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HomeMy WebLinkAbout08/18/1998, C5 - REFUND TO SOME CHARTER COMMUNICATIONS CABLE TELEVISION SUBSCRIBERS council j acEnda aEpont 1�NMA . CITY OF SA-N LUIS 0 B I S P 0 FROM: Ken Hampian,Assistant City Administrative Officer Prepared By: Wendy George,Assistant to the City Administrative OMcer L*f SUBJECT: REFUND TO SOME CHARTER COMMUrIICATIONS CABLE TELEVISION SUBSCRIBERS CAO RECOMMENDATION Approve the proposed refund of$54.00 to Charter Communications cable television subscribers who were improperly required by Sonic Cable to subscribe to its Video Club. DISCUSSION In the process of reviewing the operations of Sonic Cable Television during the transfer of the franchise to Charter Communication, our consultant discovered that Sonic had been requiring its customers to subscribe to a Video Club in order to obtain an addressable converter box and remote control unit. Converter boxes are required to enable older television sets to receive higher numbered television stations. This requirement was in direct contradiction to a rate order issued by the City Council in Resolution No. 8386 (1995 Series)which stated: "The Council orders Sonic to abide by FCC regulations regarding the establishment of separate charges for remote control units and addressable converters, and advertising practices that reflect total cable rates." The cost of the Video Club is $2.95 per month. The cost of the addressable converter box is $.29 per month and there is currently no charge for a remote control unit. When Charter Communications purchased the franchise from Sonic Cable, it assumed liability for Sonic's prior actions. Accordingly, the City and County have been negotiating with Charter Communications to find an equitable method of refunding money to subscribers who had been improperly required to pay for the Video Club in order to get the converter and remote they needed. As indicated in the attached letter from Charter Communications, based on the records available, it was difficult to ascertain exactly who ordered the Video Club simply to have the converter and remote. As a result, an agreement was made to give the refund to all "basic-only" (no premium service)subscribers who purchased the Video Club. The actual amount of the refund per subscriber is based on $1.80 per month rather than the $2.64 difference in cost between the Video Club ($2.95) and the converter ($.29). This "discount" was agreed to because of the recognition by all parties that some of the subscribers actually utilized the other benefits of the Video Club. Finally, the monthly amount was extended back for 30 months to the date of the Council's rate order. The result is a refund of$54.00 per eligible subscriber and a total cost of over$100,000 to Charter. In addition to making the refund as part of the September, 1998 bill, Charter Communications agreed to send out a notice in the August bill indicating that the converters and remotes may be purchased without joining the Video Club. The September bills will also include a new rate card which posts the separate rates for the equipment. Council Agenda Report-Charter Communications Refund Page 2 CONCURRENCES The County of San Luis Obispo concurs with this refund amount. FISCAL IMPACT There is no fiscal impact to the City.as a result of this action. ALTERNATIVES Council may direct staff to continue to negotiate with Charter Communications for a different refund rate. Staff does not recommend this action, as the County has already agreed to this rate and staff feels that it is a fair compromise based on the circumstances and the information available. Attachments Letter from Charter Communications UCHARTEACOMM July 31, 1998 VIA FACSIMILE AND NEXT DAY SERVICE Ms. Wendy George City of San Luis Obispo 990 Palm Street San Luis Obispo, California 93401-3249 Re: Video Club Dear Wendy: During the franchise transfer process Charter was advised that Sonic sold the converter and remote control unit bundled with the Sonic Video Club. While there is or was no prohibition from including the converter and remote with the Video Club, it is thought that subscribers may not have been properly advised that they could be separately purchased. I have had an opportunity to fully review all of the past correspondence related to this issue. Because the correspondence shows that a refund was previously made and that the Sonic Video Club was to continue, fashioning a remedy has been difficult. First, only the City and the unincorporated County areas are at issue. Second, since the Video Club is a legitimate package, there is no way to determine how many of the current subscribers actually intended to make the purchase. Further, there is no feasible way to determine which Video Club subscribers actually participated in the Club by purchasing a Pay-Per-View event. Lastly, with the amount of churn or turnover of subscribers, there is no feasible way to determine the length of time that any one subscriber continued the purchase of the bundled service and equipment. Given these questions, with no readily discernible answer, Charter proposes to refund in excess of One Hundred Thousand Dollars ($100,000) to City and County residents. The refund will be paid to all basic-only (no premium) subscribers who purchased the "Video Club". The amount works out to approximately $1.80 per subscriber for approximately 30 months or $54.00 per subscriber. The $1.80 is somewhat less than the $2.63 difference between the price of the converter and remote ($.33) and the price of Video Club ($2.95) because many Video Club members (approximately one third) actually utilized the benefits of the Video Club. (As such, these subscribers are not entitled to refunds related to the Video Club.) However, we are unable to determine the exact identity of those who did and those who did not receive the Video Club benefits. C--S3 12444 Powerscourt Drive•Suite 400•St Louis,Missouri 63131-3660•(314)965-0555 9 Fax(314)965-6640•Internet http:\\www.chartercom.com Ms. Wendy George July 31, 1998 Page 2 Therefore, the refund as noted above will go to all basic only subscriber to the Video Club. Charter would like to move forward in its relationship with the City of San Luis Obispo on a positive note and hopes that this resolution satisfies all involved. As noted, the subscriber notice will appear in the August bill. The customer information plan along with the bill notice and refund notice are attached. We will be contacting you early next week to confirm the remainder of the plan. Sincerely, rudi McCollum`Foushee Vice President and Senior Counsel Law and Regulatory Affairs TMF:smf Attachments cc: Dave Barford Tom Schaeffer Mel Matthews Jim Bogart SUBSCRIBER INFORMATION PLAN • Cable Service and Equipment Subscriber Bill Notice (attached) • Bulletin Board on Channel 6 identical to Subscriber Bill Notice 7/20- 8/10. • Post subscriber bill notice in office lobby. • Subscriber bill message included in August bills. • New rate cards included in September bills. • Refund $54.00 per subscriber in September bill. �.s:s "SONIC"VIDEO CLUB CABLE SERVICE AND EQUIPMENT NOTICE Subscribers may have been advised by Sonic that a converter is only available with the purchase of Video Club. Charter recognizes that you should have the choice of purchasing any one or more of these items separately. This Notice is to advise you that: • The cost of Video Club is $2.95. • Video Club includes an addressable converter, a remote control unit and 25% discount on all Pay-Per-View movies. The current charge for rental of an addressable converter box is $.29. There is currently no charge for rental of a remote control unit. You may change your level of service at any time and at no charge by calling your Charter customer service representative at (system phone number). All prices and services are subject to change upon 30 days notice. RATE REFUND NOTICE Charter has made a one-time credit.of $54.00dollars to this bill toreflect an adjustment for your past purchase of Sonic:Video Club.