ࡱ> CEBE@ 5bjbj @- 8   * * * * * * * * 0 2 2 2 2 2 2 $R^V  * * V * * k 4 * * 0 0 "   *  2t " 0 <  u u u * 0Z " |  * * * V V  $  DATE: November 9, 2004 TO: The Mayor and Council FROM: Susan Cromwell Chair, Telecommunications Board SUBJECT: Cox Franchise As Mr. Earnest reported in his memo of October 27, the Telecommunications Board voted 3-2 at their September 30 meeting to approve a version of the Cox franchise renewal with specific amendments regarding contract term (no less than 3; no greater than 5), the specification of existing return lines, and the request for 3 additional return lines. The contract before you today includes a term of 5 years and the specification of existing return lines, but no additional return lines for live broadcasts on PEG channels. Mr. Earnests letter addresses ways to acquire the additional return lines either at cost or by negotiating a longer term. The board recommends the inclusion of the three additional lines with no extension of term. The companys position was unyielding on several points as we originally worked from the 72-page document that was compiled by Bryan Grogan, an expert in the field of cable negotiations whose recently published white paper (Franchise Renewal: Answers to Frequently Asked Questions) was distributed widely via the email lists recently. To fairly represent the Boards concerns regarding the negotiations, which closely match the issues raised by Mr. Grogan, as well as the citys outside counsels views, I will highlight the most significant of those points in this memo. The reason 3 out of 5 board members were comfortable recommending moving to closure with the existing Ft. Smith version (rather than continuing to work on the 72 page version) was that the limited term would bring the outstanding issues back at a more opportune time when we begin negotiation the next time around. Though, it was a unanimous feeling from the board, as eloquently spoken by John Lewis during the public comment from the August board meeting, that we should not be negotiating from the position of an average community (Cox representatives have repeatedly pointed out to us that the average community is far less demanding than ours in contract negotiation); Fayetteville is unique among Arkansas cities who have been negotiating with the company and our need for technology to support the future direction of our city is uncommon to most Arkansas communities. There are examples from other areas of the United States that would indicate the companys willingness to negotiate some of these issues more favorably in other markets. Term The term no less than 3; no greater than 5 was originally recommended by the citys outside counsel and the motion to amend was made by Craig Brown, Telecommunications Board member and Co-Chair of the citys Technology and Telecommunications Infrastructure Planning Task Force. Some community members have confused the charge of the Task Force with the Telecommunications Board in the franchise negotiation. This is understandable since the citys infrastructure is at the heart of both conversations. However, it is only when discussing the term that Task Force members have voiced an opinion. The limited term coincides with specific objectives of the Task Force to provide strategies for infrastructure development and is intended to coincide with the window for decision-making in the 3-5 year time frame of the emerging strategic plan which the Task Force is charged to prepare. The rapid changes with technology, the confusing interpretations of federal law in the existing regulatory environment, and the media convergence that is happening all over the country, give all of us pause for engaging in any longer than a 5 year term. At least one board member was not comfortable with even a 3 year term. Definition of Gross Revenues There are many issues that have been discussed regarding exactly what services are counted in the 5% of gross revenues earned by the city. During the negotiations, it was our belief that gross revenues should encompass more than subscriber-only fees for broadcast programs (such as revenue from advertising or home shopping). The interpretation of the federal law, as expressed by the citys outside counsel during recent negotiations, contradicts the interpretation of the federal law as expressed by Coxs legal department. The board was also informed that gross revenues could actually include subscriber revenues received from the provision of high-speed data internet access services (cable modem) to the extent not prohibited by federal law. It is our belief that the identity of cable modem services has not been finally determined and may in fact be a telecommunication services or a similar service subject to franchise fees under Arkansas law. Cox did, in fact, complete their roll-out of a new fiber infrastructure in the past year. And, yes, according to their letter of November 5, they have invested considerably in our community. The question is not whether the company has provided any of the expected community services. The question is whether cable modem service, which Cox could not be offering unless they had installed their fiber in the citys right of way (which is the reason they pay us % of gross revenues in the first place), should also be included in the franchise fee. This area is the one of most concern when considering the recommendation regarding the term of the contract. There are legal challenges that are happening across the country as a result of regulations that are unclear in the federal law. They are unclear because the definitions of information service, telecommunications service, and cable service do not take into account the media convergence that has been occurring with the advances of new technologies (such as video over power lines, or voice over cable modem, etc.). I am confident that the research being done by the Task Force will help us understand more clearly the future of the regulatory environment. More on Cable Modem Services One major issue of concern expressed by feedback from the community is the apparent tying of basic cable service to the cable modem service. That is, a citizen cannot buy high speed internet services without investing in cable television. This doesnt seem fair to customers who cannot get high speed internet access from any other provider and/or who may prefer Dish or DirectTV programming choices. Now that the satellite providers offer local programming choices, many community members find their program lineup and pricing structures preferable. Universal Access Universal access has been a concern of various Council members over the years. With the growth in our community and new construction in the citys outlying neighborhoods, it would be prudent for us to continue to press on the original idea discussed during negotiations, to work out a contribution-in-aid-of-construction to encourage expansion of service in areas that are not currently wired. The companys position was to decline to participate in any installment payment arrangements in connection with providing assistance to customers to reach the last mile. The board does not argue that this is an understandable position, but would like to remind the Council that the City should facilitate some arrangements to accomplish this in the future. Additional Education Channel for Public Schools In addition to the request by Fayetteville Public Schools to install one of the three additional return lines, the board supported my recommendation to include language in the contract that would indicate the companys willingness to support a fourth community access station, specifically for public school broadcasts. The school districts new broadcast studio is located at the Bates annex and will open in January; through the TV production class at the high school, students will become producers for high school and district-level educational programming. Currently, the public schools share a single education station with UATV. Coxs position is that we already have excessive capacity for PEG channels and representatives have made specific comments at board meetings as to the nature of the content and our use of the channels, even though the contract clearly states: The City shall regulate the use of said channels. Our position is that the company should be absolutely content-neutral as to the provisioning of such a request. And the language that the board recommended be included simply stated that at such time as educational programming has saturated the existing educational channel, Cox will agree to provide a 4th channel for the public schools. The company refused to consider this request. I believe that during the term of the contract, we will easily exceed capacity of the existing educational channel shared with UATV. I also believe the UATV and FPS audiences are entirely different and that Fayetteville citizens would like to see a unique station for parents and teachers and children involved in the public school community. Institutional Network This particular issue has probably been one of the most difficult to discuss because too many different concepts of institutional network have been floating around for too many years. The current request is not a request to provide internet access for specific offices (as was originally asked by the city years ago). The request during the most recent negotiations has been that the company consider an institutional loop that would tie the local networks of the city, the university and the public schools together. We believe the company can be obliged to provide an institutional communication network, including data, as defined in federal law, as part of the renewal process. They have done so recently in other communities in the United States. The benefit to the community would be significant in defining the future infrastructure. Other There were many other issues discussed by the board as brought forth from citizen feedback. Many of the more cosmetic changes were addressed in the contract; many of the substantive changes were not. Those that were not addressed included the request for capital improvement funds, availability of unique programming for Fayetteville (as opposed to the Northwest Arkansas regional program line-up), and program listings being made available that would include PEG channel programming content. During discussions regarding these requests, the companys position was simply that in order to accommodate them, customer rates would have to rise. Finally, other citizen input documented throughout the process reflected concern over the companys monopoly-cable-provider status, a perception that its basic tier rates are unfairly high (which always begs the question as to whether cable service is an essential service for certain citizens) and that its recent program line-up changes (introducing more shopping channels in place of content) are unreasonable. However, while perhaps related to the franchise, those issues are not required to be addressed in a franchise under federal law. I appreciate the efforts of all Telecommunications Board members and City administration in dedicating the time it takes to understand the communitys interests, the franchise negotiation issues, and the federal law governing the process. Given the feedback you have received from citizens, the city staff, and this board, your decision for contract renewal simply needs to reflect whether you believe the citys future cable-related needs and interests are served by the renewal and whether the operators past performance under the existing franchise has been met. 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