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HomeMy WebLinkAbout2007 Comcast Cable Franchise Administration Report2007 Cable Franchise Administration Report City of Auburn, Washington C"-Y OF I j)ij T),qX' I Prepared 13y: I A Mi. Brad cv CTU"I,7,CCC.1, I I c Im iewda i`k.' 15t alley (253) 931-4753 February 12, 2008 INTRODUCTION The City of Auburn (the "City") engaged the cable franchise administrative services of Bradley & Guzzetta, LLC ("B&G"). B&G works with many cities across the country on cable franchising matters. For the City, B&G receives all calls related to cable franchising, such as complaints and requests for discounts from seniors and the disabled. B&G has a local number for the exclusive use of City residents. This report will outline some of the services we have offered during the year and outline the major issues facing local governments on cable franchising. Customer Service. Under the cable franchise the City has with Comcast, the City must certify that residents requesting senior/disabled discounts are eligible. B&G drafted a special form that it now uses to certify eligibility. The City has also provided B&G with City letterhead and envelopes to mail out certification forms. From all appearances, it would appear the City, rather than an outside vendor, is administering the cable franchise. In 2007, we spoke with approximately 70 citizens on cable franchising issues. The majority were residents seeking a senior/disability discount. All citizens who requested a discount application packet were supplied with applications and stamped self addressed return envelopes. We were able to certify the majority of the returned applications and forward them to Comcast for approval. The certification program has gone very smoothly from our perspective and Comcast has been cooperative with our efforts. We are pleased to report that all of the callers' issues were completely addressed. If you would like any additional detail on our services, please do not hesitate to call me. Il. Legislation Legislation was introduced last year in Olympia that proposed to among other things eliminate cable franchising at the local level. House Bill 1983 was introduced and referred to the Committee on Technology, Energy & Communications. The companion bill in the Senate was Senate Bill 6003. We prepared and submitted a summary of this bill on February 9, 2007. We also assisted the City in drafting talking points for the Mayor. The bill was supported by Qwest, but opposed by Washington municipalities and Comcast. The bills did not pass out of committee last year. However, despite not having plans to deliver wire-line video services, Qwest has continued to support such legislation. We will continue to monitor these developments. Page 2 2007 Cable Franchise Administration Report 2/12/2008 III. FCC Decisions In perhaps the biggest development in many years in cable television regulation, the FCC issued two orders on Local Franchising. The first order was released on March 5, 2007. The first order addressed rules applicable only to new cable entrants. It requires franchising authorities to act on cable franchise applications within 90 days or 120 days depending on whether the applicant already occupies the public rights of way. It clarified the reasonableness of certain franchising requirements, such as build-out requirements, and PEG and I-Net requirements. It also clarified the franchise fee revenue base and the impact of PEG and I-Net requirements on the base. The second order related to existing cable entrants. We submitted Comments and Reply Comments on behalf of the City. Our Comments were relied upon by the FCC on several important issues, such as: The FCC agreed with our position that the 90/120 day "shot clock" for awarding franchises does not apply to incumbents at renewal. The FCC agreed with our position that the "build-out" section of the First Order is not applicable to incumbents. The FCC agreed with our position that Settlement Agreements cannot be preempted by the FCC. The FCC stated "This Order should in no way be interpreted as giving incumbents a unilateral right to breach their existing contractual obligations." "Additionally, nothing in this Order can be used as an independent basis for obtaining retrospective relief." The FCC agreed with our position that state and local customer service requirements may exceed the FCC's standards. In many instances our Comments and Reply Comments addressed issues that other local governmental commenters missed, particularly the validity of settlement agreements made separately from a cable franchise. The Comments clearly made an impact with the FCC. The FCC released statements summarizing both orders, which are attached. Copies of the full orders and the Comments and Reply Comments are available upon request. IV. Litigation Both FCC orders on local franchising have been appealed and are before the United States Sixth Circuit Court of Appeals. Oral argument was held on February 6, 2008. An opinion is expected later this Spring/Summer. Page 3 I.- R 2007 Cable Franchise Administration Report 2/12/2008 V. Franchise Fees As the consideration for the privilege of occupying the public rights-of-way in the City, Comcast pays a franchise fee to the City in the amount of 5% of Comcast's gross revenues. The City received $551,923.90 in franchise fee payments from Comcast in 2007. This represents an increase of approximately $62,500 or 12% from the franchise fees paid in 2006. We believe this increase is primarily due to the increase of cable pricing and an increase in premium service subscribers. As part of the cable franchise renewal process, we will engage the services of a cable financial consultant to review the franchise fee payments. We will report back on his findings. Comcast's franchise fee reports for each quarter of 2007 are attached. VI. Performance Review The cable franchise also requires Comcast to meet certain minimum customer service standards and provide quarterly reports to the City. These reports provide the following: • Total number of calls received in a reporting period; • Time taken to answer; • Average talk time; • Number of calls abandoned by the caller; • Average hold time; • Percentage of time all lines busy; • An explanation of any abnormalities. Comcast has submitted quarterly performance reports for 2007, copies of which are attached. Upon review, it appears that Comcast is in compliance with the Franchise's Performance standards, with the exception of Service Call Responsiveness. We will be following up with Comcast on this performance measure. VII. Renewal Comcast's cable franchise expires in March, 2008. We are also working with the cities of Renton and Kent on their renewals as well. The City of Renton began the process earlier than the City. In order to most cost effectively represent the City, we are waiting for Renton to resolve its franchise renewal with Comcast before proceeding in earnest with Comcast in Auburn, since the City has many of the same issues as Renton. We expect to be in serious discussions by the end of the first quarter or beginning of the second quarter 2008. Page 4 2007 Cable Franchise Administration Report 2/12/2008 VIII. Rates The City is a certified rate regulatory authority with the FCC. Under federal laws and regulations, the City is limited to the review of basic cable service tier. In simplest terms, this means the City may regulate the rates associated with the tier of service that includes the local over-the-air channels, such as KOM04 and KING-5, and the City's PEG channel, Channel 21. In terms of programming, Comcast currently sells this level of programming service as "Limited Cable." This is somewhat confusing because Comcast also sells a "Basic Cable" package. Every year, the City receives a FCC Form 1205 and a FCC Form 1240 from Comcast. The FCC Form 1205 is the form that Comcast files to justify its maximum permitted rates for installation and equipment associated with the basic service tier. Since it is a national filing, Comcast files the same form with certified rate authorities across the country. This allows the City to join with a number of Cities to engage a cable rate consultant to conduct a thorough review of the rate form. Periodically we will recommend that the City join such a review. The FCC Form 1240 is the form that Comcast files to justify the maximum permitted rates that Comcast can charge for the programming in the basic cable service tier. This is a local form that differs from city to city. This form should also be reviewed periodically by a cable rate consultant. Since the City has not conducted a detailed rate review in several years, it is advisable for the City to do so in the near future. A detailed memorandum outlining the rate review process is attached. Other Cities, such as Renton and Federal Way, have done so recently. In addition to the FCC Forms 1205 and 1240, there still remains a FCC Form 1235 filing that is outstanding relating to the upgrade in the late 1990s, which allows Comcast to charge subscribers an addition amount exceeding $1.00 per month. Comcast was required to file a final FCC Form 1235, but in other cities in the area, they did not. IX. Puget Sound Access In 2001, the City, along with the cities of Burien, Kent, Renton, SeaTac, and Tukwila entered into an agreement with AT&T Broadband (now Comcast), which required AT&T to make a one-time payment of $3,701,942.78 to Puget Sound Access ("PSA") for the purpose of constructing, equipping, operating and maintaining a public access studio and administering the functions of a public access channel(s) for the benefit of the cities. At that time the cities all agreed that the payment would unconditionally fulfill AT&T's franchise obligation to provide, maintain, and operate a public access studio. Later in 2001, the cities entered into an agreement with PSA, in which PSA agreed to provide public access facilities to the citizens of cities until 2011, or for so long as PSA has the financial means to so, whichever is earlier. It appears that PSA may run out of Page 5 2007 Cable Franchise Administration Report 2/12/2008 AA_ funding as early as 2009. Without additional funding, PSA will be unable to continuing providing public access services. It is recommended that the City decide whether it intends to fund public access television in the future. If the City decides it wants to fund PSA, it will need to determine the desirable method to fund PSA. If it does not intend to fund PSA, the City should ascertain what, if any, legal liability it may incur by eliminating public access. X. Miscellaneous in November, 2007, Comcast increased its programming rates. The basic cable service programming increased approximately 6%. The equipment and programming rates for Limited Cable decreased in the City. Comcast made several changes to its programming channel line-up. Some changes of interest include the moving of the NFL Network to the Sports & Entertainment tier, the addition of the NFL Network HD channel, and the movement of CSPAN2 from the Limited Cable package to the Digital Limited package. CONCLUSION It is our pleasure to serve the City in the capacity of cable franchise administrator. Should you have any questions concerning our services or cable television, please do not hesitate to contact. Mike Bradley Cable Franchise Administrator Page 6 2007 Cable Franchise Administration Report 2/12/2008