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HomeMy WebLinkAbout08 - Cable TV FranchisesCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 8 December 9, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dave Kiff, Assistant City Manager and Marilee Jackson, PIO City Manager's Office 949 - 644 -3002 dkiff @city.newport- beach.ca.us or mvjackson @city.newport- beach.ca.us SUBJECT: Ordinance Extending Non - Exclusive Cable TV Franchises With Adelphia and Cox Communications ISSUE: Should the cable TV franchise agreements with Adelphia & Cox be extended for one year to accommodate the completion of the franchise renegotiation process? RECOMMENDATION: 1. Introduce Ordinance No. 2003 - extending the current franchise agreements with Cox and Adelphia until January 27, 2005; and 2. Pass to second reading on January 13, 2004. DISCUSSION: Background: In the 1960s, when the City of Newport Beach entered into two separate franchise agreements with companies that provide cable television service, cities across the nation had a significant amount of say in cable companies' operations, including: • Rates and rate increases • Customer service standards • Channel selections and placement 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 2 Cities were able to dictate these aspects of cable companies' operations because the cable companies used the public right -of -way to lay the cable "plant" (plant includes coaxial cable, boxes in the rights -of -way, connections to homes, etc). Federal law has changed significantly since the City adopted its franchise agreements. The changes, in part, took away almost all of cities' regulatory abilities relating to cable and moved them to the Federal Communications Commission (www.fcc.gov). Today, several different laws, ordinances, and agreements direct our decisions about cable television. These include: • Three federal acts relating to Cable TV and Communications (1984 Cable Act, 1992 Cable Act, and 1996 Telecommunications Act); • The NB Municipal Code (Chapter 5.44) and City Charter (Article XIII); • Our Franchise Agreement with Adelphia Communications; and • Our Franchise Agreement with Cox Community Cablevision. The Effect of Changes in Law. It's important to remind the Council and Newport Beach residents that: • FCC regulates the rates, not the cities. The FCC alone has the power to regulate rates and channel selections, with the lone exception of rate regulation on the basic service tier of channels (typically Channels 2 -13 and PEG channels). Cities can only regulate basic tier rate increases if fully certified by the FCC to do so. Cable customers should note that cable companies rarely, if ever, raise the rates on this tier - much more frequent are rate increases on the larger (and unregulated) broadcast basic tier (Channels 14 -65 and up). • Other tiers are generally unregulated. In March 1999, the FCC (generally) deemed many cable systems subject to "effective competition" from satellite dish services and removed almost all rate regulation from cable TV. • Cable TV in Newport is not literally a monopoly. Cities like Newport Beach have non - exclusive franchise agreements. Any cable provider can come into the city limits, negotiate a franchise agreement, lay new cable, and compete directly with either Cox or Adelphia. Similarly, Cox can attempt to compete directly with Adelphia and vice - versa. But doing so requires significant investment in new cable infrastructure, because each cable company owns the cable in the ground (and on poles). Very few companies anywhere in the nation "overbuild" other systems. • Denial of renewal is extremely difficult and expensive. Cities cannot typically deny a cable provider an opportunity to renew an existing franchise agreement. L 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 3 • Internet services are unregulated. Courts have ruled that the provision of Internet service over cable is not a cable - related service and therefore not subject to municipal regulation. Newport Beach can do very little to help cable customers interact with their Internet Service Providers (ISPs). Our Current Franchise Agreements. As noted, Newport Beach has a Cable N Ordinance and separate Franchise Agreements with Cox and Adelphia (see service areas on map below). The Agreements have been extended several times: ADELPHIA FRANCHISE AGREEMENT • Agreement adopted December 1966 —15 -year term (to 1981). • Amended December 1970 — term reset again to 15 years (to 1986). • Amended April 1986 — term extended by five years (to 1991) • Amended October 1991 — term extended to January 27, 2002. • Amended December 11, 2001 -- term extended to January 27, 2003. • Amended January 27, 2003 -- term extended to January 27, 2004. COX FRANCHISE AGREEMENT • Agreement adopted December 1966 — 15 -year term (to 1981). • Amended November 1981 — term extended for 10 years (to 1991). • Amended October 1991 — term extended to January 27, 2002 • Amended December 11, 2001 -- term extended to January 27, 2003. • . Amended January 27, 2003 -- term extended to January 27, 2004. • ' Cable TV a'%`. Cable TV Franchise Arees \ CIIy of Ne+aport Pzmh ' a�;` Service Area naxynIn ww .. AtM I'MU� iS0£NSmv Ma SmbM,CA9316 �. \ y'. fawazm, l/ (i 1T1)Sf69Ri FAN _ 4.y Con COVUnwi.'Mwm FF e.: L�e:.tev Ren.MS,nrcb[vquvq vhWa NAl�n \ f 151915u.:F • � 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 4 Formation of Telecom Committee. With the franchise agreements about to expire, in November 2000, the City Council formed the Telecommunications Ad Hoc Committee and directed it to address the following issues: 1. UPDATING THE CABLE TELEVISION ORDINANCE. We believed that the City's municipal code chapter that relates to cable television required significant amendments before the City can enter into any effective franchise agreements with Adelphia and Cox. 2. UPDATING THE MUNICIPAL CODE AND ENACTING A COUNCIL POLICY RELATING TO WIRELESS TELECOM. We believed that the City should add a new section to the municipal code relating to telecommunication to effectively address: • Where to site new wireless facilities; • Whether and where to use City -owned property or rights -of -way for wireless facilities; • What design and structural standards the City should apply to antennas, whether placed on rights -of -way or public or private property; • What fee should be levied for the use of the public property for antennas; • How to effectively ensure that the City's emergency radio network is not adversely impacted by siting activity. The Wireless Telecom Ordinance is now Chapter 15.70 of the NBMC. Council Policy L -23 (The Siting of Wireless Telecommunications Equipment on City - Owned Land) governs City actions relating to the use of City property for wireless telecom. 3. FRANCHISE RENEWAL NEGOTIATIONS. Given the pending expiration of the two cable television franchise agreements, the Committee was tasked with performing a community needs assessment and bringing to Council a Statement of Minimum Goals. The latter was accomplished in April 2003. The Telecom Committee includes Council members John Heffernan (Chair) and Richard Nichols and community members Leslie Daigle and Don Boortz. About the Current Cable TV Ordinance and the Charter. The Municipal Code (Chapter 5.44 -- Community Antenna Television) relating to cable television is outdated. It was first adopted in 1966 and has had little change since then, even as: Federal and state telecommunications and cable law dramatically changed; Technology dramatically changed (digital TV, satellite TV, cable- carried Internet, pay - per -view, digital cable radio, fiber optic lines, telephony over cable, etc); The city saw a series of providers transfer their Franchise Agreements from one to another via consolidations and sales; r J 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 5 • Adelphia filed for reorganization. Currently, Chapter 5.44 of the NMBC and the City Charter speaks to the following issues -- but please be aware that many have been pre - empted by changes in federal law: • Defines "gross annual receipts" as compensation resulting from the operation of a cable TV system in Newport Beach, but not the franchise fee imposed by the City. In other words, a cable company's calculation of the 5% franchise fee cannot include the line item on the bill that charges the franchise fee itself. • Describes the process by which a cable company files a franchise application with the City (along with a $1,000 franchise application fee). • Directs the City to award a franchise with a term between 10 and 25 years. To terminate a franchise prior to end -of -term, the City must find that a cable company has "violated a material term or condition" of its franchise OR that any part of Chapter 5.44 has become unenforceable and has materially changed the franchise OR the City must acquire the cable TV system. • Allows the City to inspect the cable company's records at any time. • Empowers the City Manager to settle any controversy arising between the cable company and the City or subscribers "in the best interests of the public." • Directs the City Council to set a franchise fee that is a percentage of the cable company's gross annual receipts (paid to the City quarterly). • Describes the proper operation of the "Newport Beach Community Channel" which must be cablecast on the same channel number on all cable systems in the City (NOTE: This does not occur today -- Cox uses Channel 3 for system -wide programming and places NB community programming on Channel 30. Adelphia uses Channel 3 for NB community programming). The channel number can be designated by mutual agreement between the franchisees. The Channel must include live broadcasts of all regular meetings of the City Council, at least one re- broadcast of the meetings, and up to 20 hours of community affairs programs per month as designated by the City Manager. When the Channel is not broadcasting local origination material, the cable company can run advertising that "promotes primarily persons maintaining an office within the city..." The company can collect a fee for ads on the Community Channel. in 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 6 • Requires the cable company to keep a toll -free phone number in the City as well as a service and billing office within the main franchise area. Any subscriber complaint must be addressed within 24 hours via correcting the problem or scheduling a service call within 48 hours. • Allows the City Council to review and approve all rates and charges for cable services "to the extent permitted by State or Federal statutes." • Allows the City Council to determine which franchisee serves a newly annexed area, unless the area contains a completed or commenced cable TV system. In the latter case, the area must be served by the company owning the system. The City Charter's section on franchises (Article XIII) requires the City Council to adopt franchises via ordinance and to hold a public hearing prior to granting a franchise. It limits all franchise terms to 25 years or less if a determinate term is stated. The Article allows indeterminate terms but specifies that the City may end the franchise and possess the franchisee's property if the franchisee is out of compliance with the franchise agreement (Section 1302). Preparing a New Ordinance. Since at least Fall 2000, the City has retained William Marticorena of Rutan and Tucker to assist us in our telecommunications work. Mr. Marticorena has extensive experience in all phases of franchise renewals and ordinance amendments. Additionally, upon recommendation of the Telecom Committee, we hired Sue Buske of the Buske Group to conduct a statistically valid Cable Needs Assessment (CNA) to determine the community's desires and concerns regarding cable TV (for more information about the Assessment itself, see the Agenda Item from April 8, 2003 whereby the City Council formally accepted the Assessment). The Assessment and the Statement of Minimum Goals will be used to negotiate a new Franchise Agreement with each of the two cable providers. A Franchise Agreement is distinct from a new Cable Communications Ordinance as follows: • The Ordinance reflects the regulatory environment and practices that any cable provider must follow while doing business in the City. The Agreement(s) reflects specific permission to a specific company to use the public right -of -way to operate a cable system. Included in the permission are negotiated terms by the company and the city as to adequate compensation paid to the City and its residents for the use of the right -of -way. Adequate compensation may include the 5% franchise fee, dedication of equipment, dedication of specific channels for Public, Educational, and Government (PEG) services, and more. t� 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 7 We expect to bring the proposed new Cable Communications Franchises Ordinance back to the Council in January 2004. When we brought this proposed Ordinance before the Council in November 2003, Council Member Webb and the Adelphia representatives both raised issues that deserved further discussion prior to any adoption of a new Ordinance. Because the individual Franchise Agreements with Adelphia and Cox both expire on January 27, 2004, we recommend that the Council agree to a one -year extension of the current Agreements (to January 27, 2005). Despite the extension to January 2005, we hope to have the new Cable Communications Franchises Ordinance and the new Franchise Agreements before the Council by mid -2004. Environmental Review: This Agenda Item does not require environmental review. Public Notice: This agenda item may be noticed according to the Ralph M. Brown Act (72 hours in advance of the public meeting at which the City Council considers the item). Fundinq Availability: Not applicable. Submitted by: Da`,e Kiff Marilee Jackson Assistant City Manager Public Information Offi er Attachments: Ordinance Amending Section 4 of Ordinance Nos. 1196 & 1197 Franchise Extension Agreement between City of Newport Beach & Adelphia Franchise Extension Agreement between City of Newport Beach & Cox F 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 8 ORDINANCE NO. 2003- AN ORDINANCE OF THE CITY OF NEWPORT BEACH EXTENDING NON - EXCLUSIVE FRANCHISES WITH ADELPHIA CABLE COMMUNICATIONS AND WITH COX COMMUNICATIONS TO CONSTRUCT, MAINTAIN, AND OPERATE COMMUNITY ANTENNA TELEVISION SYSTEMS WITHIN THE CITY THIS ORDINANCE is made with respect to the following: RECITALS WHEREAS, by approving Ordinance No. 1197 and its later amendments, the City of Newport Beach entered into a cable television franchise agreement ( "Franchise Agreement') with Adelphia Cable Communications and its predecessor companies, Comcast Cablevision, Newport Beach Cablevision Incorporated, and Warner Brothers TV Service, Incorporated on or about December 7, 1966. The Franchise Agreement will expire on January 27, 2004; and WHEREAS, by approving Ordinance No. 1196 and its later amendments, the City of Newport Beach entered into a cable television franchise agreement ( "Franchise Agreement') with CoxCom, Incorporated (dba Cox Communications) and its predecessor companies, Dimension Cablevision and Community Cablevision, on or about December 6, 1966. The Franchise Agreement will expire on January 27, 2004; and WHEREAS, City and Adelphia and the City and CoxCom desire to extend each respective Franchise Agreement for one year to allow for additional time for negotiations to consider the renewal of each Franchise Agreement. NOW THEREFORE the City Council of the City of Newport Beach does ordain as follows: SECTION 1. Section 4 of Ordinance No. 1196 is hereby amended to read: (a) This Franchise commenced January 27, 1967 and shall terminate on January 27,2005. SECTION 2. Section 4 of Ordinance No. 1197 is hereby amended to read: (a) This Franchise commenced January 27, 1967 and shall terminate on January 27, 2005. i 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 9 This Ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach held on the 9th Day of December 2003, and was adopted on the 13th day of January, 2004, by the following vote, to wit: AYES, COUNCIL MEMBERS: NOES, COUNCIL MEMBERS: ABSENT. COUNCIL MEMBERS: ATTEST: CITY CLERK MAYOR J 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 10 FRANCHISE EXTENSION AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND ADELPHIA CABLE COMMUNICATIONS This Franchise Extension Agreement is entered into between the City of Newport Beach and Century-TCI California LP, dba Adelphia Cable Communications ( "Adelphia ") this_ day of , 2004, with regards to the following facts: RECITALS WHEREAS, by approving Ordinance No. 1197 and its later amendments, the City of Newport Beach entered into a cable television franchise agreement ( "Franchise Agreement') with Adelphia Cable Communications and its predecessor companies, Comcast Cablevision, Newport Beach Cablevision Incorporated, and Warner Brothers TV Service, Incorporated on or about December 7, 1966. The Franchise Agreement will expire on January 27, 2004; and WHEREAS, City and Adelphia desire to extend the Franchise Agreement for one year to allow for additional time for negotiations to consider the renewal of the Franchise Agreement. NOW THEREFORE, the Parties agree as follows: 1. The Franchise Agreement shall be extended to January 27, 2005. During said extension, the terms and conditions of the current Franchise Agreement shall remain in full force and effect without modification. 2. Both parties hereby reserve all rights under applicable provisions of the Cable Communications Policy Act of 1984 (The "Cable Act'), including without limitation Sections 626 and 635. Nothing herein shall be deemed or construed as a waiver, release or surrender of any right that either party may have under the Cable Act or any applicable law. Nothing herein shall waive, release or otherwise resole the Operator, or any predecessor thereof, from any Franchise Agreement breaches or violations, if any exist, or other violations of law, if any, and the grant of this Franchise Agreement extension shall not be utilized by the operator for any purpose other than to extend, and document the extension, of the Franchise Agreement through January 27, 2005. 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 11 IN WITNESS WHEREOF, the parties hereto have caused this franchise Extension Agreement to be executed in duplicate on the date and year first written herein. APPROVED AS TO FORM: CITY OF NEWPORT BEACH City Attorney CITY OF NEWPORT BEACH: ADELPHIA CABLE COMMUNICATIONS: Mayor i r, 1 -Year Extension of Cable Franchise Agreements December 9, 2003 Page 12 FRANCHISE EXTENSION AGREEMENT BETWEEN THE CITY OF NEWPORT BEACH AND COXCOM INCORPORATED This Franchise Extension Agreement is entered into between the City of Newport Beach and CoxCom, Incorporated, dba Cox Communications ( "Cox') this _ day of 2004 with regards to the following facts: RECITALS WHEREAS, by approving Ordinance No. 1196 and its later amendments, the City of Newport Beach entered into a cable television franchise agreement ( "Franchise Agreement') with CoxCom, Incorporated (dba Cox Communications) and its predecessor companies, Dimension Cablevision and Community Cablevision, on or about December 6, 1966. The Franchise Agreement will expire on January 27, 2004; and WHEREAS, City and Cox desire to extend the Franchise Agreement for one year to allow for additional time for negotiations to consider the renewal of the Franchise Agreement. NOW THEREFORE, the Parties agree as follows: 1. The Franchise Agreement shall be extended to January 27, 2005. During said extension, the terms and conditions of the current Franchise Agreement shall remain in full force and effect without modification. 2. Both parties hereby reserve all rights under applicable provisions of the Cable Communications Policy Act of 1984 (The "Cable Act'), including without limitation Sections 626 and 635. Nothing herein shall be deemed or construed as a waiver, release or surrender of any right that either party may have under the Cable Act or any applicable law. Nothing herein shall waive, release or otherwise resole the Operator, or any predecessor thereof, from any Franchise Agreement breaches or violations, if any exist, or other violations of law, if any, and the grant of this Franchise Agreement extension shall not be utilized by the operator for any purpose other than to extend, . and document the extension, of the Franchise Agreement through January 27, 2005. 1 -Year Extension of Gable Franchise Agreements December 9, 2003 Page 13 IN WITNESS WHEREOF, the parties hereto have caused this franchise Extension Agreement to be executed in duplicate on the date and year first written herein. APPROVED AS TO FORM: CITY OF NEWPORT BEACH City Attorney CITY OF NEWPORT BEACH: COXCOM, INCORPORATED d /b /a/ COX COMMUNICATIONS Mayor F: \users \cat \shared \da\Ag\AdelphiaF ranchiseExt.doc 9l