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HomeMy WebLinkAbout01/05/1993, 2 - CABLE TELEVISION FRANCHISE RENEWAL OBJECTIVES��i��II�NIIINIIIII�� `IIIU!XIIIIUII� L MEETING DATE: fi I city or san tuts oaispo COUNCIL AGENDA REPORT ITEM NUMBER; FROM: Ken Hampian, Assistant City Administrative Officer Prepared By: Deb Hossli, Administrative Analyst-/ SUBJECT: Cable Television Franchise Renewal Objectives CAO RECOMMENDATION: Adopt a resolution establishing franchise objectives for the upcoming cable television franchise renewal negotiations with Sonic Cable Television. REPORT -IN- BRIEF: The City has used the past year to gather technical and community needs data on the cable system to prepare 'objectives° or "goals" for the upcoming franchise renewal negotiations with Sonic Cable Television. Using the information collected, staff has developed the following suggested 'objectives" for the franchise renewal negotiations: ■ The cable system should be upgraded from its present 36 channel capacity to 78- 80 channels so that the City can keep pace with technology over the term of the franchise agreement ■ Adequate channel capacity and equipment funding should be sought to support public, government, and educational uses of the cable system. ■ Customer service standards should be incorporated into the franchise to insure that cable subscribers receive timely, efficient service from the cable company. ■ Enforcement capabilities should be incorporated into the franchise agreement to insure that the terms of the franchise agreement are met throughout its term. ■ A 5% franchise fee should be incorporated into the franchise agreement. ■ A franchise renewal term should be sought that is commensurate with the level _of investment committed to by the Cable Company during franchise negotiations. ■ Rate regulation capabilities should be incorporated into the franchise agreement to insure that the City can take advantage of the rate regulation authority provided by the new cable legislation. The purpose of the January 5, 1993 public hearing is to provide staff with broad, overall guidance for pursuing franchise negotiations. As negotiations proceed, it will undoubtedly be necessary to confer with the City Council regularly on the more detailed, specific negotiation points of the franchise renewal. A -1 'II�hI�NI�II�II����Ut����� City of San L%AIS OBISPO NW COUNCIL AGENDA REPORT DISCUSSION: Background The City's fifteen year cable television franchise with Sonic Cable Television is scheduled to expire in April of 1993. In accordance with cable law, Sonic initiated franchise renewal proceedings by advising the City in mid -1991 of the Company's interest in continuing to operate in our community. Because this represents the first opportunity in fifteen years to make changes to the cable services offered to our residents, the City responded to Sonic's notification by adopting a process for pursuing the franchise renewal that would closely involve the community from start to finish. Given the community interest in cable television, the City felt it was extremely important for its residents to be very involved in establishing the terms and services offered in the new franchise agreement. It is also important to make it clear that the City is obligated to enter into renewal proceedings with Sonic as they have met the criteria for pursuing renewal as established in the Cable Policy Act. As a first step in the franchise renewal process, the City secured the services of Mr. Carl Pilnick, President of Telecommunication Management Corporation (TMC), to guide us through the proceedings. With TMC's assistance, the City has used the past year to gather all the appropriate technical and community needs data on the cable system to prepare 'objectives" for the franchise negotiations. Staff is now ready to present the franchise objectives to the City Council for their approval. Once the City Council has adopted franchise objectives, detailed negotiations can begin. The franchise objectives will provide agreed upon "parameters" to guide staff during the negotiations and insure that the final draft franchise agreement presented to the City Council reflects overall community desires. Report Format This report has been structured to provide the City Council with an overview of: (1) the process the City used to collect the appropriate data to develop franchise objectives; (2) the results of the data collection; (3) the proposed franchise objectives; (4) the key issues surrounding the negotiation process; and (5) the remaining steps to complete the franchise renewal. 1. THE PROCESS As previously mentioned, the City embarked on a very thorough year long process to collect the appropriate technical and community needs data to develop franchise objectives for the renewal negotiations. This process involved: �i����i�w►IVIIIIIIIII I jl��dlll City Of San Lai S OSI Spo NlCm COUNCIL AGENDA REPORT ■ Evaluating the technical adequacy and performance of the cable system. This analysis provided the City with an overview of: how the cable system operates; where the system "fits" in terms of meeting federal standards and state of the art technology; and the areas where the system is in need of improvement if the City is to keep pace with cable technology over the term of the next franchise agreement. This information then formed the basis for developing franchise objectives related to technical and performance upgrades to the cable system. ■ Identifying public, educational, and governmental (PEG) cable access needs. This review provided the City with comprehensive information on the types of special cable uses the public, local school officials and City officials would like to have available. Examples of PEG access uses of the cable system include, cablecasting City Council or School Board meetings, cablecasting locally produced programming, providing exclusive channels to the City or school district for training activities, etc. This information then formed the basis for developing franchise objective related to PEG access improvements to the cable system. ■ Surveying residents through the City Lights newsletter and holding focus groups to determine attitudes on cable television and franchise renewal priorities. This information was used to help the City develop franchise renewal priorities that reflect community desires. ■ Reviewing the financial capabilities of the cable company. This review provided the City with critical information regarding the cable company's ability to fund any improvements to the cable system requested during the franchise negotiations. 2. RESULTS OF DATA COLLECTION A) Results of the Cable System Technical and Performance Review The purpose of this review was to find out basic facts regarding the cable system's operations, where it "fits" in terms of meeting federal standards and state -of- the -art technology, and where it is in need of improvement if r the City is to keep pace with cable technology. Current System. Before reviewing the results of the report, it is important to first share the following basic information on the current cable system: city of San l.AS OBISpo 11iis COUNCIL AGENDA REPORT ■ It has a channel capacity of 36 - all of which all are in use (therefore, any new programming must be added at the expense of removing other programming). ■ It is composed of 140 miles of cable - 90 miles is attached to utility poles and 40 miles is buried underground. ■ It is capable of providing cable service to approximately 19,950 residences in the City (which represents nearly all households except for a few located in commercial areas). ■ It serves approximately 14,000 subscribers annually. Findinas. The technical and performance review revealed the following: ■ Our current cable system is technologically out of date and should be upgraded as part of the franchise renewal process to: accommodate 78-80 channels (as opposed to 36); introduce fiber optics into the cable system; and include PEG access capabilities. ■ Our cable system's technical performance is generally adequate - it meets the 1972 Federal Government standards (the 1992 standards established by the Federal government are more stringent and the cable system must meet the new standards in the future). ■ The cable system's service request statistics, although not alarming, represent an aging system. Currently, on average 1 out of every 4 subscribers has at least one service problem per year (which is considered an acceptable percentage for a cable system of this age) . However, if the cable system is not upgraded as part of the upcoming franchise, the system will undoubtedly become less reliable and likely fall below acceptable service request standards. ■ Sonic falls below industry standards in the area of telephone responsiveness for customer inquires. A key area of a cable company's customer service can be found in the telephone responsiveness area. A review of Sonic's customer service data shows that it takes an average of 60 seconds to be connected with a customer service representative as opposed to the industry goal of 30 seconds. Needs. In summary, TMC's findings support the need to: (1) request a technical upgrade and expansion to the cable system so that we can continue to offer up -to -date cable services to our residents, and (2) include 1�� �►�IIIII�p ���U city of San LUIS OBISpo WNrue COUNCIL AGENDA REPORT customer service aYQ technical standards, with appropriate enforcement capabilities, in our cable franchise to protect cable consumers over the life of the new agreement. The full report discussing the cable system's technical and performance review can be found in Exhibit 1. B. Results of the PEG Access Interviews Under the Cable Act, franchising authorities are permitted to negotiate for PEG access channel capacity and capital facilities and equipment during renewal proceedings. The PEG access users, in turn, must fund the ongoing operating costs such as, camera operators, program production, office expenses, overhead, etc. Again, PEG access refers to the use of the cable system by the public, educational institutions (such as colleges and local schools), and government. In order to prepare for the upcoming franchise negotiations, the City conducted interviews of all City department heads; local school officials from the Coastal Unified School District, Cal Poly, and Cuesta College; and the public. The ideas and suggestions arising from the interviews were subsequently analyzed by our consultant to determine feasibility and cost effectiveness. Attachment 2 provides a detailed listing of these ideas and suggestions. In a general sense, however, the interests of those interviewed focussed on having access to the following capabilities: ■ Cablecasting to the general public. This means that the cable system would provide adequate channel capacity and appropriate equipment to cablecast (on a one way video basis) locally produced programming, City Council meetings, School Board meetings, etc. ■ Closed circuit cablecasting for government and educational institutions. This means the cable system would have the ability to cablecast on a one -way or two -way video basis (interactive television) to a target audience as opposed to the entire cable audience. For example, a Fire Department training program could be sent over a private channel that is not available to other cable subscribers. Closed circuit capabilities are of particular interest to government and educational institutions because of the potential cost savings that could accrue through centralized training and remote teaching. �1111�� city of san ,-.Ais oaispo - COUNCIL AGENDA REPORT ■ Two -way data communications for government and educational institutions. This means that the cable system would have the ability to allow two or more remote locations to share data in a more cost- effective manner. As an example, the City currently leases telephone lines to tie City Hall's computers to 955 Morro Street's computers. Using cable lines as opposed to leasing telephone lines to accomplish this would eliminate monthly telephone line lease expenses. TMC is recommending that we pursue channel capacity and funding for equipment to achieve the above outlined capabilities during franchise negotiations without specifically defining the initial uses. This recommendation is made with the understanding that once Sonic's financial commitment to PEG access activities is confirmed, the City will work with the public and educational institutions to develop a plan for prioritizing and allocating PEG access resources and funding the ongoing operational expenses. The full report discussing PEG access can be found in Exhibit 2. C) Results of Citizen Cable Survey and Focus Groups Input Survey. The City distributed a cable survey in the summer edition of the City Lights. Nearly 1,600 residents responded. This represented a 8.3% response rate which is considered relatively high for a mail survey. It is important to keep in mind that the survey results are not considered statistically valid as they do not represent a random sampling from the community - the results can, however, serve as a "barometer" for community opinion. The City asked questions in three major areas: (1) customer satisfaction, (2) new services desired; and (3) priorities for renewal. Below is a sampling of the highlights: ■ 78% that responded indicated some level of dissatisfaction with the rates. ■. Nearly everyone wanted new services so long as there was no cost to the consumer involved. ■ Of those who wanted new services, cablecasting of City Council meetings was ranked relatively high. Q� 111111%11111111pl city Of San LUIS OBISPO WhGe COUNCIL AGENDA REPORT ■ Priorities for the franchise renewal were: rates, programming, and quality of service (in priority order). As we suspected might happen, the issues the community is most concerned with are the issues the City has the least control over. Even with the passage of the Cable Television Consumer Protection and Competition Act of 1992, the City will still have no control over cable system programming and little control over cable rates (although this will not be confirmed until the Federal Government develops a definition for the basic tier of service, which is expected by April 1993). Because of these legislative constraints, the survey results were of limited benefit in developing franchise objectives. However, an underlying theme of the survey results did provide some guidance to staff. Survey responses confirmed that the issues of greatest concern to the community are more of the "bread and butter' nature (e.g., rates. and programming). This suggested to staff that many residents are not particularly interested in paying for a cable system with a lot of "bells and whistles", and as such, the franchise objectives should be more conservative in nature. Exhibit 3 provides a complete overview of the survey results. Focus Groups. Focus Group comments, on the other hand, were very helpful. The City held three Focus Group sessions on October 29, 1992. Over 200 residents asked to participate - 44 actually attended. The sessions were two hours in length and structured to provide each attendee with: background on the technical and survey information collected; a chance to ask our consultant questions on general cable issues and the recent cable legislation; and an opportunity to comment on the proposed franchise objectives (these are discussed in detail in the next section of the report). Nearly all the participants were supportive of the proposed objectives and felt they represented reasonable goals for the franchise renewal process. The only disagreement surrounded the area of funding for public access activities. Several participants felt that it was unfair for all cable subscribers to pay for a service that in their opinion only benefitted a few. The participants also suggested that the City develop a few additional objectives for the franchise renewal negotiations. Unfortunately, in most of the cases, the suggestions revolved around issues that the cable company still has legal control over. For example, several attendees felt that Sonic should: create a low cost tier for seniors or those with limited income, provide more northern California programming, allow subscribers to pick iuh��N��IIIIIIIII� ►�9�B�II city o� san .ais owpo COUNCIL AGENDA REPORT and choose in a menu format their programming, eliminate syndex requirements, etc. Again, because these are issues that the cable operator still has legal control over, they may not be willing to negotiate over them. Such goals could be added to the franchise objectives; however, we should have realistic, expectations relative to the outcome. 3. PROPOSED FRANCHISE OBJECTIVES Staff, with the assistance of TMC, has analyzed the information collected over the last year and used it to develop the following listing of the major franchise objectives that we consider to be reasonable, well balanced and reflect community priorities for the City Council's consideration: ■ Upgrading the Cable System Staff is recommending that the Cable Company be required as part of the franchise renewal to upgrade the cable system from its 36 channel capacity to 78-80 channel capacity (550 megahertz) and incorporate fiber optics into its design so that our cable system can keep pace with cable technology over the term of the franchise. This is the single most costly item (low end estimates are $2 million) and will have the greatest impact on the cable service offered to our residents in the future. Without the upgrade, it is likely that technical performance of the system will fall below Federal standards over the next several years and there will be no capability to add new programming or accommodate PEG access needs (without removing other programming as all channels are in use). ■ Providing Funding for PEG Access Equipment Staff is recommending that we pursue funding to accomplish our PEG access goals identified in the PEG access section of this report (e.g., cablecasting from live remote locations, using our cable system for closed circuit applications or data communications activities, etc.). It is important to note, however, that achieving our PEG access goals requires two things. First, the cable system must be technically upgraded (e.g., more channel capacity and two -way communications capabilities). The secondary issue relates to equipment needs (e.g., equipment to cablecast meetings or develop locally produced programming). With respect to this, TMC is recommending that we negotiate for a level of funding for equipment as opposed to specific items. Because our PEG access goals are currently so broad, taking this approach will give us more time to develop a rational plan for allocating the equipment resources lu"1IIIIIIpI1I��IN city of San LUIS OBISpo MW COUNCIL AGENDA REPORT between public, education, and government uses once the franchise is in place. In determining an appropriate funding level for equipment, TMC is recommending that we rely on a combination of what other comparable sized cable systems have been offered and the length of the franchise term (generally speaking, the longer the term, the greater the commitment). ■ Establishing Customer Service Standards Staff is recommending that the City pursue as part of negotiations the inclusion of customer service standards, along with regular reporting requirements and enforcement capabilities, in our franchise agreement. Customer service standards refer to standards a cable operator must comply with in delivering their services. Examples include standards for: (1) holding office hours and telephone availability (including requirements for how quickly a subscriber is connected to a cable service representative); (2) responding to installation, outages and services calls; and (3) responding to subscriber complaints (e.g., billing concerns, refund requests, etc.). With the recent passage of the new cable legislation, the Federal Communications Commission (FCC) will be required to develop minimum customer services standards for cable operators. This legislation also allows local franchising authorities to establish standards that exceed the FCC's minimum standards. Because the FCC's standards will not be finalized prior to our negotiations, staff is recommending that we develop standards that are based on common practices of well managed, responsive cable companies throughout the nation. By taking this approach, the City's standards will likely exceed FCC standards but still be defensible in a court of law (the legal test lies in what is reasonable and if other well managed companies are meeting these standards, it is reasonable to assume that our cable operator can). ■ Establishing Franchise Enforcement Capabilities Staff is recommending that the City pursue as part of the negotiations inclusion of enforcement capabilities in our franchise agreement to insure that all terms of our franchise are met. Most older franchise agreements (ours included) lack practical or rapid methods for enforcing a cable operator's commitments. The theoretical ability to revoke of franchise as set out in current cable law is not practical as it inevitably leads to protracted, expensive litigation. Similarly, requiring performance or construction bonds usually require the successful prosecution of a lawsuit against the bonding entity before the proceeds can be collected. i��n� ►b►►��Illlll�lpii ����lll MY Of San LJIS OBISpo NMIGN COUNCIL AGENDA REPORT To solve this dilemma, many communities are now negotiating for the ability to assess damages or penalties prior to litigation, with the cable operator able to litigate after the assessment, if it believes that the assessment is unwarranted or arbitrary. With this approach, correction of, or relief from, franchise violations can be achieved within a reasonable time period. This approach can be implemented by requiring the operator to post an irrevocable letter of credit, with agreed upon procedures for assessment. Within these procedures the cable operator would be provided due process which includes written notification of the violation and reasonable opportunity to cure the violation. ■ Establishing a 5% Franchise Fee The City currently assesses a 4% franchise fee from Sonic which amounts to approximately $170,000 annually. A franchise fee represents compensation for using the City's right of way to lay the cable system's cable lines. As part of the renewal negotiations, staff is recommending that we increase the franchise fee to 5 %, the maximum allowed under the law and the typical fee charged by most franchising authorities. A concern has been expressed that if the City increases the franchise fee, the cable company will merely pass this on the consumer through higher cable rates. TMC refutes this argument from the perspective that a cable company develops their rates based upon what the market will bear - costs of operations are only considered secondarily. Therefore, if the City does not ask for the increase in franchise fees, we will not see lower cable rates when Sonic is considering their next rate increase. Rather, Sonic will be the beneficiary of a greater profit margin. ■ Establishing a Franchise Renewal Term Establishing the franchise renewal term will likely be the last item negotiated as the term length will be dependent upon the amount of investment the cable company is willing to commit to as part of the franchise negotiations. Generally speaking, longer term franchises (ten to fifteen years) are offered when cable companies are willing to-.make significant investments in their systems. Longer franchise renewal terms are needed to secure financing _ and provide the company adequate time to amortize their investment. Conversely, shorter franchises are appropriate in situations where cable companies are not willing to invest in their systems. a -io ii�H� ►�NNI�I��gIUIN city of san ais oBispo COUNCIL AGENDA REPORT During the franchise renewal proceedings, the City will rely heavily on the experience of TMC in recommending an appropriate term length. Mr. Pilnick, the President of TMC, has negotiated hundreds of cable franchises throughout the United States and is well versed in correlating capital investment to term length. Therefore, staff does not have a specific recommendation regarding term length. Rather, this will be determined as the negotiations progress. ■ Requiring Compliance with Rate Regulation In order to insure that the City will be able to take advantage of the rate regulation authority recently provided by the new cable legislation, staff is recommending that language to accomplish this be included in our franchise agreement. It is also important to add that TMC's review of the cable operator's cash flow has shown that Sonic should be able to support the City's franchise objectives listed above. 4. KEY ISSUES SURROUNDING THE FRANCHISE RENEWAL In pursuing the franchise renewal, it is important that the following key issues be kept in mind throughout the process: ■ City Leverage During Renewal Proceedings First and foremost, the franchise renewal negotiations are just that - negotiations. Even with the recent cable consumer protection legislation, the City is still very limited in what it can ask for during the franchise negotiations. The only meaningful "hammer" that the City holds over the proceedings is the length of the renewal term. The longer the franchise agreement, the more valuable the cable system is on the resale market. This is where the City's leverage lies in pursuing upgrades and enhancements to our cable system. However, it must be emphasized that even though the City has control over a crucial issue (term length), cable law still largely favors the cable operator. Therefore, the City and the public should enter into the proceedings recognizing that negotiations will be difficult, and there are limitations on what can be "demanded" or "required ", 421 �i����HllullullUlP� q�pl city of San AS OBISp4 i 00 COUNCIL AGENDA REPORT ■ Impact of Franchise Renewal on Cable Rates Clearly, the cost of cable television is an issue of great consequence to the community. Many are concerned that the franchise renewal proceedings will automatically result in higher cable rates to subscribers as the cable operator will automatically pass on the costs of any enhancements. While no guarantees can be provided in this area (as we do not as yet know the impact of the new rate regulation legislation), TMC offers a compelling argument against this. As mentioned previously, a cable company develops their rates based upon what the market will bear - costs of operations are only considered secondarily. Therefore, if the City does not ask for any enhancements to the cable system as part of the franchise renewal, we will not see lower cable rates when Sonic is considering their next rate increase. Thus, concern regarding rates should not prevent the City from pursuing reasonable improvements to the franchise and cable system. ■ Concerns Over Length of Franchise Over the last several years, many communities have opted for short term franchises in response to rapid changes in cable technology. Many felt that by taking this approach, they could avoid situations where a cable system's technology becomes obsolete long before the franchise expires (thereby creating a situation where a community is "stuck" with an out of date cable system until the franchise expires). The downside to this strategy is that few cable operators are willing to make significant commitments to system upgrades if the franchises are not long enough to amortize their investments. Because franchise agreements continue to become more sophisticated, these types of concerns can be mitigated by negotiating to place "most favored nations" clauses in franchises. This means a franchising authority could require the cable operator to keep up with improvements and advances occurring in other comparable cable systems throughout the life of the agreement based on mutually agreed upon criteria. Therefore, our negotiations over term length should focus on the level of commitment the cable company is willing to make during the franchise term. 5. THE NEXT STEPS Upon City Council adoption of a set of franchise objectives, staff will begin negotiations with Sonic. Staff anticipates that the negotiations process will last through the end of March (during which time staff will keep the Council fully a -/a �I���► ��IIIIII�I���glUlh MY Of San �JIS OBISPO COUNCIL AGENDA REPORT informed of our progress). Once negotiations have concluded, a draft franchise agreement and cable ordinance will be developed and presented to the City Council and the community at a public hearing. Under this schedule, the City should have a new mutually acceptable franchise agreement and ordinance in place by the time the existing franchise with Sonic expires in April of 1993. ATTACHMENTS: 1 - Resolution 2- Government and Education Listing of Access Suggestions 3- Recommended Cable Television Franchise Renewal Objectives 4- Overview of New Cable Legislation EXHIBITS: (Distributed to City Council only. Available to public for review in the City Clerk's Office.) A - Cable Television System Technical Performance Review B - Assessment of Government and Educational Access Needs C - Tabulation and Review of Cable Television Survey D - Assessment of Cable System's Ability to Meet Community Needs a -13 RESOLUTION NO. (1993 Series) RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO ESTABLISHING FRANCHISE OBJECTIVES FOR THE SONIC CABLE TELEVISION FRANCHISE RENEWAL WHEREAS, the City's franchise with Sonic Cable Television is scheduled to expire in April of 1993; and WHEREAS, Sonic Cable Television advised the City in mid -1991, in accordance with the Cable Policies Act, of their interest in renewing their franchise; and WHEREAS, the City responded to Sonic's notification by preparing a schedule and process for pursuing the franchise renewal negotiations; and WHEREAS, this process has involved collecting appropriate technical and community needs data on the cable system to prepare for the franchise renewal negotiations; and WHEREAS, a major component of this preparation involved the development of franchise objectives to serve as formal parameters for the franchise renewal negotiations. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of San Luis Obispo that figure 1 (attached hereto) represents the franchise objectives that will be used to guide the franchise renewal negotiations with Sonic Cable Television. MAYOR PEG PINARD ATTEST: CITY CLERK a -14 Page Two Resolution No. (1993 Series) APPROVED: CITY ADMINISTRATIVE OFFICER 61W ATTOR a -►s a M n 7 n S r m m 7 m E w r H rym 3 M n 7 n 7 w m m m y m < Y• n m N ttl T. 0 0 ►3 pou+ nrA mt• wAM 3 nb m m m 0 0.0 10 w o 0 n 0 w< go rw• 3 o n n m ft w m ID rt 14 ID r wow m r r wr 7- r Ar m n M ►sn rrro r w m 3 m m w n r r m e n ae w o `< m 7 w o w n m tl rt Q 0 rt r m ar0 0'7 w C6 w0 a n m A rt A r 6 t.. 10 m 0< m m m s ;pw n rn D m n AAA 300• r °' "�a m70 nn nm rn ar p mm wc. rwtr mm M r S 6 m n 0 to rrt rnt O. O m m r7 510 n w 7 m 10 m t<p m n o 3 rmt r o n O. 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SURVEY OF PUBLIC AGENCIES A. City Departments Most City departments who have not utilized cable to any significant extent in the past find it difficult to forecast what access needs they may have in the future, particularly over a 10 or 15 year time period. An ascertainment survey, therefore, can only provide Preliminary information, which may change substantially with time. A key priority, in the franchise renewal process, is for the City to "not close the door" to future needs. This can be accomplished by negotiating for some commitment by the cable operator on a contingency or "trigger" basis. For example, funds for access equipment would be made available only when a new City need could justify the expenditure. This would preserve some City flexibility for the future. With this background in mind, discussions with City department representatives elicited the following cable - related interests. (1) Fire Department As in most cities, the Fire Department is interested in using cable for video training, to the extent practical. This would require: • Access to a video studio, and possibly a mobile studio van, to be able to transmit training programming to fire stations. The City has 4 stations, and therefore the direct transportation savings through the use of video may not be great. However, over the long term, fire training may be standardized throughout the County, and even on a multi - county or regional basis. In that event, remote video training could achieve substantial cost savings. • Access to a closed- circuit video channel for video transmission to fire stations. The channel could be shared with other public agencies. • Capability for data communications between the stations and headquarters. Here again, this capability could be extended to cover County and regional areas in the future. a -aa (2) Police Department While other facilities currently are being utilized, the Department is interested in improving its communications capability in such areas as satellite reception of law enforcement programming from State or Federal agencies, and lower cost, higher speed data communications. Also of interest is the possibility of utilizing cable for security monitoring of public buildings, through alarm sensing and /or video surveillance. (3). Information Systems Department The Information Systems Department indicated interest in the following: • Reduction in the cost of leased data circuits. Currently, it is estimated that the City spends about $50,000 a year for such circuits. • Increased data -rate transmission capability, at reasonable cost (less than common carrier). • Data communications links to selected County and State agencies. Possible establishment of information kiosks around the City which would enable the public to access City information. • Connection to, and use of, Cal Poly's teleconferencing facilities. • Possible use of the cable network to reduce frequency congestion of mobile communications. (4) Finance Department Interest was expressed in the possibility of automatic utility meter reading and billing. (This service, to be effective, may require cable connection to all homes, even those which do not subscribe to cable television service.) (5) City Manager's Office Among the services of possible.interest were: • Cablecasting of Council meetings, and possibly other public meetings. A of 0)- j • Use of cable to improve, or reduce the cost of, such City services as traffic signal control and utility telemetry. • A new Performing Arts Center is expected to be constructed within a year. Cablecasting facilities at the Center may be desired. • Improved communications links, possibly on a multimedia basis, among the City, the County, California Polytechnic State University, Cuesta College and the schools. The potential impact of developing such services via cable is addressed in Section IV. B. Educational Agencies Discussions were held with representatives of Cuesta College, California Polytechnic State University (Cal Poly) and the San Luis Obispo Unified School District with respect to current and future interests in the utilization of cable television facilities and channels. (1) Cuesta College Representatives of the College indicated strong interest in cable television, as indicated in the position letter included in Appendix C. The College currently has a television studio, offers a telecommunications program and has produced programs and courses both for academic instruction and specialized training. A Fine Arts /Performing Arts complex and a learning center are planned for future construction, both of which would expand the potential use of television and video. Preliminary discussions were held as to whether Cuesta College might serve as a primary local resource for PEG access programming, as described in Section II.A above. In this model, PEG access equipment funds provided by the cable operator as a result of the franchise renewal process might be made available to the College to expand or augment the current video studio. The new equipment would permit a broader range of program production. In return, the College would agree to support programming desired by City departments and the School District, up to some defined level. This would eliminate, or at least greatly reduce, the need for the City to budget funds for cable television.operating expenses. a -aa (2) Cal Poly California Polytechnic State University services an area ranging as far south as Santa Barbara and as far north as Salinas. As a technically oriented university, Cal Poly is interested in telecommunications in general, and video education in particular. Cal Poly has an on- campus television studio with production and editing capability. A new distance - learning facility has recently become operational in which an instructor at a dais can be seen on television sets in remote classrooms. The dais permits the instructor to view the students at any location as well, and provides the ability to switch and control the remote cameras. If this capability were extended to include.the schools, City departments and businesses in San Luis Obispo, it would constitute a comprehensive distance - learning network. Cal Poly also is interested in videodisc storage and retrieval, in which visual or graphical information stored on videodisc can be accessed through personal computers or terminals located at public locations, such as libraries. The requested information would then be transmitted over a video channel to a television set at the requesting location. It is also of interest to note that Cal Poly and Sonic executed an Agreement in July 1991 (Appendix D), under which: • Sonic was permitted to provide cable services to about 31000 students in the on- campus residence halls. Sonic allowed Cal Poly to program Channel 2 (KCBS) of the cable system during the periods of "syndicated exclusivity" when the channel otherwise would be unprogrammed. (Syndicated exclusivity gives the right to a local television broadcast station to reauire a cable operator to delete programming from another station that carries a duplication of that programming, if the local station has the exclusive broadcast rights to that geographic area.) The normal times when Channel 2 would be "blacked out" under this requirement would be Monday through Friday, 10.00 AM -Noon 12.30 PM -4:00 PM and 8:00 PM -11:00 PM. This considerable block of time is available for Cal Poly use. a a3 Luis Obispo Cable system, Sonic will make available one video channel for exclusive Cal Poly access use, to permit the university to Droaram to "all off - campus Sonic subscribers County which have 550 MHz systems." This channel would replace the part -time use of Channel 2. This provision is of interest because it commits a cable channel to Cal Poly use even before negotiations have begun with respect to renewal of Sonic's franchise in the City. • Sonic will provide a second channel for Cal Poly access use when the first channel is "being used by the University seventy five percent (75 %) of the time to distribute substantially unduplicated live, taped or character generated programming ". (It is not clear whether this refers to a 24 -hour day, which would mean 18 hours a day of pro(zramming.) • It states that "Sonic will provide the University with a wide band 550 MHz distribution system compatible with that used by Sonic in the City of San Luis Obispo ". This indicates that as far back as mid -1991, and considerably in advance of a franchise renewal agreement, Sonic contemplated a 41 A ,4F }he /� -0 }..1e .. -.L.l— a.— c=n of about 80 video channels. This agreement establishes Cal Poly as a major access user of Sonic's cable facilities, regardless of the outcome of the City's renewal process. Cal Poly might be considered, therefore, as a possible resource for support of City and schools programming, in the same manner as described above for Cuesta College. (3) San Luis Obispo Unified School District The San Luis Obispo Unified School District includes the City of San Luis Obispo, the County, and the communities of Morro Bay and Pismo Beach. A total of 8,000 students are served at some 18 school sites. Both Sonic and Falcon Cable cover portions of the District's service area. This makes the question of interconnection of the two systems a high priority, to be able to reach all schools in the District through cable. All of the schools have a cable drop currently. The major interests of the District include: Remote Learning /Trainina -- The possible sharing of teachers among schools through video is becoming more attractive as budgetary considerations limit the number of specialized teachers and courses that can be made available. Similarly, in- service training of teachers and staff through interactive video also is attractive. • The use of data communications appears increasingly important. This would include two -way data communications capability between the Board Center and all schools. The Center has a main -frame computer, and with the anticipated proliferation of personal computers and terminals (e.g., each school will have a computer learning center), the need for on -line communications and for transmission of student and administrative data is growing rapidly. The specific perceived cable - related needs of the District for the future include the following: • Ability to transmit video to all schools simultaneously from a central facility such as a Media Center. • Ability to transmit some programming on a closed- circuit basis. This may entail either the allocation of a channel not available to the cable subscribers, or the use of a scrambling technique. • Cabling of all classrooms, so that video can be received by any class. • Interconnection to other institutions, such as Cal Poly, Cuesta College and libraries. • Data communications capability among all schools and the Board Center. • Access to studio /video facilities, including a fixed studio and /or mobile studio van. Because the school district serves areas outside the City of San Luis Obispo, the City's franchise renewal process may not be able to address all of the above needs. a -a5 To some degree, a multi - jurisdictional effort will be required. C. Summary of Government and Educational Needs and Interests Figure 9 summarizes the categories of cable services of interest to the public agencies and also the cable system capability that would be required to provide the services. Cablecasting to the general public (i.e., cable subscribers) requires no special modifications to the system. The only special requirements are connections at each cablecasting location that provide the "upstream" capability to transmit the signal back to the cable system headend. For example, cablecasting live City Council meetings requires video cameras and ancillary equipment in the Council Chambers, and a communications link that will modulated the video signal for transmission on an upstream cable channel to the headend. At the headend, the signal is processed and placed on the government access channel for distribution over the cable system. For closed- circuit applications, where the target audience is specialized, the same general capability is required, with the addition of the capability to limit audiences. A Fire Department training program, as an example, might be sent over a "private" channel not selectable by the ordinary cable system converter, or the signal might be transmitted in scrambled form with descramblers located at each fire station. Data communications, for most applications, requires full duplex (two -way) communications capability, and therefore is not directly compatible with the conventional cable system design and would require special system modifications. Options for these modifications are discussed in Section IV. a -A0 FIGURE 9 MATRIX OF CABLE- RELATED NEEDS COMMUNICATIONS INTERESTED REQUIRED CABLE SYSTEM SERVICE DEPARTMENTS AND CAPABILITY TO MEET NEEDS AGENCIES Video to the • City Council • Compatible with conventional Public (one -way video) • City departments cable system design • Educational Requires upstream (reverse) Institutions system connection at each (Cal Poly, cablecasting location Cuesta, schools) . Requires video and modulation equipment at each cablecasting location • Requires channel capacity Closed- Circuit Fire Department . Compatible with conventional Video to Selected Audiences other City cable system design (one -way video, Departments . Requires upstream system two -way audio via Educational connection at each telephone) Institutions cablecasting location (Cal Poly, . Requires cable drop, Cuesta, schools) converter, telephone & TV _ set at each receiving location • Requires video and modulation equipment at each cablecasting location. • Requires channel capacity. May require closed- circuit channel or signal scrambling for information security Data . Information . Requires two -way Communications Systems Dept. communication link connected (two -way data) • Other City to all locations Departments . Requires cable modems at all • Educational locations Institutions (Cal Poly, Cuesta, schools) a c� TELECOMMUNICATIONS MANAGEMENT CORP. 5757 Wilshire Blvd. • Suite 344 • Los Angeles, CA 90036 • (213) 931 -2600 Fax (213) 931 -7355 CITY OF SAN LUIS OBISPO RECOMMENDED CABLE TELEVISION FRANCHISE RENEWAL OBJECTIVES October 1992 Attachment "3" a a 9 TABLE OF CONTENTS I. INTRODUCTION .... ............................... 1 II. KEY RENEWAL ISSUES .............................2 A. Level and Quality of Service ............... 2 B. Public Benefits ............................ 3 C. Renewal Term ............................... 5 D. Franchise Enforcement Capability ........... 6 E. Consumer Service and Protection Standards.. 6 III. RECOMMENDED RENEWAL REQUIREMENTS ............... 7 IV. CONCLUSIONS AND RECOMMENDATIONS ................ 15 a aq I. INTRODUCTION The City of San Luis Obispo (the City) has retained Telecommunications Management Corp. (TMC) to provide consultant assistance and support in the City's forthcoming cable television franchise renewal process. The City is provided with cable service by Sonic Cable Television of San Luis Obispo (Sonic) a subsidiary of Sonic Communications, under a franchise granted in 1978 and expiring in 1993. TMC previously has submitted to the City reports covering the following: • Task 1: Cable Television System Technical and Performance Review • Task 2A: Assessment of Government and Educational Access Needs • Task 2B: Tabulation and Review of Cable Television Survey • Task 2C: Assessment of Cable System's Ability to Meet Community Needs This report covers Task 3, which includes recommendations to the City for franchise renewal objectives. 1 a -3o II. KEY RENEWAL ISSUES A number of key issues usually arise in establishing a city's objectives for franchise renewal. These include the following: A. Level and Quality of Service Although the Cable Act placed all authority to select specific cable services in the hands of the system operator, almost all cities are concerned that their residents have as broad a choice of services as are provided to comparable other communities. In effect, this means that there is a valid public interest in assuring that the cable system has the capability to offer the full range of services commonly offered in other systems. Since two -way services are not yet commonly offered, the primary capability of concern at present is the one -way channel capacity of the system, which determines how many programming services can be provided to subscribers. The 36- channel (300 MHz) capacity of the San Luis Obispo system may be marginally adequate a present, but is substantially lower than the present state -of- the -art. Only one channel is available for new services without dropping existing services, and over the course of a new franchise term this limitation probably will become severe. What capacity will be adequate over the renewal term is an open question. one factor is whether more attractive new program services will become available. While new networks and channels are being announced almost daily, many of the existing services are not profitable and many others are merging in an attempt to remain viable. The number of programming services with significant audiences, that will exist some 5 -15 years from now, is therefore almost impossible to predict. It is reasonable, however, to expect that an upgrade should expand channel capacity to the maximum, consistent with reasonable costs and available state -of- the -art equipment. As has been noted, at present a 78-80 channel (550 MHz) system is considered as the commercial state -of- the -art. Sonic, therefore, should be requested to provide information as to the feasibility and cost to upgrade to 550 MHz capacity, as compared to the current 300 MHz capacity. In addition, the conditions under which other channel - expansion technologies, such as digital compression, would be incorporated into the San Luis Obispo system should be . explored. 2 a -31 Along with the number of programs offered there is a concurrent public interest in the quality of service that is provided. Since the cable system is a de facto monopoly, it is the City's responsibility to assure that some minimal quality and consumer protection standards are met. The Cable Act recognizes this, and vests the local franchising authorities with the power to establish and regulate consumer service standards. San Luis Obispo will be considering the adoption of a new regulatory and consumer protection ordinance to this effect. Finally, with respect to new categories of service, such as two -way services, it probably is not reasonable for a city, particularly a smaller one, to attempt to force its cable system operator to pioneer those services, at great financial risk. The other extreme, however, in which a city may have to wait until the franchise term expires until it can negotiate for the capability to provide new services that may have been offered routinely for many years on other systems, also does not appear fair. A course between these two extremes, which establishes some "trigger mechanisms ", that require the capacity for new services to be provided after some percentage of comparable systems are providing those services, appears to be a reasonable approach. In San Luis Obispo's case, a "most favored nations" provision, which ties these services to their offering in other specifically designated communities, may be desired. In summary, the City's interest is in: • Having a present system capacity sufficient for current and near -term services. • Establishing and enforcing reasonable consumer service and protection standards. • Establishing a mechanism for system upgrading prior to the end of the franchise term, if comparable systems are providing new capabilities. B. Public Benefits The public benefits that can accrue from a cable franchise usually consist of the franchise fee, which provides revenue to the City in return for the use of public rights -of -way by the cable system, and use of the cable system by educational and government agencies, and by community groups and members of the public. This utilization, or PEG Access, is sanctioned by the Cable Act, and prior to that, was established as far back as 1972 by FCC regulations. 3 jrV� The maximum allowable franchise fee under both Federal and State Law is 5% of gross revenues. No reason is seen to accept less. With respect to PEG access, as noted, the Cable Act permits a city to request the cable operator to provide PEG access facilities, equipment and channels, if these can be related to community needs, and if, also, their cost is considered reasonable. The operator, however, cannot be required to pay ongoing operational expenses for PEG access. Operating expenses, in many cases, are by far the greater cost, in comparison with capital costs. As a hypothetical example, a typical, well - equipped cablecasting studio might require about $2001000- $250,000 in equipment and facility costs. If two full -time employees were hired to operate the studio, and to produce and edit programs, the cost might approach $100.000 a year, when overhead expenses are added to direct salaries. For a 15 -year franchise term, this would total $1,500.000, about 6 -8 times the capital costs. Consequently, in negotiating for capital grants from the cable operator, the City should consider the operating cost requirements, and how they will be met. These costs do not necessarily require directly budgeted funds. Student interns, for example, are used by a -number of cities where the students gain "hands -on" video experience at little or no cost to the City. An agreement with Cuesta College or Cal Poly might facilitate this approach. In many post -Cable Act renewals, the capital equipment commitments of the cable operator have been combined with specific PEG access operating plans, so that the source of operating funds is clearly identified. This minimizes the possibility of equipment not being utilized effectively. In San Luis Obispo, there has been little utilization of the cable system by the City and the schools, but this utilization may be expected to expand in the future. Another category of use involves cablecasting to the general public, i.e., the cable subscribers. For cablecasting to the public, camera and ancillary facilities are required at the origination site. If live cablecasting is desired, a return path from the origination site to the headend or local hub is required. As rule -of -thumb guides, the costs of cablecasting facilities are in the following range: 4 a -33 Council Chamber, or Equivalent • Installation of Cameras, $40,000 - $75,000 Lights, Audio, Control Room, etc. Fixed Cablecasting Studio • With Editing and $100,000 - $250,000 Production Facilities, Leasehold Modifications Mobile Studio Van • With Editing $50,000- $150,000 Portable Video Packages $51000- $151000 For institutionsto- institution communications, bidirectional communications capability in the form of an institutional network (I -Net) would be required. Regardless of the individual items desired, the task essentially is negotiating with Sonic for a grant of funds, for educational and government access use. The amount of the grant undoubtedly will be a subject of considerable discussion. It may be prudent for the schools and the City to place some priorities on their needs list, in the event that sufficient grant funds will not be available to achieve all of the objectives. In addition to these specific and direct public benefits, as noted above the City may also wish to negotiate a "most favored nations" provision that will assure - improvements or advances occurring on other systems in the area will be duly incorporated into the San Luis Obispo system C. Renewal Term The Cable Act does not establish any specific term for a franchise renewal, or even an initial term. When the FCC, in 1972, issued its Third Report and Order covering cable regulation, a 15 -year initial term was suggested, but not mandated. The rationale for 15 years was that a cable company that constructed the initial system would need that length of time to achieve a reasonable rate -of return on its investment. In the first few years, as a cable system is being built, the operator experiences losses, since costs are high and revenues low. In the intermediate years, profitability is usually reached, but it may takes as long as 10 -15 years to achieve the desired cumulative return on the total investment. This approach is reasonable, and appears applicable to renewals as well as initial franchises. If the cable operator is willing to commit to significant new investment, to upgrade or rebuild the system for example, then the renewal term should be long enough to achieve a reasonable return on that new investment. If not, a short renewal term may well be appropriate. D. Franchise Enforcement Capability Perhaps the single most significant deficiency in older cable television franchises is the lack of any practical and rapid mechanism for enforcing the operator's commitments. The theoretical ability to revoke the franchise is not practical, except perhaps in a few "last- ditch" cases, since it inevitably leads to protracted, expensive litigation. Similarly, performance and construction bonds usually require the successful prosecution of a lawsuit against the bonding entity before the proceeds can be collected. To solve this dilemma, many communities now are negotiating for the ability to assess damages or penalties prior to litigation, with the cable operator able to litigate after the assessment, if it believes that the assessment was unwarranted or arbitrary. With this approach, correction of, or relief from, franchise violations may be achieved within a reasonable time period. The approach can be implemented, as one example, by requiring the operator to post an irrevocable letter of credit, with agreed -upon procedures for assessment, if the operator has been provided due process, which usually includes written notification of the violation and a reasonable opportunity to cure the violation. E. Consumer Service and Protection Standards It has been noted that the City will be considering the adoption of a new cable television regulatory ordinance, which contains regulatory provisions, and also consumer service and protection standards. These standards can be adopted unilaterally, or negotiated with Sonic as part of the franchise renewal agreement. It is expected, in any event, that the regulatory ordinance will be applicable to, and incorporated as part of, the renewal agreement. 6 0_35 III. RECOMMENDED RENEWAL REQUIREMENTS Based on the foregoing analysis, Figure 1 contains a list of recommended renewal requirements for the City's consideration. The recommendations are considered a reasonable basis for establishing the parameters of forthcoming negotiations, but should be reviewed by the City and other interested public agencies prior to establishing final requirements. The list does not attempt to place priorities on each item, which should be done by the City, and for educational access, by the various educational institutions. Pending the establishment of priorities, the basis for the initial recommendations are as follows: (1) Service Area Sonic indicates that all residences in the City have cable service available, and free drops are provided to the public buildings identified in Appendix A of the Task 1 report. The public buildings list should be verified and updated, if necessary. Live cablecastina capability_ (i.e., the ability to transmit a live event from a specific location for distribution over the cable system) should be established for a defined number of public facilities. 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W U li: W W W 3L 0 ri a -3q f (3) Franchise Renewal Term As noted in C. above, the term should be appropriate to the new, enforceable financial investment that will be introduced into the new cable system. The term should be reviewed as one of the last. if not the last, issues to be negotiated, since only after the other issues are defined can the franchisee's investment commitment be determined clearly. (4) System Upgrading and /or Rebuilding This is perhaps the single most important item, with respect to subscriber service, and certainly is the largest cost item to the franchisee. For the San Luis Obispo system, the following features are recommended: (a) Upgrade to 550 MHz (78 -80 channels) capacity. This is current state- of -the- art, based on available production equipment. (b) Significant introduction of fiber optics into the design and construction. This will improve the quality of the signal because it substantially reduces the number of amplifiers in cascade. It also facilitates the expansion of channel capacity in the future. A "fiber to the service area" approach is recommended. (c) Plans for construction of an institutional network (I -Net), linking public buildings, under specified trigger conditions. These plans will depend to a major extent upon the nature of the system upgrade (e.g., how much fiber optics is deployed). Also, an operating plan for an I -Net must be established. Since most users will be City or educational agencies, there is little incentive for Sonic to expend resources in operating an I -Net. A more feasible approach may be City operation of the I -Net. (d) A "most favored nations" clause, which permits the City to require Sonic to 11 d--40 keep up with improvements and advances occurring in other cable systems, is highly desirable, since it provides a reasonable capability to modify the system without having to wait until the franchise term expires. (5) System Technical Standards The FCC's new technical standards, in contrast to the previous 1972 standards, do provide assurance of reasonable signal quality, if the cable system meets those standards. Consequently, no local standards are required. (6) Customer Service Standards and Regulatory Capability These are addressed in the draft of a new cable regulatory ordinance to be considered by the City. (7) EG (Educational and Government) Access Equipment. Channels and Facilities The amount of capital equipment support provided by Sonic for EG access use will be a major negotiation item, supported by the defined needs of the City, schools, and perhaps Cuesta College and /or Cal Poly. As a preliminary guide, based upon the size of the San Luis Obispo cable system, a total grant in the range of $400.000- 600.000 over a 15 -year franchise renewal term, would be financially within the cable system's ability to absorb, based upon a comparison to grants provided to other communities. It should be remembered, however, that EG operating costs will be the responsibility of the access users, i.e., the City and the educational institutions. If they are not prepared to make such a commitment, the availability of access equipment will become moot. In this context, an agreement with Cuesta College and /or Cal Poly, whereby that institution receives eguipment funding, and in return provides operational support (presumably using student interns to the 12 a -41 maximum extent possible) is a reasonable approach. (8) Emergency Alert This is a relatively low -cost item ($5,000- 10,000) that can provide significant public benefits, even if utilized only once or twice over the course of the franchise term. (9) Incorporation of User - Friendly Equipment The FCC, under the new Cable Act, is charged with recommending approaches to make cable equipment, such as converters, more compatible with in -home video equipment, such as VCR's, remote controls, etc. While a single city, such as San Luis Obispo, probably cannot force its cable operator to innovate in this area, it may be possible in the franchise agreement to specify trigger conditions under which user - friendly equipment would be installed. (10) Franchise Enforceability The franchise agreement should contain adequate security funds, with procedures for allowing the City to assess damages in the event of breaches of the franchise agreement. The damages should be collectible prior to any ensuing litigation. (11) Rate Regulation The new Cable Act permits a degree of regulation of the rates for the lowest cost "basic service" tier. The City should have the ability to regulate to the extent permitted by the Act and FCC regulations. In summary, the four major negotiation items are expected to be: (1) The details of the system rebuild. (2) The level of PEG access support provided by the cable operator. (3) The franchise renewal term. 13 49 �L� (4) The franchise enforcement mechanisms. These items generally are negotiated, together with others, as part of a "total package ". It is to be expected that if the City places a high priority on any one item, such as the level of PEG access support, it may have to be more flexible on other items of the package. 14 A-43 IV. CONCLUSIONS AND RECOMMENDATIONS The conclusions drawn from the foregoing are as follows: • Initial City action should include review and consideration of the updated regulatory ordinance. This should be effective prior to execution of the franchise agreement. • The key renewal issues include: Near -term and long -range system rebuild and performance improvement plans, including possible future additional expansion of the cable system, prior to the end of the franchise renewal term. Provision of funding of appropriate Educational and Government (EG) access facilities and channel capacity. Length of renewal term. The franchise enforcement and regulatory capability of the City. After City review of this report and the updated regulatory ordinance draft, it is recommended that: • The City receive public and cable operator input on the updated regulatory ordinance, and proceed to adopt a final version. • The City establish its franchise renewal objectives and priorities. • The City commence negotiations with Sonic., leading toward a mutually acceptable renewal agreement. 15 d�44 TELECOMMUNICATIONS MANAGEMENT CORP. 5757 Wilshire Blvd. • Suite 344 • Los Angeles, CA 90036 • (213) 931 -2600 Fax (213) 931 -7355 August 27, 1.992 Ms. Deb Hossli Administrative Analyst City of San Luis Obispo P.O. Box 8100 San Luis Obispo, CA 93403 -8100 Dear Deb: Enclosed is a brief summary of the major provisions of the legislation recently passed by the House of Representatives, H.R. 4850, and an indication of the potential impact on City regulation of cable television franchises. It is very important to note that this is not the law of the land. This legislation, along with the companion bill from the Senate, S. 12, must first go to conference committee to eliminate differences in the two bills. What comes out of the conference committee may be significantly different than what is indicated on the enclosed pages. Additionally, representatives for President Bush are recommending that the President veto any regulatory bill that comes out of the conference committee unless it is "pro- competition" and "anti- regulatory ". The White House views both S. 12 and H.R. 4850 as being neither, so that a veto is anticipated. However, because this is an election year, it is extremely difficult to predict if there will be a veto on legislation that is perceived by some as being "pro - consumer". It is also difficult to predict: a) Whether the President would risk his first veto override on this issue, or b) Whether Congress actually would be able to override a veto, or c) Whether the conference committee will be able to agree on final language prior to recessing for the year. Please let me know if you have any questions about this information. Enclosure Sincerely, /LX • - .- MICHA L J. FRIEDMAN Vice President Attachment "4" a- *J4000 H.R. 4850 REVIEW OF PROVISIONS SECTION PROVISION POTENTIAL IMPACT 3. REQUIREMENTS FOR THE PROVISION AND REGULATION OF BASIC SERVICE PERMITS LOCAL RATE REGULATION FOR BASIC SERVICE, EQUIPMENT, AND INSTALLATION COSTS WHERE NOT SUBJECT TO EFFECTIVE COMPETITION. RATES CAN ONLY BE REGULATED ACCORDING TO A SPECIFIC FORMULA ESTABLISHED BY THE FCC AND THE CITY MUST FIRST OBTAIN CERTIFICATION TO REGULATE RATES FROM THE FCC. BASIC SERVICE TIER INCLUDES ALL PEG ACCESS CHANNELS AND ANY BROADCAST STATIONS. SUBSCRIBERS CANNOT BE REQUIRED TO BUY ANY OTHER SERVICE TIER THAN BASIC IN ORDER TO ACCESS PER CHANNEL OR PER PROGRAM SERVICES. EFFECTIVE COMPETITION DEFINED AS (1) FEWER THAN 30% OF THE HOUSEHOLDS IN THE FRANCHISE AREA SUBSCRIBE TO CABLE SERVICE, (2) THE FRANCHISE AREA IS SERVED BY AT LEAST 2 MULTICHANNEL VIDEO PROGRAMMING DISTRIBUTORS EACH OF WHICH OFFERS COMPARABLE SERVICES TO AT LEAST 50% OF THE HOMES AND THE NUMBER OF SUBSCRIBING HOUSEHOLDS EXCEEDS 15% OF THE HOUSEHOLDS IN THE FRANCHISE AREA; OR (3) A FRANCHISE AUTHORITY - OPERATED MULTICHANNEL PROGRAMMING SERVICE OFFERS PROGRAMMING TO AT LEAST 50% OF THE HOUSEHOLDS IN THE FRANCHISE AREA. THE CITY WOULD HAVE THE RIGHT TO REGULATE RATES FOR THESE CATEGORIES OF SERVICE SUBJECT TO THE RESTRICTIONS NOTED. THE CERTIFICATION PROCESS APPEARS TO.BE A PRO FORMA APPLICATION SHOWING THAT THE CITY HAS THE AUTHORITY TO REGULATE AND WILL ADOPT PROCEDURES CONSISTENT WITH THE LAW. IN A MULTI -TIER SYSTEM, SUBSCRIPTION TO THE HIGHEST TIER MAY NOT BE REQUIRED IN ORDER TO SUBSCRIBE TO MOVIE CHANNELS OR PAY - PER -VIEW. BUY THROUGH PROVISION DOES NOT APPLY TO SYSTEMS WITHOUT ADDRESSABLE CONVERTERS. MOST CABLE MARKETS WOULD BE SUBJECT TO RATE REGULATION AS DEFINED HEREIN. PREPARED BY TELECOMMUNICATIONS MANAGEMENT CORP. FOR THE CITY OF SAN LUIS OBISPO SECTION I PROVISION I POTENTIAL IMPACT NEGATIVE BILLING PROHIBITED. SUBSCRIBERS MUST MAKE A POSITIVE ACTION IN ORDER TO SUBSCRIBE TO A CABLE SERVICE 4. MULTIPLE EXCLUSIVE FRANCHISES ARE THIS IS CONSISTENT WITH FRANCHISES PROHIBITED AND REFUSAL TO CURRENT CALIFORNIA STATE LAW AWARD FUTURE FRANCHISES MUST (CODE 53066.3) BE FOR SPECIFIC JUSTIFICATION (NOT JUST BECAUSE THERE IS AN EXISTING FRANCHISE) 5. CARRIAGE CABLE OPERATOR PERMITTED TO SLIGHTLY EXPANDS EXISTING OF LOCAL INDICATE FRANCHISE FEES, PEG CABLE ACT DEFINITION, BUT CHANNEL CAPACITY. ACCESS FEES, ANY OTHER TAXES PRIMARILY CODIFIES WHAT MANY OR FEES ON SUBSCRIBER CABLE OPERATORS ARE ALREADY INVOICES. DOING. RE MT. FCC IS REQUIRED TO ESTABLISH MAY RESULT IN REDUCTION IN AT LEAST 3 PROCEDURES FOR RESOLVING RATES IF UNREASONABLE RATES UP TO 1/3 OF CASES OF UNREASONABLE RATES. ARE FOUND TO EXIST. CAPACITY LOCAL AUTHORITIES MAY MOST LIKELY WOULD ELIMINATE REGULATE ANY PER PROGRAM THE POSSIBILITY OF THESE RATES FOR NATIONAL EVENTS (SUPER BOWL,, WORLD CHAMPIONSHIP GAMES BETWEEN SERIES, ETC.) FROM APPEARING PROFESSIONAL TEAMS IN ON PAY -PER -VIEW BASEBALL, BASKETBALL, FOOTBALL OR HOCKEY. DISCRIMINATION PROHIBITED IN CITY MAY REQUIRE AND REGULATE SERVICES FOR THE HEARING THE INSTALLATION OF EQUIPMENT IMPAIRED. FOR THE HEARING IMPAIRED. NEGATIVE BILLING PROHIBITED. SUBSCRIBERS MUST MAKE A POSITIVE ACTION IN ORDER TO SUBSCRIBE TO A CABLE SERVICE 4. MULTIPLE EXCLUSIVE FRANCHISES ARE THIS IS CONSISTENT WITH FRANCHISES PROHIBITED AND REFUSAL TO CURRENT CALIFORNIA STATE LAW AWARD FUTURE FRANCHISES MUST (CODE 53066.3) BE FOR SPECIFIC JUSTIFICATION (NOT JUST BECAUSE THERE IS AN EXISTING FRANCHISE) 5. CARRIAGE ESTABLISHES REQUIREMENTS FOR OF LOCAL SIGNAL CARRIAGE VARYING WITH COMMERCIAL CHANNEL CAPACITY. TELEVISION SIGNALS SYSTEM CHANNELS RE MT. <12 AT LEAST 3 >12 UP TO 1/3 OF CAPACITY REINSTITUTES TO SOME EXTENT THE "MUST CARRY" PROVISIONS THAT ONCE WERE IN EFFECT. MAY REDUCE THE NUMBER OF CHANNELS AVAILABLE FOR SATELLITE CABLE SERVICES OR OTHER NON- BROADCAST SIGNALS. CHANNELS TO BE CARRIED ON MAY CAUSE SOME CHANNEL THE SAME NUMBER CHANNEL AS REALIGNMENT. THE OFF -AIR CHANNEL NUMBER OR ON THE SAME CHANNEL AS CARRIED ON 7/19/85. PREPARED BY TELECOMMUNICATIONS MANAGEMENT CORP. FOR THE CITY OF SAN LUIS OBISPO 2 SECTION PROVISION POTENTIAL IMPACT REQUIREMENT DELETED FOR CABLE OPERATORS CANNOT BE PROVIDING INPUT SELECTORS. REQUIRED TO PROVIDE EITHER A/B SWITCHES OR INFORMATION ABOUT THEM. 6. CARRIAGE ESTABLISHES REQUIREMENTS FOR OF NON- NONCOMMERCIAL SIGNAL COMMERCIAL CARRIAGE VARYING WITH STATIONS CHANNEL CAPACITY. SYSTEM CHANNELS REOMT. <12 1 13 -36 1 -3 >36 ALL 7. CONSUMER A FRANCHISING AUTHORITY MAY CODIFIES EXISTING REGULATORY PROTECTION ESTABLISH AND ENFORCE: ENVIRONMENT. AND CUSTOMER SERVICE CUSTOMER SERVICE REQUIREMENTS CONSTRUCTION SCHEDULES AND OTHER CONSTRUCTION- RELATED REQUIREMENTS. FCC TO ESTABLISH STANDARDS LOCAL STANDARDS IN EXCESS OF FOR THESE MAY BE ENACTED BY A CITY IN AGREEMENT WITH A OFFICE HOURS AND TELEPHONE CABLE OPERATOR. AVAILABILITY INSTALLATIONS, OUTAGES AND SERVICE CALLS COMMUNICATIONS WITH SUBSCRIBERS (INCLUDING BILLS AND REFUNDS). 9. CONSUMER FCC TO PRESCRIBE REGULATIONS MAY EVENTUALLY RESULT IN ELECTRONICS NECESSARY TO INCREASE THE MORE CONSUMER - FRIENDLY EQUIPMENT COMPATIBILITY BETWEEN TV's EQUIPMENT. COMPATIBILITY WITH PREMIUM FUNCTIONS AND FEATURES, VCR's AND CABLE SYSTEMS. PREPARED BY TELECOMMUNICATIONS MANAGEMENT CORP. FOR THE CITY OF SAN LUIS OBISPO 0949 SECTION PROVISION •POTENTIAL IMPACT 10. FCC TO ESTABLISH MINIMUM MAY IMPROVE TECHNICAL TECHNICAL STANDARDS WITH REGARD TO PERFORMANCE. STANDARDS; TECHNICAL OPERATION. EMERGENCY ANNOUNCE- FRANCHISING AUTHORITY CAN MENTS & REQUIRE AS PART OF A PROGRAMMING FRANCHISE (INCLUDING MODIFICATIONS, RENEWALS AND TRANSFERS) ENFORCEMENT PROVISIONS OF THESE STANDARDS. FRANCHISING AUTHORITY CAN APPLY TO THE FCC TO IMPOSE STANDARDS MORE STRINGENT THEN THOSE PRESCRIBED. FCC TO PRESCRIBE STANDARDS FOR INCLUDING CABLE SYSTEMS IN THE EMERGENCY BROADCAST SYSTEM. FRANCHISING AUTHORITY MAY REQUIRE 30 DAYS ADVANCE NOTICE OF CHANGE OF CHANNEL ASSIGNMENT OR SERVICES PROVIDED. 11. FCC TO ESTABLISH PROVISIONS MAY RESULT IN CABLE REGULATION GOVERNING THE RELATIONSHIP COMPETITORS HAVING GREATER OF CARRIAGE BETWEEN CABLE OPERATORS AND ACCESS TO VIDEO SERVICES. AGREEMENTS VIDEO PROGRAMMING VENDORS. 14. SALE OF NO CABLE OPERATOR MAY SELL OR NO IMMEDIATE IMPACT. MAY CABLE OTHERWISE TRANSFER OWNERSHIP IMPACT CITIES WHERE SYSTEMS IN A CABLE SYSTEM WITHIN A TRANSFERS HAVE BEEN COMMON. 36 -MONTH PERIOD FOLLOWING ACQUISITION OR INITIAL CONSTRUCTION EXCEPT AS OTHERWISE PROVIDED HEREIN. FRANCHISING AUTHORITIES MUST ACT UPON ANY REQUEST FOR SALE OR TRANSFER WITHIN 120 DAYS FROM RECEIPT OR THE TRANSFER WILL BE DEEMED TO BE APPROVED. PREPARED BY TELECOMMUNICATIONS MANAGEMENT CORP. FOR THE CITY OF SAN LUIS OBISPO a-f9 j COPIES TO: ❑ • D=W s Acdon ❑ F\1 1 �'CMM6 ❑ CDD DI-TL CAO ❑ Fes. DI R. ICAO ❑ :11:E CHIEF [� i IOFL�t�.' ❑ Il•VD�. ❑ Inca-T.rL- �T'.,:1 ! r= r;x (•'• �'�E DRU MEETING AGENDA Z DATE 3 ITEM # THE MINISTERIAL ASSOCIATION OF SAN LUIS OBISPO 1118 PALM STREET SAN LUIS OBISPO, CALIFORNIA 93401 -3177 TELEPHONE (805) 544 -8510 January 5, 1993 HAND'DELIVERED Hon. Peg Pinard, Mayor � City of San Luis Obispo" City Hall, 990 Palm Street San Luis Obispo, CA 93401 J4N - 5 1993 355 RE: Sonic Cable Programming CITY CLEFIK SAN LUIS OBISPO, CA Dear Mayor Pinard: The San Luis Obispo Ministerial Association is composed of members of the clergy and designated representatives from member congregations representing many thousands of Catholic, Jewish and Protestant parishioners in our City. I am writing to you on behalf of the Ministerial Association to express their unanimous request that Sonic carry the VISN network as a part of their regular programming. we previously sent a resolution to Sonic to that effect signed by all of the members of the Association. The VISN network presents religious programming prepared by. its member affiliated denominations. Virtually every denomination of any consequence in the United States is a member of VISN. There are programs dealing with religious observance rituals, cultural matters, religious history, cartoons, plays and other dramatic productions for all age levels, dance, art, music, debate, philosophy and so on. Each member denomination has an opportunity to input programming and the viewing audience receives advance information as to what programs are available and when they will be broadcast. There is no attempt made to either proselytize or solicit funds. No programming is permitted which extols one religion over another or denigrates any religion or religious practice. VISN represents the best effort yet on the part of the American religious community to join together in order to foster ecumenical relations by promoting the inherent worth and dignity of every person and faith and by encouraging a free and responsible search for truth and meaning. VISN seeks to meet human needs without discrimination as to religion or creed, to respect the diversity of the various religious and ethnic Hon. Peg Pinard, Mayor January 5, 1993 Page Two backgrounds and traditions among our people, and to work toward creating a religious community of hope, spiritual healing, and social empowerment. In recognition of the religious pluralism which enriches and ennobles our faiths, VISN would help us to deepen our understanding of ourselves and one another, and thus to expand our personal and communal vision. Because of our location in San Luis Obispo we do not have access to the quality or quantity of religious resources and materials which exist in urban areas. For that reason VISN would be particularly helpful to the residents of our City. We hope that the City will vigorously request that Sonic include the VISN network as a cable channel. Thank you for your consideration of this request. Sincerely, ICHARD A. CARSEL President RAC:noa cc: Members of the City Council Members of the Ministerial Association