%). *Id.* and
    Exhibit 2.

[^33]: *See Charter Communications Properties, LLC* , 17 FCC Rcd 4617
    (2002).

[^34]: 47 C.F.R. § 0.283.