Public Access Cable - Progress is made in Fresno

There was a significant development in the struggle for Cable Access in Fresno this week. A new ordinance, updating the 1967 City Code governing the cable franchise agreement, was introduced to the City Council. With City Council member Jerry Duncan reusing himself because of a conflict of interest (he owns Comcast stock) the remaining council members voted unanimously to approve the new ordinance. The updated Cable Franchise ordinance will be brought before the council on October 19 and is expected to be adopted with no further debate.

The significance of this is that the old 1967 portion of the City Code now includes new language that will update the "rules of the road" for all cable operators now or in the future and creates a floor for negotiating the new franchise. It does include a few things relative to a Community Media Center and PEG. For example, it says all cable operators (including Comcast) must provide at least 3 PEG channels. We will negotiate with Comcast for additional PEG channels/bandwidth based upon the needs assessment once we get to the negotiations with Comcast on the renewed Comcast franchise.

Another significant development that happened last Tuesday (October 5) was that the current contract which expires on December 31, 2004 was extended to December 31, 2005. The extensions will be made on a month to month basis, for up to one year (December 31, 2005).

Here is the City of Fresno’s report on why they supported the updated ordinance:

FROM: DANIEL G. HOBBS, City Manager

City Manager’s Office

BY: TIMOTHY LYNCH, Chair, Cable Franchise Renewal Working Group

SUBJECT: BILL (FOR REINTRODUCTION) - REPEALING ARTICLE 2 OF CHAPTER 6 OF, AND ADDING ARTICLE 2 TO CHAPTER 6 TO, THE FRESNO MUNICIPAL CODE, RELATING TO CABLE COMMUNICATION SYSTEMS

 

RECOMMENDATION

Staff recommends the City Council take the following action:

Reintroduce bill REPEALING ARTICLE 2 OF CHAPTER 6 OF, AND ADDING ARTICLE 2 TO CHAPTER 6 TO, THE FRESNO MUNICIPAL CODE, RELATING TO CABLE COMMUNICATION SYSTEMS.

EXECUTIVE SUMMARY

The City of Fresno current cable franchise ordinance dates from 1967 and is not reflective of current cable industry, regulatory law, or needs of the City. The Reintroduced Ordinance makes several minor changes to the previous ordinance introduced on August 31, 2004, requested by the incumbent cable franchise operator clarifying federal law limitations upon applicability of the ordinance to the existing franchise. The proposed reintroduced ordinance replaces the City’s antiquated ordinance to reflect current state and federal law, industry developments, input from the City’s cable franchise consultant, comments from interested City departments, the City’s preliminary needs assessment report and a review of other cable franchise ordinances in place in California. It is considered best practice to put in place an updated ordinance prior to franchise negotiations to reduce the areas of uncertainty and confusion in the negotiation process. The current franchise expires December 31, 2004, and adoption of this ordinance is consistent with the direction given City staff, facilitates the negotiations and helps achieve the outcomes desired by the City within the constraints of controlling federal and state law and the City’s reserved police powers.

BACKGROUND

The City’s Ordinance pertaining to cable franchises, Fresno Municipal Code Article 2, Chapter 6 dates back to 1967.

Since that time, significant technological, legal, and business developments in the telecommunications field have impacted the cable industry and cable services, and the City’s current cable Ordinance does not reflect these changes.

Technological advances such as the development of fiber-optic cable and the growth of the Internet have led to the emergence of new services offered to the consumer. The cable industry has been gearing up to offer new services and perfecting a modem to offer Internet services over cable lines as well. Fiber optic cable is critical to the availability of new high-speed two-way services. New providers and cable operators use the public right-of-way to construct fiber optic networks. These new developments are addressed in the proposed Ordinance to ensure that new services, including two-way activated services, are available to consumers in the City of Fresno. The Ordinance also seeks to minimize pavement damage to public rights-of-ways from additional street cuts by requiring persons using the right-of-way to cooperate with others through joint trenching and the use of existing poles and conduit, and by requiring a provision for further expansion.

The Telecommunications Act of 1996 addressed “barriers to entry” of business and individuals from providing telecommunications services in any market. For example, the Act repealed the ban imposed by the 1984 Cable Act on the telephone-cable cross-ownership restriction which prohibited telephone companies from providing video programming directly to subscribers in their telephone service areas. In the 1996 Act, Congress established a new framework for entry into the video programming delivery marketplace intended to stimulate competition to cable: the “open video system” (OVS).

Under the OVS, an entity, such as a phone company, which makes two-thirds of its cable capacity available to unaffiliated entities, can provide cable-type services. As designed by Congress, this open video framework provides an option for the distribution of video programming other than as a “cable system.” The Act authorized local governments to enter into agreements with operators of open video systems which include requirements for Public, Education and Government, (“PEG”) access channels, equipment, facilities and support and a fee which is equivalent to the fee paid by an existing cable franchisee. This matter is addressed in the proposed Ordinance.

The Telecommunications Act of 1996 also preserved local management of public rights-of-way and directed telecommunications and cable service providers to pay local governments a fair and reasonable compensation for right-of-way use, which includes a franchise fee not to exceed five percent of gross revenues. At the same time, the Act immediately deregulated “expanded basic” tier cable rates for providers serving 50,000 subscribers or less and directed the “expanded basic” tier cable rates to be deregulated in 1999, regardless of the number of subscribers served.

In the 1996 Act, Congress also established a general duty of telecommunications carriers to interconnect directly or indirectly with the facilities and equipment of other carriers and not to install network features, functions or capabilities that are incompatible with other systems. The issue of interconnection of cable systems is addressed in the proposed new Ordinance for purposes of providing Public, Education and Government (PEG) access and Institutional Network services and for sharing these programming resources with subscribers in adjacent systems.

The proposed Ordinance sets the framework for all cable franchises, laying out minimum standards and assuring a level playing field. This framework provides for currently available, technologically advanced services to be offered to City of Fresno residents. It also assures City residents of a certain minimum level of service such as signal quality, PEG Access channels, and customer service. As required by federal law, certain of the provisions laid out in the proposed Ordinance will be subject to regulatory franchise renewal procedures with individual cable operators. Additional terms may be negotiated in a franchise document beyond those set forth in the Ordinance.

DISCUSSION

In early 2003, the City engaged the consultant services of the Buske Group to assist and guide the City through the cable re-franchising process. An important element of that process is an updated cable franchise ordinance. Working with Staff and the City Attorney, the Buske Group has assisted with the preparation of a new ordinance reflecting the Buske Group’s preliminary community needs assessment activities, best practices in other communities, and related issues surrounding cable franchises. In preparation of this work the Buske Group had reviewed the current City of Fresno ordinance, the multiple franchise contract and other documents (e.g., MOU’s and Change of Control documents) which have been adopted and amended since 1967.

In brief, the proposed Ordinance provides minimum service levels for any cable operator wishing to provide cable services in City of Fresno; establishes minimum customer service standards; provides application, renewal and transfer procedures for a cable franchise agreement and updates insurance, security fund and bonding requirements.

The introduction ordinance makes the following fundamental changes to the City's current CATV franchise ordinance:

• Updates general provisions such as definition of terms; oversight and administration of the Ordinance, transfers of a franchise, conditions upon construction, operation and repair of a system, procedures for applying for or renewing a franchise;

 

• Changes the basic non-exclusive franchise term from current 5-25 years to 8 years or the amount negotiated in the franchise agreement;

 

• Expands the definition of "gross revenue" upon which the City recovers the franchise fee to the maximum permitted by Federal law (5%);

 

• Clarifies the definition of "public right of way" to expressly include areas "above and below" streets and easements (n.b., purely private projects on private property would remain beyond City's ability to franchise as required by federal law) and expressly allows for a franchise area constituting only a portion of the City;

 

• Expressly includes provisions for authorizing "Open Video Systems" (see explanation in above text) in a manner consistent with federal and state law;

 

• Expands the reach of "cable services" to include evolving types of communication services over cable;

 

• Consistent with the preliminary needs assessment, updates the minimal PEG/INET requirements and implementation options under the current antiquated franchise documents to a minimum of 3 PEG channels or specified % system capacity, and allows for the possibility of independent Community Media Center/authority to serve the City alone or in combination with adjoining franchisor jurisdictions (e.g., Fresno County, Clovis in which Comcast is the incumbent franchisee);

 

• Updates undergrounding requirements;

• Includes a tree trimming/removal provision; and

• Updates boilerplate things like insurance, indemnity, reporting, privacy, transitional provisions and post-expiration issues/obligations.

 

When the ordinance was originally introduced on August 31, 2004, a representative of the incumbent cable operator acknowledged that this ordinance was within the rights of the City, but they had some concerns about how it related to their current franchise and renewal of it. The City and the cable operator subsequently met and discussed ways to resolve areas of concern. As a result, the City has made a number of minor, clarifying changes to address the concerns of the incumbent cable operator, which are completely consistent with the intent of the original ordinance. The Re-Introduction Ordinance now before you changes the original (August 31, 2004) Introduction Ordinance in the following ways:

* Clarifies pre-emptive effect of federal requirement for non-impairment of both existing franchise contract rights and franchise renewal process;

* Clarifies pre-emptive effect of federal franchise fee cap as applicable to city's recovery of incidental franchise administration costs;

* Extends time for franchisee to accept/reject a city offer of franchise;

* Gives CAO discretion to forego the undergrounding requirement where cable system functionality would be affected;

* Clarifies process where the City requires movement of cable system facilities; and,

* Allows franchisee to negotiate cost sharing with a third party where the third party requires movement of cable system facilities.

 

Also included in the Council package, for informational purposes only, is the Draft Resolution setting Customer Service Standards. This is the customary practice in communities that have made Customer Service a priority concern of the franchising authority.

This Resolution, which cannot be adopted until the ordinance is adopted, establishes standards for customer service including office availability; telephone service and appointments for service, installation or disconnection. The standards also include timelines for acknowledging and providing requests for service, and responding to billing inquiries; billing statement information; late fee provisions; credit for loss of service; and service disconnection and penalties for failure to comply with the customer service standards. This section also grants discretionary authority to the City Manager to relieve the franchisee of its obligations based on certain criteria. For example, if based on the number of subscribers served, there is an alternative way to serve the same interest.

SUMMARY

A copy of the Re-Introduction Ordinance has been provided to Comcast. A new ordinance is necessary to address changes in federal law and give the City an instrument to deal with current and future cable and open video systems. The new proposed Reintroduced Ordinance is to be introduced for first reading on September 28 2004 on the consent calendar, and set for approval after second reading on the Council’s on October 5, 2004.

IMPACT TO THE COMMUNITY

The cable television and services system affects nearly all residents of the City and many of them consider it an important part of their daily lives. A new ordinance that protects the interests of our citizens and is flexible enough to allow for future changes in cable system and telecommunications services is essential.

Attachments:

Appendix A, Re-Introduction Cable Services Ordinance

Appendix B, Draft Resolution setting Customer Service Standards (Information Only – Non-Action item).