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Home My WebLink AboutSS3 - Cable TV Franchise UpdateWhat's Up with Cable TV? (i.e.: what's taking so long ?) Newport Beach City Council Tuesday, September 27, 2005 What We'll Cover Quick history - Cable TV in Newport Beach . Reminder: What Cities Can and Cannot Do . Why Newport Beach is Special . Telecom Committee — Task List More about Franchise Ordinance, Franchise Agreements More about the Statement of Minimum Goals . Adelphia's Bankruptcy Why we might want to reject a transfer Why it's slowed the Franchise Agreements down — can we go ahead and enter into an agreement with Cox? For more information Quick History Reminder: What Cities Can and Cannot Do Today's environment = The market controls rates. • Cities ( "LFAs ") no longer regulate rates (exception: basic service tier [channels 2 -131); • Congress has fully deregulated all other tiers effective March 1999, saying that satellite service effectively & directly competes with Cable N. Cable TV in Newport Beach is NOT a govt- controlled monopoly (even though it may seem that way): ■ City's franchise agreements are non - exclusive. . Cable companies own the "plant" (cable in the ground) Denial of renewal is extremely difficult, rare, and expensive. Internet service is NOT regulated by FCC or cities i.e. Internet over cable is unregulated — FCC says you have alternatives in wireless, DSL /phone, dial -up, etc. Why Newport Beach is Special Most cities don't have 2 cable companies. Note that in NB, Cox and Adelphia don't directly compete. . Direct competition is rare! Cable companies own the cable in the ground. Competitors (called "overbuilders ") can come into the city, get a franchise agreement, and dig up the streets - - but it's expensive for them to do so & they have no subscriber base. . Split is roughly Adelphia 2 /3rds and Cox 1 /3rd Subscriber Information Adelphia Cox Total # of homes passed in Franchise Area 31,123 13.900 45,023 # of Gable TV subscribers 16,978 10,100 27,078 % of homes passed that subscribe to cable 55% 73% 60% —1999 (Calendar Year) —2000 —2001 —2002 —2003 —2004 .. 2005 (to dale, includes 4th Q'04) $ 656,558 $ 266,671 $ 923,229 $ 722,714 $ 280,602 $ 1.003,316 $ 706,709 $ 395,824 $ 1,101,533 $ 714,762 $ 394,732 $ 1,109.494 $ 640.330 $ 470,404 $ 1,110,734 $ 766,343 $ 494,411 $ 1,260,753 $ 411,480 $ 402,014 $ 813.494 ( 'able TV F=dw o A � - 1 /�s CA, ,f N "TM Dea: Subscriber Information Adelphia Cox Total # of homes passed in Franchise Area 31,123 13.900 45,023 # of Gable TV subscribers 16,978 10,100 27,078 % of homes passed that subscribe to cable 55% 73% 60% —1999 (Calendar Year) —2000 —2001 —2002 —2003 —2004 .. 2005 (to dale, includes 4th Q'04) $ 656,558 $ 266,671 $ 923,229 $ 722,714 $ 280,602 $ 1.003,316 $ 706,709 $ 395,824 $ 1,101,533 $ 714,762 $ 394,732 $ 1,109.494 $ 640.330 $ 470,404 $ 1,110,734 $ 766,343 $ 494,411 $ 1,260,753 $ 411,480 $ 402,014 $ 813.494 Quick History (cont'd) Telecom Committee formed in November 2000 to: • Update the NBMC relating to: Cable Communications (TASK COMPLETE) Wireless Telecom (TASK COMPLETE) General use of City right -of -way (TASK COMPLETE) • Adopt a policy on the use of city facilities for wireless telecom sites (TASK COMPLETE) • Revise /renew Franchise Agreements with existing cable providers (NOT COMPLETE) • Educate the public as to what cities can and cannot do relating to Cable TV and Internet Service (ONGOING). Committee consists of: John Heffernan (Chair), Leslie Daigle, Dan Wampole, and Donald Boortz. Quick History More about the Ordinance and Agreements City's first Cable TV Franchise Ordinance was approved in 1966 then amended several times. • Changes to Federal Law (1984, 1992, and 1996) pre- empted portions of the old ordinance and related Franchise Agreements. • City Council updated the Cable Communications Franchises Ordinance in May 2004. In April 2004, the City Council adopted a "Statement of Minimum Goals" (SMG) — an SMG tells what we expect out of a Franchise Agreement. Franchise Agreements with Adelphia and Cox both expired in January 2004. . Special Counsel Bill Marticorena in July 2004 opined that the FAs did not have to be extended further. Quick History More about the Statement of Minimum Goals To get a Franchise in NB, a cable operator must: Upgrade all cable systems to 860 Mhz; Have an active Emergency Access System (EAS); Provide an institutional broadband network ( "I- Net ") between government facilities and schools; Be in full compliance with the FCC's subscriber service standards; Support Public, Educational, and Government (PEG) Access channels; Provide a minimum of three PEG channels, with additional channels added as growth dictates; Quick History More about the Statement of Minimum Goals (cont'd) To get a Franchise in NB, a cable operator must: Assist with the development of and support for community programming; Provide cable connections for remote housing facilities serving homebound seniors; Provide remote - controlled cable equipment for the Council Chambers plus ongoing support and replacement capacity; Provide live broadcasting of City Council meetings and other City and School District meetings as the City sees fit Be in full compliance with FCC regulations, the municipal code, and franchise fee obligations. Adelphia in Reorganization Adelphia filed Chapter 11 (reorganization) June 2002. In May 2005, Adelphia and Time Warner filed before the FCC to transfer assets from Adelphia to TW. In June 2005, TW asked the City to consent (via a "Form 394 ") to a transfer from Adelphia to TW. City had 120 days to consider transfer (would have been October 10, 2005). . Marticorena got date extended to mid - December 2005. . Your Council adopted Resolution 2005 -48 authorizing staff to act quickly to deny a transfer if we needed to do so, but with consultation from Telecom Committee. Why would we reject a transfer? Failure to provide info required by the terms of the Franchise Agreement; Failure to timely provide other info necessary to analyze the proposed transfer and its relation to the Ordinance; Failure on the part of TW to cooperate with us as we do our due diligence, esp relating to technical and financial quals and the impact of the transfer on rates & services; Failure to cure any outstanding breach of franchise; Failure give us a Transfer Agreement acceptable as to form and substance by the City Attorney; Failure to demonstrate the legal, technical and financial qualifications of the TW's subsidiary; Failure to provide a written financial guarantee, for which financial disclosure was provided in the Application of and /or additional filings; Filing FCC Forms 394 providing for potentially different Transferees. Adelphia's Bankruptcy How the BK has slowed progress on Franchise Agreement talks . We don't know with whom to negotiate. Adelphia means working through the BK judge Time Warner doesn't have us yet. No point in approaching either TW or Adelphia until the dust settles. Adelphia's Bankruptcy Shouldn't we just approach Cox and get a deal done for that side of the city? . We could, but our SMG talks of several important components that will be citywide: I -net Emergency Access System (EAS) PEG Channels (count and placement on spectrum) Capital Grants (which Cox likes to do), including support for City Council Chambers tech improvements Ongoing per- Subscriber support (which Adelphia liked to do, but Cox doesn't do) for community programming.