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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) ) Columbus, OH Coaxial Communications of Central Ohio, Inc. ) CUID No. OH0170 ) Petition for Determination of ) Effective Competition ) MEMORANDUM OPINION AND ORDER Adopted: February 4, 1997 Released: February 11, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Coaxial Communications of Central Ohio, Inc. ("Coaxial") filed a Petition for Determination of Effective Competition asserting that it is subject to effective competition in Columbus, Ohio ("Columbus") because of the presence of Ameritech New Media's cable service in that City. This petition is unopposed. 2. Section 623(a)(4) of the Communications Act of 1934, as amended ("Communications Act") allows franchising authorities to become certified to regulate basic cable service rates of cable operators which are not subject to effective competition. For purposes of the initial request for certification, local franchising authorities may rely on a presumption that cable operators within their jurisdiction are not subject to effective competition unless they have actual knowledge to the contrary. Certification becomes effective 30 days from the date of filing unless the Commission finds that the authority does not meet the statutory certification requirements. In Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996 ("Cable Act Reform Order"), the Commission instructed cable operators believing themselves subject to local exchange carrier ("LEC") effective competition under Section 623(l)(1)(D) of the Communications Act to file a petition for determination of effective competition pursuant to Section 76.7 of the Commission's rules. Section 623(l)(1)(D) of the Communications Act provides that a cable operator is subject to effective competition where: a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such 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. A successful LEC effective competition petition will exempt a cable operator from rate regulation as of February 8, 1996, the enactment date of the Telecommunications Act of 1996 (the "1996 Act"). II. THE PLEADINGS 3. Coaxial asserts that it is subject to LEC effective competition in its Columbus, Ohio franchise area. With regard to the LEC affiliation requirement, Coaxial asserts that Ameritech New Media ("Ameritech") is a competing franchised cable operator wholly owned by Ameritech Corporation, a local exchange carrier serving customers in Ohio, Illinois, Indiana, Michigan, and Wisconsin. 4. With regard to the requirement that the LEC competitor offer video programming service in the unaffiliated cable operator's franchise area, Coaxial asserts that Ameritech is physically able to offer service to subscribers in Columbus. Coaxial asserts that Ameritech has overbuilt nearly half of Coaxial's franchise area, which encompasses nearly two-thirds of the 93,000 Coaxial homes passed, and that construction is continuing. Coaxial adds that Ameritech has heavily marketed the availability of its cable service and notes that it has experienced subscriber loss since the introduction of Ameritech's cable service. Coaxial also asserts there are no regulatory, technical, or other impediments to households taking service. The operator states that Ameritech became eligible to begin service to Columbus residents on June 10, 1996, 60 days after the LEC complied with the City's requirement to file its proposed rates and services. 5. Coaxial asserts that Ameritech offers comparable programming to Columbus subscribers. Specifically, Coaxial provides Ameritech's channel line-up which demonstrates that Ameritech offers almost 80 channels, 6 of which are local television broadcasting signals. Coaxial offers 64 channels in Columbus. 6. Coaxial adds that since June of 1996, it has made changes in its channel line- up,service, and pricing to better distinguish itself from the competition. It specifically states, for example, that it has continued its plant upgrade by expanding bandwidth and has repackaged and repriced its CPS and Premium service tiers to give more value to its customers. Coaxial also asserts that it has descrambled it CPS tier, in advance of competition, so that it could make subscribers' cable-ready TV operational features and VCR operations easier to operate. III. ANALYSIS 7. 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. 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. Coaxial has met this burden. 8. 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 Coaxial has provided sufficient evidence demonstrating that Ameritech New Media is an MVPD wholly owned by a LEC. Ameritech is unquestionably a LEC as defined by the Communications Act, and Ameritech New Media meets the Commission's definition of MVPD. Therefore, we find that Coaxial satisfies the affiliation prong of the LEC effective competition test. Coaxial is unaffiliated with both Ameritech New Media and Ameritech. 9. We also find that Coaxial has submitted sufficient evidence that the programming of Ameritech is comparable to that which it provides. The channel information for Ameritech submitted by Coaxial establishes that Ameritech offers at least 80 channels, including 6 local broadcast channels; this satisfies the Commission's programming comparability criterion. 10. To meet the LEC effective competition test, the alleged competitive service must also be offered directly to subscribers in the franchise area. In enacting the LEC test, Congress indicated that the Commission should apply its preexisting definition of the term "offer" to the new LEC effective competition test. Under that definition service is offered: (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. 11. Based on the information before us, we find that Ameritech is offering service in Coaxial's franchise area sufficient to demonstrate the presence of effective competition. Ameritech's initial service area lies in the core of the City of Columbus, with current construction expanding from that point in both a northern and southern direction during the next 15 months. Coaxial states that Ameritech's cable system overlaps its own in nearly half of its franchise area, which encompasses nearly two-thirds of the 93,000 Coaxial homes passed, and asserts that numerous households have already switched to Ameritech for cable service. We find Ameritech's presence and Coaxial's subscriber loss as evidence that Ameritech is physically able to offer service in the cable community at issue. While the entire franchise area is still in the process of being wired, Ameritech's franchise agreement provides for Ameritech to construct its system throughout the City of Columbus. Under its franchise, Ameritech is obligated to complete system construction on or before the third anniversary following its initial system activation. Ameritech also has a legal obligation to provide the City with a bond of not less than three million dollars guaranteeing its full and faithful performance under the terms of the franchise agreement. We find that expansion of service is on schedule and investment in the community will continue as it has since Ameritech was awarded its franchise. 12. Ameritech's aggressive marketing efforts, combined with the extensive press coverage of Ameritech in the local media, ensure that potential subscribers are reasonably aware of the availability of Ameritech's service. Within the area that Ameritech has wired, potential subscribers are able to receive service for only a minimal additional investment and without regulatory, technical or other impediments. Subsequent to the introduction of competition, Coaxial has upgraded its physical plant and reconfigured its prices and services for the benefit of its subscribers. In the circumstances, consistent with Congressional intent in adopting Section 623(l)(1)(d) of the Communications Act, we find "effective competition" to be present. IV. ORDERING CLAUSES 13. Accordingly, IT IS ORDERED that the Petition for Determination of Effective Competition filed by Coaxial Communications of Central Ohio, Inc. challenging the certification of the City of Columbus, in Columbus, Ohio IS GRANTED. 14. IT IS FURTHER ORDERED that the certification of the City of Columbus, Ohio to regulate the basic cable rates of Coaxial Communications of Central Ohio, Inc. in Columbus, Ohio IS REVOKED. 15. This action is taken pursuant to the interim rules adopted in Implementation of Cable Reform Provisions of the Telecommunications Act of 1996, and is without prejudice to any further action taken by the Commission in adopting final rules pursuant to the Notice of Proposed Rulemaking contained therein. 16. This action is taken pursuant to delegated authority under Section 0.321 of the Commission's rules, as amended. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau