Before the

Federal Communications Commission

Washington, D.C. 20554

+----------------------------------+---+------------------------------+
| In the Matter of                 | * | CSR 7234-E                   |
|                                  | * |                              |
| Time Warner Cable Inc., and Time | ) | CSR 7235-E                   |
| Warner                           | * |                              |
|                                  | * | CSR 7236-E                   |
| Entertainment-Advance/Newhouse   |   |                              |
| Partnership                      | * | CSR 7369-E                   |
|                                  | * |                              |
| 25 Petitions for Determination   | ) | CSR 7370-E                   |
| of Effective Competition in 229  | * |                              |
| Communities in New Jersey and    | * | CSR 7385-E                   |
| New York                         |   |                              |
|                                  | * | CSR 7386-E                   |
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|                                  | ) | CSR 7388-E                   |
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|                                  | * | CSR 7404-E                   |
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|                                  | * | CSR 7405-E                   |
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|                                  | ) | CSR 7406-E                   |
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|                                  | * | CSR 7483-E                   |
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|                                  | * | CSR 7491-E                   |
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|                                  | ) | CSR 7492-E                   |
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|                                  | * | CSR 7494-E                   |
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|                                  | ) | CSR 7499-E                   |
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|                                  | * | CSR 7501-E                   |
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|                                  | * | CSR 7536-E                   |
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|                                  | ) | CSR 7547-E                   |
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|                                  | * | CSR 7555-E                   |
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|                                  | * | CSR 7556-E                   |
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|                                  | ) | CSR 7557-E                   |
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|                                  | * | CSR 7559-E                   |
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+----------------------------------+---+------------------------------+

MEMORANDUM OPINION AND ORDER ON RECONSIDERATION

**Adopted: November 6, 2008 Released: November 7, 2008**

By Senior Deputy Chief, Policy Division, Media Bureau:

# INTRODUCTION AND BACKGROUND

1.  This Memorandum Opinion and Order resolves two petitions[^1] that
    the cable operator Time Warner Cable Inc., and Time Warner and
    Entertainment-Advance/Newhouse Partnership (collectively, "Time
    Warner" or the "Company") filed about two decisions of this
    Commission. Those decisions concerned Time Warner's requests to have
    the rates for its basic cable service deregulated in approximately
    760 franchise areas ("Communities") in New Jersey, New York, and
    Pennsylvania. The decisions granted Time Warner's requests for the
    vast majority of the Communities, but denied deregulation in 229 of
    them (3 in New Jersey and 226 in New York).[^2] The petitions seek
    reconsideration of the 229 denials. The only opposition to the
    petitions that was filed concerns the 3 New Jersey Communities and
    was filed by the Division of Rate Counsel (the "DRC") of the
    Department of the Public Advocate for the State of New Jersey.[^3]
    Time Warner filed a reply to it.[^4] We are resolving both of Time
    Warner's petitions in this one Memorandum Opinion and Order on
    Reconsideration for reasons of efficiency and economy.

2.  The DRC, which opposes the parts of our *New Jersey MO&O* that favor
    Time Warner, also filed an Application for Review of those parts of
    the *New Jersey MO&O*. The DRC requests that that pleading and Time
    Warner's Petition for Reconsideration in CSR 7547-E be consolidated
    and decided by the full Commission.[^5] We deny the DRC's request.
    Section 1.104(c) of our rules specifically provides that "If in any
    matter one party files a petition for reconsideration and a second
    party files an application for review, the Commission will withhold
    action on the application for review until final action has been
    taken on the petition for reconsideration."[^6] This allows all
    issues to be thoroughly considered by the staff and conserves the
    Commissioners' resources until then.

# analysis

## The Original Petitions and Memorandum Opinions and Orders

3.  In the original petitions that led to the decisions of which Time
    Warner seeks reconsideration, Time Warner alleged that it was
    subject to so much competition in the 229 Communities that its rates
    for basic cable service there should be deregulated. In particular,
    Time Warner alleged that it was subject to "competing provider
    effective competition" pursuant to Section 623(l)(1)(B) of the
    Communications Act of 1934, as amended,[^7] in each of the 229
    Communities. This form of effective competition required Time Warner
    to make two showings about each Community. The first, which Time
    Warner successfully made, was that in each Community it faced
    certain kinds of competitors (multichannel video programming
    distributors or "MVPDs").[^8] The second showing that Time Warner
    was required to make, and the one that it failed to make credible,
    concerned the success in winning subscribers that Time Warner's
    competitor MVPDs had achieved in each Community. Specifically, Time
    Warner had to prove that, in each Community, in excess of 15 percent
    of the households subscribed to MVPD services other than Time
    Warner's.[^9]

4.  Time Warner's petitions included statistical evidence that stated,
    for each Community, Time Warner's own market share and the combined
    market shares of its competitors, who were the Direct Broadcast
    Satellite ("DBS") providers DIRECTV and Dish Network. The decisions
    of which Time Warner seeks reconsideration found fatal flaws in Time
    Warner's statistical evidence. First, Time Warner's evidence showed
    that, in the 229 Communities, its own market share and that of the
    two DBS providers combined was in excess of 100 percent.[^10]
    Second, Time Warner stated that in 33 of those Communities its own
    market share was over 100 percent; in three of those Communities, it
    was over 200 percent; and, in one Community, Time Warner stated that
    its own market share was 771 percent.[^11] It strains credulity for
    a company to claim that it has significant competition in a market
    where it claims a market share in excess of 100 percent.

5.  A final evident flaw in Time Warner's statistical evidence appeared
    in pairs of Communities that bordered each other and had the same
    name. In 15 such pairs of Communities, Time Warner stated that it
    and/or the DBS providers had subscriberships that were so different
    as to strain credulity. For example, Time Warner stated that its own
    subscribership in the Town of St. Johnsville was nine percent and,
    in the neighboring Village of St. Johnsville, was 69 percent;[^12]
    and that the DBS providers' market share was 19 percent in the Town
    of Groton and, in the neighboring Village of Groton, was nearly
    twice as high, 37 percent.[^13]

6.  Time Warner's petitions offered no explanation for the obviously
    inaccurate and unreliable data that they contained. Indeed, the
    petitions showed no awareness of these patent flaws. Attached to the
    petitions were sworn declarations personally signed by an officer of
    the Company and its outside counsel attesting, to the best of their
    knowledge, information and belief, to the accuracy of the factual
    statements in the petitions.[^14]

7.  The Commission found that these conspicuous flaws in Time Warner's
    own evidence made its showings in the 229 Communities "obviously
    inaccurate and unreliable."[^15] Accordingly, the Company failed to
    sustain its burden of proof in those Communities and the Commission
    denied the petitions for deregulation in them. The Commission
    hypothesized in its *MO&Os* that a possible source of Time Warner's
    flawed data likely reflected a Community with a very small
    population included in a five-digit zip code with a very large
    population, and stated that Time Warner could re-file using
    nine-digit zip code data that would provide more precise data.[^16]

## The Petitions for Reconsideration

8.  Time Warner petitions for reconsideration, asking that the
    Commission reverse itself and find that the Company's evidence
    showed that competing provider effective competition does exist in
    the 229 Communities. Pointing to its evidence showing DBS
    subscribership in excess of 15 percent, Time Warner asks that we
    disregard the rest of the evidence it submitted, especially the
    evidence of its own subscribership and the combined subscribership
    of itself and the DBS providers.[^17] We decline to do so. Cable
    systems are presumed not to be subject to effective
    competition.[^18] We require a cable operator to sustain a burden of
    proof that its cable system is subject to effective competition by
    producing evidence that effective competition is present in its
    franchise area.[^19] When a cable operator presents evidence that is
    patently unreliable as described in the foregoing paragraphs, it
    fails to sustain its burden of proof.

9.  Time Warner attempts to explain the estimates of its own market
    share by alleging generally that in some small rural communities, a
    significant number of households may subscribe to both cable service
    and DBS service, producing subscribership estimates slightly over
    100%.[^20] Or, Time Warner theorizes, perhaps some households in one
    Community receive their mail in another Community and therefore
    appear on Time Warner's records as residing in the latter.[^21] We
    cannot find merit in these explanations, for several reasons. First,
    Time Warner offers no evidence that these conditions actually exist
    in any of the 229 Communities, much less explain those instances
    where the subscribership for all MVPDs exceeded 200 percent. Second,
    the Company has not attempted to comply with our rules by showing
    that evidence of such conditions, if it exists, consists of recent
    events, changed circumstances, facts that Time Warner did not know
    of earlier and could not have known through the exercise of ordinary
    diligence, or facts the consideration of which is "required in the
    public interest."[^22] Third, even if Time Warner were able to
    provide data in support of this explanation for Communities in which
    it has subscribership in excess of 100%, it still fails to take into
    consideration those households that may (a) subscribe to a
    competitive cable provider or local exchange carrier or (b) not
    subscribe to any form of pay television service.

10. Finally, Time Warner criticizes the Commission's suggestion that it
    re-file its DBS subscribership estimates based on nine-digit
    "Zip+Four" codes.[^23] Time Warner characterizes the use of
    nine-digit zip code data as "prohibitively expensive in the context
    of 226 small communities,"[^24] but fails to provide any support for
    this assertion. We doubt that such data would be prohibitively
    expensive for Time Warner, because the major cable operators
    Charter[^25] and Mediacom[^26] commonly provide such data in
    proceedings for rate deregulation. The Commission was merely
    suggesting a new approach to Time Warner, which the Company is free
    to follow or not as it chooses. We urge the Company, if it does not
    accept the Commission's suggestion, to intensify the efforts that it
    describes in its Petitions for Reconsideration to produce credible
    data in support of its petitions for cable rate deregulation.[^27]

# ORDERING CLAUSE

11. Accordingly, **IT IS ORDERED** that the Petitions for
    Reconsideration filed in the captioned proceedings by Time Warner
    Cable Inc., and Time Warner and Entertainment-Advance/Newhouse
    Partnership **ARE DENIED.**

12. This action is taken pursuant to delegated authority pursuant to
    Section 0.283 of the Commission's rules.[^28]

    FEDERAL COMMUNICATIONS COMMISSION

    Steven A. Broeckaert

    Senior Deputy Chief, Policy Division, Media Bureau

[^1]: Petition for Reconsideration in CSR 7234-E *et al.* filed by Time
    Warner on Sept. 12, 2008; Petition for Reconsideration in CSR 7547-E
    filed by Time Warner on Sept. 15, 2008.

[^2]: *Time Warner Cable Inc., & Time Warner &
    Entertainment-Advance/Newhouse Partnership*, Memorandum Opinion &
    Order DA 08-1893 ("*New York/Pennsylvania MO&O*")*,* released Aug.
    13, 2008, available at 2008 WL 3450890; *Time Warner Cable, Inc.,*
    Memorandum Opinion & Order DA 08-1917 ("*New Jersey MO&O*")*,*
    released Aug. 15, 2008, available at 2008 WL 3823069.

[^3]: Opposition to Time Warner's Petition for Reconsideration on Behalf
    of the New Jersey Division of Rate Counsel ("DRC Opposition"), filed
    in CSR 7547-E on Oct. 10, 2008.

[^4]: Reply in CSR 7547-E, filed Oct. 16, 2008.

[^5]: DRC Opposition at 2, 7-8.

[^6]: 47 C.F.R. § 1.104(c).

[^7]: 47 U.S.C. § 543(l)(1)(B).

[^8]: Specifically, 47 U.S.C. § 543(l)(1)(B)(i) requires that each
    Community be "served by at least two unaffiliated multichannel video
    programming distributors each of which offers comparable video
    programming to at least 50 percent of the households in the
    franchise area."

[^9]: Specifically, 47 U.S.C. § 543(l)(1)(B)(ii) requires that "the
    number of households subscribing to programming services offered by
    multichannel video programming distributors other than the largest
    multichannel video programming distributor," which was Time Warner,
    "exceeds 15 percent of the households in the franchise area."

[^10]: The Petition for Reconsideration in CSR 7234-E *et al.* states at
    6 that the *New York/Pennsylvania MO&O* erred in including the
    Village of Bridgewater (NY0296) among the Communities where the
    combined market shares of Time Warner and the DBS providers exceeded
    100%. The statistics stated in the *MO&*O about subscribership for
    that Community add up to 99.62% and round to 100%. *New
    York/Pennsylvania MO&O* at Att. C. And, on closer evaluation, we
    determined that the *New York/Pennsylvania MO&O* mis-copied Time
    Warner's data, mistakenly using the DBS subscribership for the Town
    of Bridgewater instead of the Village. Time Warner's actual data
    state Time Warner's subscribership in the Village of Bridgewater as
    65.20% and the DBS providers' as 44.98%, for a total of 110.18%.
    Petition for Special Relief in CSR 7501-E at Exhs. A & F. Thus, the
    Village of Bridgewater is a Community in which Time Warner's
    evidence states that its own market share and that of the two DBS
    providers combined was in excess of 100%.

[^11]: *New York/Pennsylvania R&O at* Att. C; *New Jersey R&O,* *R&O at*
    Att. C.

[^12]: Petition for Special Relief in CSR 7235-E, Exh. A.

[^13]: Petition for Special Relief in CSR 7492-E, Exh. E.

    Other occurrences of evident flaw in Time Warner's evidence are, in
    CSR 7235-E, the Town and Village of Canajoharie (Time Warner
    subscribership of 6% and 69% (respectively and rounded off to the
    nearest whole number); in CSR 7236-E, the Town and Village of Argyle
    (DBS subscribership of 32% and 57%); in CSR 7385-E, the Town and
    Village of Richmondville (Time Warner subscribership of 19% and 88%
    and DBS subscribership of 28% and 44%) and the Town and Village of
    Schaghticoke (DBS subscription of 16% and 28%); in CSR 7406-E, the
    Town and Village of Gainesville (DBS subscribership of 28% and 45%);
    in CSR 7492-E, the Town and Village of Groton (Time Warner
    subscribership of 11% and 75% and DBS subscribership of 19% and
    37%); in CSR 7499-E, the Town and Village of Newport (Time Warner
    subscribership of 7% and 98% and DBS subscribership of 14% and 34%);
    in CSDR 7556-E, the Town and Village of Franklin (DBS subscribership
    of 23% and 44%), the Town and Village of Otego (DBS subscribership
    of 15% and 36%), and the Town and Village of Oxford (DBS
    subscribership of 25% and 38%); in CSR 7557-E, in the Town and
    Village of Fabius (Time Warner subscribership of 20% and 57% and DBS
    subscribership of 32% and 45%); in CSR 7559-E, the Town and Village
    of Sherburne (DBS subscribership of 49% and 30%); and in CSR 7560-E,
    the Town and Village of Burke (DBS subscribership of 30% and 49%)
    and Town and Village of Waddington (DBS subscribership of 39% and
    23%). Of the foregoing pairs of Communities, one of each pair was
    among the 229 Communities for which the Commission denied
    deregulation. There may be more such pairs among the Communities for
    which the Commission granted deregulation.

[^14]: *See, e.g.,* Petition for Special Relief in CSR 7406-E, in which
    Time Warner stated that its own subscribership in the Village of
    LeRoy, New York, was 771.43%, at 10 (signed statement by outside
    counsel that, to the best of his knowledge, information and belief
    formed after reasonable inquiry, the petition "was well grounded in
    fact"); *id.* at 11 (declaration under penalty of perjury by
    President of the Rochester Division of Time Warner Cable Inc., that
    statements made in the petition and facts contained therein "are
    true and correct" to the best of his knowledge, information and
    belief).

[^15]: *New York/Pennsylvania R&O* at ¶ 10; *New Jersey R&O,* *R&O* at ¶
    8. The evidently flawed evidence submitted by Time Warner, described
    in paragraph 4 above, was not necessary for denial of the petitions
    and was therefore not mentioned in the Commission's Memorandum
    Opinions and Orders.

[^16]: *New York/Pennsylvania R&O* at ¶ 10; *New Jersey R&O,* *R&O* at ¶
    8.

[^17]: Petition for Reconsideration in CSR 7234-E *et al.* at 3-6;
    Petition for Reconsideration in CSR 7547-E at 3-6.

[^18]: 47 C.F.R. § 76.906; *see also* 47 U.S.C. § 543(a)(2), (l).

[^19]: 47 C.F.R. § 76.907(b).

[^20]: Petition for Reconsideration in CSR 7234-E *et al.* at 6
    (theorizing that perhaps "where one or more DBS Providers may not
    provide local-into-local broadcast service or a full complement of
    all local broadcast HD and multicast SD streams, . . . some
    subscribers \[may\] receive a combination of 'basic' service from
    the cable operator and 'expanded' video services from a DBS
    Provider"; Petition for Reconsideration in CSR 7547-E at 6.

[^21]: Petition for Reconsideration in CSR 7234-E *et al.* at 7.

[^22]: 47 C.F.R. § 1.106(b)(2), (c)(1, 2); DRC Opposition at 4-5.

[^23]: Petition for Reconsideration in CSR 7234-E *et al.* at 7;
    Petition for Reconsideration in CSR 7547-E at 3-4.

[^24]: Petition for Reconsideration in CSR 7234-E *et al.* at 4 n.10.

[^25]: *See, e.g.,* Petition for Special Relief in CSR 7830-E at Exh. 3
    (filed April 3, 2008, by Charter for St. James Parish, Louisiana);
    Petition for Special Relief in CSR 7546-E at Exh. 3 (filed Aug. 31,
    2007, by Charter for Hoover, Alabama); in CSR 6916-E (Petition for
    Special Relief by Charter in St. Louis, Missouri), Letter from
    Steven J. Horvitz, Esq., Davis Wright Tremaine LLP, counsel for
    Petitioner, to Steven Broeckaert, Deputy Chief, Policy Division,
    Media Bureau, dated March 30, 2007, at 2.

[^26]: *See, e.g.*, Petition for Special Relief in CSR 7689-E at Exh. E
    (dated Nov. 2, 2007, by Mediacom for Hudson, Iowa); Petition for
    Special Relief in CSR 7688-E at Exh. E (dated Nov. 1, 2007, by
    Mediacom for Britt, Iowa).

[^27]: Petition for Reconsideration in CSR 7234-E *et al.* at 6-7;
    Petition for Reconsideration in CSR 7547-E at 6.

[^28]: 47 C.F.R. § 0.283.