**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of: ) CSR 5048-E

)

Cablevision of Boston, Inc. ) Boston, MA

) CUID No. MA0182

Petition for Determination of )

Effective Competition )

**MEMORANDUM OPINION AND ORDER**

**Adopted: July 18, 2001 Released:** **July 20, 2001**

By the Chief, Cable Services Bureau:

# I. INTRODUCTION

I.  

1\. Cablevision of Boston, Inc. (\"Cablevision\")[^1] has filed a
petition for determination of effective competition asserting that it is
subject to effective competition in Boston, Massachusetts because of the
presence of Residential Communications Network of Massachusetts,
Incorporated\'s (\"RCN\") cable operations in that franchise area. The
City of Boston ("Boston") filed comments opposing Cablevision\'s request
to which Cablevision filed a reply. Both Cablevision and Boston filed
supplements to update the record.

2\. In the absence of a demonstration to the contrary, cable systems are
presumed not to be subject to effective competition,[^2] as that term is
defined by Section 76.905 of the Commission\'s rules.[^3] 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.[^4] Section 623(l)(1)(D) of
the Act provides that a cable operator is subject to effective
competition, and therefore exempt from cable rate regulation, if a LEC
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, provided the video
programming services thus offered are comparable to the video
programming services provided by the unaffiliated cable operator in that
area.[^5]

3\. The Commission has stated that an incumbent cable operator could
satisfy the "LEC" effective competition test by showing that the LEC is
technically and actually able to provide cable service that
substantially overlaps the incumbent operator's service in the franchise
area.[^6] The incumbent also 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, and that no regulatory, technical or other impediments
to household service exist. In addition, the incumbent must demonstrate
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.[^7]

**II. THE PLEADINGS**

4\. Cablevision asserts that it is subject to LEC effective competition
in its Boston, Massachusetts franchise area. With regard to the LEC
affiliation requirement, Cablevision asserts that RCN[^8] is a
\"fast-growing\" multichannel video programming distributor
(\"MVPD\")[^9] providing video programming, telephony, and internet
services to thousands of subscribers in Boston. Cablevision adds that
RCN is engaged in the provision of local exchange service.[^10]
Cablevision additionally asserts that RCN is also affiliated with
C-TEC[^11] and MFS Communications Company, Inc. (\"MFS\"),[^12] two
other local exchange carriers. Cablevision explains MFS, RCN, and C-TEC
were, at one time, all owned by Peter Kiewit Sons, Inc., but that MFS
was spun-off from Kiewit in September, 1995. Cablevision, however,
states that RCN is still affiliated with MFS, through Kiewit, for
purposes of the LEC affiliation requirement.[^13]

5\. With regard to the requirement that the LEC competitor offer video
programming service in the unaffiliated cable operator\'s franchise
area, Cablevision asserts that RCN is now offering service by means of a
fiber optic network in Boston owned by MFS. Cablevision further asserts
that RCN has entered into a joint venture with the Boston Energy
Technology Group (\"BETG\"), a wholly-owned subsidiary of Boston Edison
Company (\"Boston Edison\"), to furnish video programming service in
Boston and surrounding communities. Cablevision states that the venture
will invest \$300 million to upgrade Boston Edison\'s existing 200-mile
ring of fiber optic cable, which will serve as a delivery route for
RCN\'s video and telephony services.[^14] Cablevision states that RCN
has heavily marketed the availability of its cable service through local
media[^15] and other means, and news reports indicate that RCN currently
furnishes, or has agreements to furnish, video programming service to
thousands of customers in multiple dwelling units in the Boston
area.[^16] Cablevision asserts there are no regulatory, technical, or
other impediments to households taking service from RCN.

6\. Cablevision also asserts that RCN offers comparable programming to
Boston subscribers. Specifically, Cablevision provides RCN\'s channel
line-up demonstrating that RCN offers 84 channels of video programming,
12 of which are local television broadcast signals. Cablevision offers
over 100 channels of video programming in Boston.

7\. In opposition, the City of Boston argues that \"effective
competition\" is a premature description of the Boston video market. The
City states that only two of the fourteen neighborhoods comprising the
franchise area may obtain competing video service from RCN. It adds that
it will take between three to five years for RCN to build its system
throughout the City. A determination of effective competition, the City
argues, would also remove the \"level-playing field\" of uniform rates
for most subscribers in Boston.

8\. In reply, Cablevision argues that the City does not dispute any of
the salient facts necessary to grant the relief requested. The operator
asserts that the plain language and legislative history of the 1996 Act
dictate that cable rates should be deregulated whenever a LEC affiliate
offers comparable multichannel video programming service in the
incumbent\'s franchise area. Congress could have specified, but did not,
a \"homes passed\" criterion for LEC-affiliated competitors in
connection with cable rate deregulation; moreover, Congress did not
require that actual penetration reach a specified level although it
certainly could have done so. Cablevision also states, contrary to the
City\'s assertion, that RCN-BETG is currently providing video
programming service within six of the fourteen neighborhoods in the City
of Boston.[^17]

9.  In its supplement, Cablevision states that RCN has obtained a 15
    year cable franchise from the City of Boston on July 27, 1999.[^18]
    According to the operator, RCN\'s franchise requires it to build a
    \$250 million network capable of serving over 265,110 homes in
    Boston by the end of 2002 (approximately 90% of all Boston
    households) and complete its city-wide system within six years.[^19]
    Cablevision states that RCN\'s failure to meet these requirements
    would subject the company to substantial liquidated damages of up to
    \$400 per day.[^20] In addition, the franchise requires RCN to pay
    5% of its gross revenues to the city, build and manage a private
    data network linking all city buildings, and provide free of charge
    one connection to the cable television system and the basic service
    to all public institutions in the City.[^21] Cablevision adds that
    RCN now provides more than 100 channels of programming comparable to
    that it offers in Boston.

10. Boston replies by stating that RCN's activities in the city do not
    constitute effective competition under the Commission's rules and
    guidelines. According to Boston, as of December 31, 1998, RCN had a
    total of 2,500 cable subscribers in the City whereas Cablevision had
    150,000.[^22] Boston also states that there is no evidence offered
    by Cablevision of widespread construction by RCN in Boston. It
    asserts that it has only wired assorted MDUs in the city and is
    beginning construction in three or four of the city's 22 residential
    wards.[^23]

11. Cablevision counters Boston's factual assertions. According to
    Cablevision, RCN itself has at least 5000 cable subscribers in
    Boston.[^24] Cablevision also states that RCN's cable service is
    available in at least 12 Boston neighborhoods.[^25] Cablevision adds
    that RCN has commenced construction in four other communities within
    Boston.[^26] Cablevision asserts that RCN does not appear to be
    providing service or engaging in construction in only the three
    remaining neighborhoods within the city---East Boston, Mattapan, and
    Roslindale.[^27] Cablevision asserts that the likelihood of
    impending competition throughout all of Cablevision's Boston
    franchise area is established as RCN is going forward in serving all
    of Boston under a 15 year franchise that will provide competition to
    90% of the franchise area by the end of 2002.[^28]

# III. ANALYSIS 

12\. In the absence of a demonstration to the contrary, cable systems
are presumed not to be subject to effective competition as defined in
the Communications Act.[^29] The cable operator bears the burden of
rebutting the presumption that such effective competition does not exist
and so must provide evidence sufficient to demonstrate that effective
competition, as defined by Section 76.905 of the Commission\'s rules, is
present in the franchise area.[^30] Cablevision has met this burden.

13\. With regard to the first part of the LEC effective competition
test, which requires that the alleged competitive service be provided by
a LEC or its affiliate (or any multi-channel video programming
distributor (\"MVPD\") using the facilities of such LEC or its
affiliate), we find that Cablevision has provided sufficient evidence,
through SEC documents and other materials, demonstrating that RCN is a
LEC[^31] as defined by the Communications Act,[^32] and RCN fits the
Commission\'s definition of MVPD.[^33] Neither Cablevision nor AT&T
Broadband are affiliated with RCN or any of RCN\'s partners.

14\. We also find that Cablevision has submitted sufficient evidence to
show that the programming of RCN is comparable to the programming
provided by Cablevision. The channel information for RCN submitted by
Cablevision establishes that RCN offers more than 100 channels of
programming, including 12 local broadcast channels.[^34] This satisfies
the programming comparability criterion.

15\. In addition, we find that based on the information before us, RCN
is offering service in Cablevision\'s franchise area sufficient to
demonstrate the presence of effective competition. RCN, once operating
as an open video system, has obtained a 15 year traditional cable
franchise with the City of Boston.[^35] This long term franchise
requires RCN to serve approximately 90% of Boston within 3 1/2 years of
signing the franchise agreement, and complete its buildout to every
Boston neighborhood six years after signing the franchise
agreement.[^36] In partnership with BETG, RCN will invest millions of
dollars in infrastructure development to provide video, as well as voice
and data service, to residents of Boston and surrounding
communities.[^37] We find that RCN\'s sizeable investment in physical
plant, its franchise agreement with the City, its recruitment of
thousands of subscribers in the franchise area,[^38] and its financial
backing[^39] are indicia that RCN is now offering, and will continue to
offer, service in the City of Boston.

16\. We note that RCN\'s extensive marketing efforts and the wide press
coverage of RCN\'s construction activity in the local media ensure that
potential subscribers are reasonably aware of the availability of RCN\'s
service. Generally, subscribers in wired areas are able to receive
RCN\'s cable service for only a minimal additional investment and
without encountering regulatory or technical obstacles. Consistent with
Congressional intent in adopting Section 623(l)(1)(D) of the
Communications Act, under the circumstances we find \"effective
competition\" to be present.

17\. Insofar as the City of Boston\'s belief that a finding of effective
competition would be \"premature,\" we disagree. As discussed above,
Cablevision has provided evidence sufficient to satisfy all parts of the
LEC effective competition test. In particular, we note the aggressive
buildout requirement and liquidated damage provisions of the franchise
indicating that our finding is not premature.[^40] We also note that the
Mayor of Boston, Thomas Menino, has recognized RCN as a viable
competitor to Cablevision when RCN's franchise agreement was signed:
"Today, Boston residents, as customers, will reap the benefits of the
real choice that comes from deregulation of the cable industry. . . .We
have a new company that gives subscribers the right to choose based on
product, costs, and consumer service."[^41] As Cablevision has submitted
sufficient evidence demonstrating that its cable system serving Boston,
Massachusetts is subject to LEC effective competition from RCN, its
petition is granted, and the certification of the City of Boston is
revoked.

**IV. ORDERING CLAUSES**

18\. Accordingly, **IT IS ORDERED** that the Petition for Determination
of Effective Competition filed by Cablevision of Boston, Inc.
challenging the certification of the City of Boston, in Boston,
Massachusetts **IS GRANTED.**

19\. **IT IS FURTHER ORDERED** that the certification of the City of
Boston, Massachusetts to regulate the basic cable rates of Cablevision
in Boston, Massachusetts **IS REVOKED**.

20\. This action is taken pursuant to delegated authority under Section
0.321 of the Commission\'s rules, as amended.[^42]

FEDERAL COMMUNICATIONS COMMISSION

W. Kenneth Ferree

Chief, Cable Services Bureau

[^1]: ^?^ Cablevision recently transferred its Boston cable franchise to
    AT&T Broadband. Nevertheless, we refer to Cablevision in this Order
    because it filed the original petition.

[^2]: ^    ?^ 47 C.F.R. § 76.906.

[^3]: ^    ?^ 47 C.F.R. § 76.905.

[^4]: ^?^ *See* 47 C.F.R. §§ 76.906 & 907.

[^5]: ^    ?^ Communications Act, § 623(1)(1)(D), 47 U.S.C. §
    543(1)(1)(D); *see also* 47 C.F.R. § 76.905(b)(4). This fourth
    statutory effective competition test within Section 632(l) is often
    called the "LEC" effective competition test.

[^6]: ^?^ *See Implementation of Cable Act Reform Provisions of the
    Telecommunications Act of 1996*, 14 FCC Rcd 5296, 5305 (1999)
    ("*Cable Reform Order*").

[^7]: ^?^ *Id*.

[^8]:   ^?^ RCN is a wholly-owned subsidiary of RCN Telecom Services,
    Inc., which presently is a wholly-owned subsidiary of C-TEC
    Corporation (\"C-TEC\"). RCN currently provides service in the
    Boston, New York, Philadelphia/Lehigh Valley, Chicago, San
    Francisco, and Washington, D.C. metropolitan television markets.
    *See* RCN's Annual Report for the Year 2000.

[^9]:    ^?^ The Commission\'s rules define an MVPD as \"an entity such
    as, but not limited to, a cable operator, a multichannel multipoint
    distribution service, a direct broadcast satellite service, a
    television receive-only satellite program distributor, a video
    dialtone service provider, or a satellite master antenna television
    service provider that makes available for purchase, by subscribers
    or customers, multiple channels of video programming.\" 47 C.F.R. §
    76.905(d). While not formally included in the definition, we
    consider OVS operators to be MVPDs for the purposes of effective
    competition.

[^10]:     ^?^ Cablevision attaches exhibits to demonstrate that RCN
    meets the LEC affiliation requirement. *See* C-TEC Corporation SEC
    Form 10-K, Item 1, Business (filed March 31, 1997), attached as
    Exhibit 1 to Cablevision\'s petition; *see also* Peter Kiewit
    Sons\', Inc. SEC Form 10-K, item 1, business\--RCN Telecom Services
    (filed March 28, 1997) (\"in Massachusetts, RCN is registered to
    offer local exchange carrier services and to resell long
    distance.\"), attached as Exhibit 2 to Cablevision\'s petition.

[^11]:     ^?^ C-TEC is a holding company with wholly and majority-owned
    subsidiaries engaged in the provision of competitive local exchange
    services and cable television. C-TEC operates as a local exchange
    carrier in Pennsylvania, offering service to a 19 county, 5067
    square mile service territory in the state. *See* C-TEC 10-K at
    Exhibit 1.

[^12]:     ^?^ MFS is a holding company with subsidiaries providing
    \"local and long distance switched service\" and \"local access\"
    service. MFS is now a wholly-owned subsidiary of WorldCom, Inc.
    (\"Worldcom\"). *See* MFS Communications Company, Inc. SEC Form
    10-K, item 1, Business (filed May 16, 1997), attached to
    Cablevision\'s petition as Exhibit 4.

[^13]:     ^?^ Cablevision assumes that Kiewit shareholders retained
    their MFS stock after the spin-off and that the post-merger portion
    of WorldCom shares held by Kiewit stockholders would be
    approximately 315 million, or roughly 35% of all WorldCom shares. It
    adds that Standard and Poor\'s had reported that certain directors
    of MFS and Kiewit received approximately 23% of the common shares
    received in the distribution following the spin-off. *See* Standard
    and Poor\'s Corporation, S7P Daily News, \"MFS Communications Co.,
    Inc.\", October 3, 1995, attached to Cablevision\'s petition as
    Exhibit 7.

[^14]:     ^?^ *See* Exhibit 9 attached to Cablevision\'s petition.

[^15]:     ^?^ Cablevision states that RCN launched the Boston component
    of a \$10 million advertising campaign aimed at publicizing its
    service offerings. *See* Cablevision petition at Exhibit 17.

[^16]:     ^?^ Cablevision includes the two following articles, as
    Exhibit 12, to support this statement: (1) \"RCN Takes Off the
    Gloves,\" *CableFax Daily*, July 1, 1997 at 1; and (2) Bruce Mohl,
    \"Cablevision Rival Gets OK from FCC,\" *Boston Globe*, December 11,
    1996 at D1.

[^17]:     ^?^ *See* Declaration of Kathleen Mayo, Regional Vice
    President for Cablevision of Boston, attached to Cablevision\'s
    Reply.

[^18]:     ^?^ Cablevision Supplement at 1.

[^19]:     ^?^ *Id.* at 2.

[^20]:     ^?^ *Id.*

[^21]:     ^?^ *See* RCN\'s franchise agreement with the City of Boston
    at Sections 8.1, 6.7, and 7.2, respectively (attached as an exhibit
    to Cablevision\'s Supplement).

[^22]: ^?^ City of Boston Supplement of August 26, 1999.

[^23]: ^?^ *Id.*

[^24]: ^?^ *See* Cablevision Supplement of September 9, 1999 *citing In
    the Matter of Annual Assessment of the Status of Competition in
    Markets for the Delivery of Video Programming*, CS Docket No.
    99-230, Comments of RCN Corp. (Aug. 6, 1999) at 5.

[^25]: ^?^ These neighborhoods include: (1) Charlestown; (2) North End;
    (3) South Boston; (4) South End; (5) Jamaica Plain; (6) Roxbury; (7)
    Back Bay; (8) Beacon Hill; (9) Fenway; (10) Financial District; (11)
    Allston; and (12) Brighton. *See id.*

[^26]: ^?^ These are: (1) North Dorchester; (2) South Dorchester; (3)
    Hyde Park; and (4) West Roxbury. *See id.*

[^27]: ^?^ *Id.*

[^28]: ^?^ *Id.*

[^29]:     ^?^ 47 C.F.R. § 76.906.

[^30]:     ^?^ 47 C.F.R. § 76.911(b)(1).

[^31]:     ^?^ David McCourt, CEO of RCN, has stated that RCN is a
    \"phone company that offers cable service.\" *See* Tony Munroe, \"
    Firm Offering One-Stop Shopping for Cable, Phone,\" *Boston Herald*,
    August 14, 1996 at p. 24.

[^32]:     ^?^ The Communications Act defines the term \"local exchange
    carrier\" as:

    any person that is engaged in the provision of telephone exchange
    service or exchange access. Such term does not include a person
    insofar as such person is engaged in the provision of a commercial
    mobile service under Section 332(c), except to the extent that the
    Commission finds that such service should be included in the
    definition of such term.

    Communications Act § 3(26), 47 U.S.C. § 153(26).

[^33]:      ^?^ *See supra* n. 9 (definition of MVPD).

[^34]: ^?^ We note that RCN's bundled products run from a \$65 package
    that includes a cable modem, phone service with four features and
    unlimited regional calling time, to a \$160 package with analog and
    digital cable, two set top boxes, multiplexed HBO, Cinemax, Starz
    and Encore premium channels, two phone lines with 16 features and a
    cable modem. *See* Joe Estrella, RCN Tests Home Fiber, Awaits
    Financial Model, *Multichannel News*, June 18, 2001.

[^35]: ^?^ RCN has signed a contract with the Boston Housing Authority
    ("BHA") to provide BHA residents bundled telecommunications
    services. The contract agreement gives RCN access to all 14,000
    units in BHA's 64 developments throughout Boston. The properties
    should all be connected to RCN's network by 2004. RCN is also
    providing communication services to offices and youth centers in the
    BHA developments. *See* "RCN to provide Boston Housing Authority
    residents with bundled communications services," *RCN Press
    Release*, March 26, 2001.

[^36]: ^?^ RCN has begun offering its bundled services to residents of
    West Roxbury and Roslindale, Massachusetts, two communities in or
    around Boston. These communities join over a dozen other
    Massachusetts communities that receive RCN services in the state,
    including, Arlington, Brookline, Burlington, Dedham, Framingham,
    Lexington, Needham, Newton, Somerville, Wakefield, Waltham, and
    Watertown. *See* "RCN launches Resilink bundled phone, cable and
    high speed internet services to residents of West Roxbury and
    Roslindale," *RCN Press Release*, April 17, 2001.

[^37]: ^?^ RCN plans to build a \$250 million network capable of serving
    all residents of the city by the end of 2002. *See* Bruce Mohl, City
    Hopes Cable Pact Means Rate War, *Boston Globe*, July 28, 1999 at 1.

[^38]: ^?^ Last year, trade reports stated that RCN's systems in Boston
    and its suburbs are about 50% completed. *See* John Higgins, RCN's
    High Wire Act, *Broadcasting & Cable*, May 8, 2000, at 22.

[^39]: ^?^ Paul Allen reportedly has invested \$1.65 Billion in RCN and
    the company has raised over \$5 Billion more, to roll out its
    network and acquire new firms. *See* Kara Swisher, Paul Allen is
    Investing \$1.65 Billion in Telecommunications Firm RCN Corp., *Wall
    Street Journal*, October 4, 1999 at A-3.

[^40]:     ^?^ *See Time Warner-St. Petersburg,* 12 FCC Rcd 20964
    (1997); *Time Warner-Pinellas County*, 12 FCC 3143 (1997); and *Time
    Warner-Clearwater*, 11 FCC Rcd 20909 (1996) (all finding LEC
    effective competition when only a portion of the franchise area was
    built out by the competitor at the time when the Cable Services
    Bureau rendered its decisions.)

[^41]: ^?^ *See* RCN's press release, July 27, 1999.

[^42]:     ^?^ 47 C.F.R § 0.321.