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HomeMy WebLinkAbout03 - Cox Communications Cable Franchise AgreementCITY OF NEWPORT BEACH COUNCIL AGENDA N0. 3 - CITY COUNCIL STAFF REPORT Agenda Item No. 16 July 25, 2006 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, Assistant City Manager 9491644 -3002 or dkiff @eity.newport- beach.ca.us SUBJECT: CABLE TELEVISION: ORDINANCE 2006 -_ ADOPTING A FRANCHISE AGREEMENT WITH COX COMMUNICATIONS ISSUE: Should the City enact an ordinance that adopts a new Franchise Agreement with Cox Communications? RECOMMENDATION: 1. Introduce Ordinance No. 2006 -_ relating to the adoption of a Cable Communications Franchise Agreement with Cox Communications; 2. Pass to second reading on August 8, 2006. DISCUSSION: As far back as 1966, the City of Newport Beach has had a Cable TV Ordinance and separate "franchise agreements" with two cable providers. Today, those providers. are Cox Communications 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 (now on holdover status) COX FRANCHISE AGREEMENT • Agreement adopted December 1966 -15 -year term (to 1981). Cox Communications Franchise and Ordinance July 25, 2006 Page 2 • 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 (now on holdover status). +.tiny" Cable TV Franiliase i('h' cf Nv jrrl ISotr•h , i /Xy / ��� � Ceble Ccmq+am• l Ij /; \ t Ann klmn.. t t r g Smn Ans".A9i�5 .. FA, ,"y�e —'e✓- T1Ii0SM1 n.lvoa?civA. ; 'm{ 'emu*^. .. `... i gyp "� AFrt Letle' -nnm , RmrbSvnSf4y.mh CM1 T.eN � _,� t� ;,�� 1 . IWI51t1h: . , _ # of homes passed in Franchise Area 31,123 13,900 45,023 # of cable N subscribers 16,978 10,100 27,078 % of homes passed that subscribe to cable 55% 73 %. 60% Franchise - Revenue to City Adelphia Cox Total -- 1999 (Calendar Year) $ 656,558 $ 266,671 $ 923,229 —2000 $ 722,714 $ 280,602 $ 1,003,316 --2001 $ 705,709 $ 395,824 $ 1,101,533 2002 $ 714,762 $ 394,732 $ 1,109,494 --2003 $ 640,330 $ 470,404 $ 1,110,734 2004 $ 766,343 $ 494,411 $ 1,260,753 -- 2005 (to date, includes 4th Q'04) $ 411,480 $ 402,014 $ 813,494 Cox Communications Franchise and Ordinance July 25, 2006 Page 3 In May of 2004, the City adopted a new Cable Communications Franchises Ordinance (Chapter 5.44 of the NBMC). Since that time, the staff team (Bill Marticorena of Rutan and Tucker, Assistant City Attorney Aaron Harp, City Attorney Robin Clauson, Assistant City Manager Dave Kiff, and PIO Marilee Jackson) has worked to negotiate two new franchise agreements (which mirror each other) with Cox and Adelphia. Adelphia's bankruptcy filing and subsequent sale of Adelphia assets to Time Warner greatly complicated our discussions. Preparing for the franchise renewals, the City Council worked with us to amend or wholly re- vamp three different ordinances (Public Right -of -Way, Cable Communications Franchises, and Wireless Telecommunications) to lay a framework for the Agreements and for the overall industry's work in the area. Those tasks are complete. Generally, the negotiations with both Cox and Adelphia/Time Warner have centered around template agreements - 95% of the template is a fairly standard version of the agreements that Mr. Marticorena's clients (cities and counties) have adopted in recent years. The remaining 5% of the discussions have centered around: • How many channels will be dedicated for Public Access, Educational and Government (PEG) -- now and in the future (in case our community programming grows). • How much money might be forthcoming for a one -time capital grant to enable us to install one -time projects like cameras in City Hall, a computer editing bay, and more. How many remote City facilities will be hooked up with a network (called the "Institutional" or "I -Net" we talk about). How much will the companies provide on an ongoing basis per subscriber to support community programming. Not surprisingly, areawide research shows that Cox and Adelphia have given a variety of capital grants, a variety of sums per subscriber, and different I -Net services to different municipalities. The City has been fairly aggressive in stressing that we know what other cities have received and that we expect similar treatment by our cable providers. Addkional 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; and • Channel selections and placement 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 - and both Federal and State law will continue to affect us in the years to come. The changes, in part, took away almost all of cities' regulatory abilities relating to cable and moved them to the Cox Communications Franchise and Ordinance July 25, 2006 Page 4 Federal Communications Commission (FCC or www.fcc.aov). Today, several different laws, ordinances, and agreements direct our decisions about cable television. The Effect of Changes in Law. It's important to remind the Council and Newport Beach residents that: FCC regulates rates, not 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 basictier(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. 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). Many more changes are expected. Legislation in both Sacramento and Washington propose "statewide" franchises for telephone and cable providers - these may supercede local agencies' franchise abilities and some or all franchise revenue. A note about the City Charter. 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 also directs us to notice the public hearing in advance of considering a new franchise. This notice was provided at the Council's July 11'" meeting. 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). Franchise Discussions. Since at least Fall 2000, the City has retained Mr. Marticorena 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). Cox Communications Franchise and Ordinance July 25, 2006 Page 5 Given the problems with Adelphia (and generally no one there with whom to negotiate), we used the Assessment and the Statement of Minimum Goals to work with Cox on a new Franchise Agreement. A Franchise Agreement is separate and 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 and support for Public, Educational, and Government (PEG) services, and more. The Proposed Franchise Agreement with Cox. The attached Franchise Agreement - which, as noted, must be adopted by Ordinance - has the following key provisions: TERM: Until April 1, 2011 -with an option to extend to April 1, 2018 FRANCHISE FEE: 5% LETTER OF CREDIT: $17.25 per subscriber BANDWIDTH At least 750 Mhz LOCAL OFFICE: Within 20 miles PEG SUPPORT: Initial grant of $60 /subscriber (roughly $660,000); and Additional grant of $30 /new subscriber over 2006's numbers in 2010. No ongoing PEG support PEG CHANNELS: Three immediately, up to 2 more if needed. OTHER: Drops provided to City facilities in Cox service area Undergrounding required Subscriber Complaint Log kept Technical Service standards met Assurance that changes to State or Federal law will not impact Capital Grant or Franchise Fee payments for the duration of the Franchise Term. More This tentative agreement with Cox compares to the negotiated settlement with Adelphia -Time Warner, via a proposed Memorandum of Understanding (MOU). The MOU twould be binding on Time Warner for ten years (until December 31, 2016) and includes the following benefits from Time Warner for the City and its residents: For support of Public, Educational, and Government (PEG) programming, an Ongoing PEG Grant of $0.50 per subscriber per month (roughly $120,000 per year). Importantly, Cox asserts that Cox will not and has not agreed to ongoing PEG support - instead, Cox offers limited one -time capital grants (thus the higher number at $60 /subcriber than the below $28 /subcriber offered by the Time Warner MOU; An Initial PEG Access Grant of $28.00 per subscriber (roughly $476,000 on a one -time basis); and Maintenance of current 5% franchise fee. Cox Communications Franchise and Ordinance July 25, 2006 Page 6 The MOU also directs that the City and Time Warner negotiate a new Franchise Agreement with the goal of completing the Agreement by December 31, 2006. Staff agrees with the proposed terms of the Cox Franchise Agreement and recommends that the Council approve the Cox FA by ordinance as required by the City Charter. Committee Action: This item came to Council before staff had the opportunity to convene the Media & Communications Committee, but we have discussed the recommended actions with the Council Members who serve on the Committee. Public Notice: This agenda item was noticed at the July 11'h meeting, per City Charter Section 1310. Submitted by: 6 Dave Assistant City Manager Attachments: Ordinance No. 2006 - Draft Franchise Agreement with Cox Cox Communications Franchise and Ordinance July 25, 2006 Page 7 ORDINANCE NO. 2006 - AN ORDINANCE OF THE CITY OF NEWPORT BEACH GRANTING TO COXCOM, INCORPORATED, A NONEXCLUSIVE FRANCHISE TO CONSTRUCT, MAINTAIN AND OPERATE A CABLE COMMUNICATIONS SYSTEM WITHIN THE CITY OF NEWPORT BEACH The City Council of the City of Newport Beach does ordain as follows: SECTION 1. Definitions. Wherever in this ordinance the following words or phrases are used, they shall have the respective meanings assigned to them in the following definitions; and words or phrases not defined in this section which are defined in any franchise document shall have the same meaning in this ordinance assigned to them in such franchise document, unless the context in which they are used shall clearly indicate a different meaning: (a) "City" shall mean the City of Newport Beach in its present incorporated form or in any later recognized, consolidated, enlarged or reincorporated form. (b) "Council' shall mean the present governing body or the City, or any future board constituting the legislative body of the City. (c) 'Person" shall mean any individual, firm, partnership, association, corporation, company or organization of any kind. (d) "Cox" shall mean CoxCom, Incorporated, a Delaware Corporation, doing business as Cox Communications Orange County, its employees, agents, successors and assigns. (e) "Subscribers" shall mean any person or entity receiving for any purpose the Cable Service of Cox herein. (f) "Franchise Area" shall mean the territory within the City throughout which Cox shall be authorized to construct, maintain and operate its system which is depicted on Exhibit A, which is incorporated herein by this reference, and shall include any enlargements thereof and additions thereto approved by the City in writing. (g) "Franchise Documents" shall mean and shall include all of the following: (1) Article XIII of the Charter of the City of Newport Beach. 7 Cox Communications Franchise and Ordinance July 25, 2006 Page 8 (2) Chapter 5.44 of Title 5 of the Newport Beach Municipal Code as the same now exists or as it may hereafter be amended. (3) Any and all rules and regulations governing the operation of Cable Systems within the City of Newport Beach which are adopted by the City Council. (4) The written acceptance of a Cable Communications Franchise filed with the City by Cox. (5) The Franchise Agreement approved by the Office of the City Attorney executed by the City and Cox. (i) "Street" shall mean the surface of and the space above and below any public street, road, highway, freeway, lane, path, alley, court, sidewalk, parkway, or right of way whether or not improved, now or hereafter existing as such throughout the City. SECTION 2. Grant of Franchise. There is hereby granted to Cox by the City a nonexclusive franchise to construct, erect, operate and maintain, in, upon, along, across, above, over and under the public streets, alleys, public ways and public places, now or in the future dedicated for public use in the City, poles, wires, cables, underground conduits, manholes and other television conductors, appurtenances and fixtures necessary or convenient for the maintenance and operation in the City of a Cable System to transmit television and FM radio signals, within the franchise area depicted on Exhibit A. The Cable System herein franchised shall be used and operated solely and exclusively for the purposes expressly authorized by ordinance of the City of Newport Beach and no other purposes whatsoever. SECTION 3. Nonexclusive Grant The right to use and occupy said streets, alleys, public ways and places for the purposes herein set forth shall not be exclusive, and the City reserves the right to grant a similar use of said streets, alleys, public ways and places to any person at any time during the term of this franchise. SECTION 4. Term of Franchise. The initial term of this franchise shall commence upon its approval by the Council (the "Effective Date "), and shall expire on April 1, 2011, provided that Cox has filed written notice of acceptance and executed the franchise agreement in accordance with the requirement of Section 9 of this ordinance ( "Initial Term "). At Cox's written election filed with the City no later than January 1, 2010, Cox may extend the Initial Term by seven E Cox Communications Franchise and Ordinance July 25, 2006 Page 9 (7) additional years so that the franchise will expire on April 1, 2018. SECTION 5. Inclusion of Franchise Documents. All of the franchise documents applicable to this franchise are hereby incorporated by reference and made a part of this ordinance. By acceptance of this franchise, Cox agrees to be bound by all of the terms, provisions and conditions contained in said franchise documents. SECTION 6. Right of City to Adopt Additional Rules and Requlations. The right is hereby reserved to the City to adopt, in addition to the provisions contained in this ordinance and in any other applicable ordinances and resolutions, such additional regulations as it shall determine to be necessary or convenient in the exercise of the police power. SECTION 7. Prohibited Activities of Cox. Cox shall be prohibited from directly or indirectly doing any of the following: (a) Engaging in the business of selling at retail, leasing, renting, repairing or servicing of television sets, radios or other receiving apparatus, or any part or component thereof. (b) Providing any repair service to its subscribers, for a fee or otherwise which extends beyond the connection of its service and the determination by Cox of the quality of its signal to its subscribers. (c) Soliciting, referring, or causing or permitting the solicitation or referral of any subscriber to any specific named persons firms or corporations engaged in any business which Cox is prohibited from engaging in by the provisions hereof. SECTION 8. Transfer of Franchise. This franchise shall not be sold, transferred, assigned, leased or otherwise disposed of in whole or in part by voluntary or involuntary sale, merger, consolidation, or otherwise, without the prior consent of the Council expressed by resolution, and then upon such terms and conditions as the Council may prescribe. No sale, transfer or assignment shall be effective until the vendee, assignee or lessee has filed in the Office of the City Clerk an instrument, duly executed and approved as to form and content by the City Attorney, reciting the fact of such transfers sale, assignment or lease, accepting the terms of the franchise, and agreeing to perform all the conditions thereof, including any additional conditions required by the Council. M Cox Communications Franchise and Ordinance July 25, 2006 Page 10 SECTION 9. Acceptance of Franchise. This franchise shall not become effective for any purpose unless and until the franchise agreement is executed by Cox and the City and written acceptance of the franchise shall have been filed with the City Clerk. The franchise agreement and written acceptance of the franchise shall be in form and substance as shall be prescribed by the City Attorney and shall be and operate as an acceptance of each and every term, condition and limitation contained herein, or otherwise specified by ordinance or resolution of the City Council. An executed franchise agreement and written acceptance of the franchise shall be filed by Cox not later than 12:01 P.M. of the fifteenth (15th) day next following the date of the adoption by the Council of this ordinance; and, in default of the filing of an executed franchise agreement and written acceptance of the franchise as herein required, Cox shall be deemed to have rejected and repudiated the same; and thereafter, the acceptance by Cox of the franchise shall not be received by the City Clerk and the City shall not execute the franchise agreement, and such Cox shall have no rights, remedies, or redress in the premises, unless and until the City Council shall, by resolution, determine that such written acceptance of the franchise be received and filed and that the franchise agreement be executed by the City, and then upon such terms and conditions as the Council may impose. SECTION 10. Annual Franchise Fee. Cox shall pay annually to the City during the life of this franchise for the privilege of operating a Cable System under this franchise the franchise fees and other payments set forth in the franchise agreement. SECTION 11. If any section, subsection, sentence, clause or phrase of this ordinance is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this ordinance. The Council hereby declares that it would have passed this ordinance, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. SECTION 12. The Mayor shall sign and the City Clerk shall attest to the passage of this ordinance. The City Clerk shall cause the same to be published once in the official newspaper of the City, and it shall be effective thirty (30) days after its adoption; provided, however, that the franchise hereby granted shall not become effective unless and until Cox files written acceptance thereof and executes and delivers the franchise agreement in the manner specified in Section 9 of this ordinance and delivers to the City all bonds and insurance 10 Cox Communications Franchise and Ordinance July 25, 2006 Page 11 policies required to be furnished in accordance with the requirements of Chapter 5.44 of the Newport Beach Municipal Code and /or the franchise agreement. SECTION 13. This ordinance was introduced at a regular meeting of the City Council of the City of Newport Beach, held on the 25th day of July, 2006, and adopted on the 8th day of August, 2006, by the following vote, to wit: AYES, COUNCILMEMBERS NOES, COUNCILMEMBERS ABSENT COUNCILMEMBERS MA' ATTEST: CITY CLERK II FRANCHISE TO PROVIDE CABLE TELEVISION SERVICES BETWEEN THE CITY OF NEWPORT BEACH, CALIFORNIA AND COXCOM, INCORPORATED THIS AGREEMENT AND FRANCHISE (the "Franchise ") is made and entered into this day of 2006, by and between CoxCom, Incorporated, a Delaware corporation dba Cox Communications Orange County (hereinafter "Cox ") and the City of Newport Beach, California ( "City "). Authority. This Franchise has been granted and approved pursuant to the provisions of Title 5, Business Licenses and Regulations, Chapter 5.44, Cable Communications Franchise, of the Municipal Code of the City of Newport Beach ( "NBMC "). This Franchise is in the form of a nonexclusive franchise, contract and agreement. 2. Definitions. A. All terms used in this Franchise Agreement shall be as defined herein and in Title 5, Business Licenses and Regulations, Chapter 5.44, Cable Communications Franchise, of the NBMC. The provisions of the NBMC and the wordings, specifications, and requirements in this Franchise shall constitute the terms of a franchise as authorized in the NBMC in the form of an agreement to permit use of the public rights -of -way and to provide cable television services by Cox. For the purposes of this Franchise, the following words, terms, phrases, and their derivations have the meanings given herein. When not inconsistent with the context, words used in the present tense include the future tense, and words in the singular number include the plural number. "Complaint" means a dispute in which a Subscriber notifies Cox of an outage or degradation in picture quality, billing or other issue pertaining to the Subscriber's Cable Service which is not corrected during the initial telephone or service call. "Control" or "Controlling Interest" means actual working control in whatever manner exercised, including, without limitation, working control through ownership, management, debt instruments, or negative control, as the case may be, of the Cable System or of Cox. A rebuttable presumption of the existence of Control or a Controlling Interest shall arise from the beneficial ownership, directly or indirectly, by any Person or group of Persons acting in concert (other than underwriters during the period in which they are offering securities to the public) of twenty percent (20 1/4) or more of any Person (which Person or group of Persons is referred to as "Controlling Person "), or being a party to a management contract to manage the Cable System in lieu of Cox. "Gross Annual Revenue" or "Gross Annual Receipts" or "Gross Receipts" means all revenue, as determined in accordance with Generally Accepted Accounting Principles, which is received, directly or indirectly, by Cox and by each Affiliated Person from or in connection with the distribution of any Cable Service, and any 0,, Cox -CNB Franchise Agreement Page 2 other Service which may, under now or then applicable federal law, be included in the Cable Act definition for the purpose of calculating and collecting the maximum allowable franchise fee for operation of the System whether or not authorized by any Franchise, including, without limitation, leased or access channel revenues received, directly or indirectly, from or in connection with the distribution of any Cable Service. It is intended that all revenue collected by Cox from the provision of Cable Service over the System, whether or not authorized by the Franchise, be included in this definition. Gross Annual Revenue also specifically includes any revenue received, as reasonably determined from time to time by the City, through any means which is intended to have the effect of avoiding the payment of compensation that would otherwise be paid to the City for the Franchise granted. Gross Annual Revenue also includes any bad debts recovered. Gross Annual Revenue also includes all advertising revenue which is received directly or indirectly by Cox or any Affiliated Person from or in connection with the distribution of any Service over the System or the provision of any Service - related activity in connection with the System. Gross Annual Revenue does not include: (i) the revenue of any Person to the extent that said revenue is also included in the Gross Annual Revenue of Cox; (ii) taxes imposed by law on Subscribers which Cox is obligated to collect; and (iii) amounts which must be excluded pursuant to applicable law. B. Terms Not Defined — Words, terms, or phrases not defined in the NBMC or herein shall first have the meaning as defined in the Cable Act, and then the special meanings or connotations used in any industry, business, trade, or profession where they commonly carry such special meanings. If those special meanings are not common, they will have the standard definitions as set forth in commonly used and accepted dictionaries of the English language. 3. Scope of Franchise. A. Cox is authorized and obligated to construct, reconstruct, and operate the System within the public streets and rights -of -way. This authority includes the privilege to use Cox's cable television system in the Service Area, as defined in Section 14 below, (hereinafter the "System ") to provide Cable Service to customers in the Service Area located in all residential dwellings, commercial structures and industrial structures. B. This Franchise Agreement solely and exclusively creates, defines, and limits the legal rights and obligations between City and Cox and does not; in any way, obligate City to take any action, actions or refrain from taking any action, or actions, to or in relation to any third party. 4. Payments. Regular Percentage Franchise Fee. From and after the Effective Date, Cox shall pay a Franchise Fee, in quarterly installments, in a sum equal to five percent (5 %) of the Gross V Cox -CNB Franchise Agreement Page 3 Annual Revenue. The Franchise Fee shall be paid to the City within forty -five (45) days after the close of the calendar quarter. Cox expressly acknowledges and agrees that: A. Except for the payments expressly required by this Section 4, none of the payments or contributions made by, or the services, equipment, facilities, support, resources, or other activities required to be provided or performed by Cox pursuant to this Agreement are franchise fees chargeable against the compensable payments to be paid to City by Cox pursuant to this Section 4; and B. As applicable, except for the compensation payments expressly required by this Section, each of the payments or contributions made by, or the services, equipment, facilities, support, resources, or other activities to be provided by Cox, are voluntary and are not "franchise fees" within the meaning of the Cable Act (47 U.S.C. §542.(g)(2)); and C. The compensation payments due from Cox to City pursuant to this Section shall take precedence over all other payments, contributions, services, equipment, facilities, support, resources, or other activities to be paid or supplied by Cox pursuant to this Franchise; and D. The compensation and other payments to be made pursuant to this Franchise Agreement shall not be deemed to be in the nature of a tax, and shall be in addition to any and all taxes of general applicability or other fees or charges which Cox or any Affiliated Person shall be required to pay to the City or to any state or federal agency or authority, all of which shall be separate and distinct obligations of Cox and Affiliated Persons; and E. Neither Cox nor any Affiliated Person shall have or make any claim for any deduction or other credit of all or any part of the amount of the compensation or other payments to be made pursuant to this Franchise from or against any City or other governmental taxes of general applicability (including any such tax, fee, or assessment imposed on both utilities and cable operators or their services but not including a tax, fee, or assessment which is unduly discriminatory against cable operators or cable subscribers or income taxes) or other fees or charges which Cox or any Affiliated Person is required to pay to City or other governmental agency;and F. Neither Cox nor any Affiliated Person shall apply or seek to apply all or any part of the amount of the compensation or other payments to be made pursuant to this Franchise as a deduction or other credit from or against any City or other government taxes of general applicability (other than income taxes) or other fees or charges, each of which shall be deemed to be separate and distinct obligations of Cox and Affiliated Persons; and G. Neither Cox nor any Affiliated Person shall apply or seek to apply all or any part of the amount of any City or other government taxes or other fees or charges of general applicability (including any such tax, fee, or assessment imposed on both 14 Cox -CNB Franchise Agreement Page 4 utilities and cable operators or their services) as a deduction or other credit from or against any of the compensation or other payments to be made pursuant to this Franchise, each of which shall be deemed to be separate and distinct obligations of Cox and Affiliated Persons; and H. City acknowledges that, during the term of this Agreement, Cox may offer to its subscribers, at a discounted rate, a bundled or combined package of certain cable services that are subject to the franchise fee referenced above in Section 4, and other services that are not subject to that fee. With regard to such bundled or combined services, the following provisions are applicable: During the term of this Agreement, if Cox offers to individual subscribers cable services subject to the franchise fee that are bundled or combined with non -cable services that are not subject to the franchise fee, then the revenue from those bundled or combined services must be allocated on the basis of proportionality, as follows: 1. The percentage that the price for all bundled services is discounted from the established retail rates for the individual services, as those rates are advertised by Cox in its marketing materials or published rate cards, will be prorated across all services in the bundled package, subject to the adjustment referenced below in Section 4(H)(2). Cox shall provide the City with the all requested information regarding the charge for each individual service for any bundled package within ten (10) days of the City requesting this information. 2. The revenue derived by Cox from services that are subject to mandatory tariff rates imposed by the California Public Utilities Commission, or any similar governmental rate - setting authority, will be deducted from the aggregate revenue to determine the revenue that is subject to the franchise fee. By way of example, Cox may offer a bundle of voice, video, and data services for a flat fee of $75, where the aggregate retail rate of those services when purchased on an individual basis would equal $100. If there is no service in that bundled package subject to a mandated tariff rate, Cox would apply a 25 percent discount to each individual service. Thus, if the established retail rate for video service was then $50, Cox would recognize revenue in the amount of $37.50 and would pay a franchise fee on that amount. 3. Cox will not structure the pricing of any bundled or combined services so as to intentionally or unreasonably cause a reduction in the Gross Annual Revenue against which franchise the City may impose fees or other proportionately derived taxes, surcharges, or fees. 4. If City reasonably determines that Cox has unlawfully, inequitably, or contrary to Section 4(H) allocated Gross Annual Revenue between video services and non -video services in calculating franchise fee payments, 6 Cox -CNB Franchise Agreement Page 5 then the parties will meet upon advance notice from the City to discuss the allocation methodology. If the parties cannot resolve the dispute within a reasonable period of time, then the parties will submit the matter to a mutually agreeable third party for non - binding mediation. The parties will share the cost of the mediation equally. If the mediation is not successful, or if the parties cannot mutually agree upon a mediator, then either party may file an action in a court of competent jurisdiction or pursue any other remedies available under the law or this Agreement. I. If any franchise payment or recomputed amount is not made on or before the dates specified above in Section 4, Cox shall pay as additional compensation the greater of the following: 1. An interest charge, computed from the applicable due date, at an annual rate equal to the prevailing commercial prime interest rate in effect upon the due date, plus three percent (3 %). 2. In addition to any late payment made pursuant to this section, if a payment is late by sixty (60) days or more, Cox shall pay a sum of money equal to five percent (5 %) of the amount due in order to defray reasonable additional documented and itemized expenses and costs incurred by City as a result of such delinquent payment. 3. No acceptance of any payment shall be construed as a release of, or an accord, or satisfaction of, any claim that the City might have for further or additional sums payable under the terms of this Franchise, or for any other performance by Cox of an obligation hereunder. 4. Payments of compensation made by a Cox to the City pursuant to the provisions of this Franchise are in addition to, and exclusive of, any and all authorized taxes, business license fees, and other fees, levies, or assessments now in effect or subsequently adopted in accordance with state and federal law. 5. Letter of Credit. A. Pursuant to Section 5.44.060(B)(1)(a) of the NBMC, within thirty (30) days of the Effective Date of this Franchise, Cox shall post an irrevocable standby Letter of Credit in the amount of ($17.25 per current subscriber but not less than One Hundred Thousand Dollars ($100,000). The Letter of Credit provider shall have, at a minimum, a credit rating of A issued by Moody's or Standard & Poor's. The letter of credit shall incorporate wording approved by City enabling City to draw such sums from time to time as the City may find necessary to satisfy any material default of Cox or to meet any payment due City under or in connection with the NBMC or this Franchise, upon ten (10) days' written notice to the Letter of Credit provider. The Letter of Credit shall provide in substance that, upon written notice by City of a material default or failure to make a payment due to tu Cox -CNB Franchise Agreement Page 6 City under or in connection with the NBMC or this Franchise, City may draw upon the Letter of Credit without any offset, contingencies or conditions of any kind. This Letter of Credit shall provide that it may not be revoked or amended without City's prior written approval. Cox shall obtain prior approval by the City of the wording of the Letter of Credit, the form of the Letter of Credit, and the Letter of Credit provider. Such approval shall not be unreasonably withheld. B. The Letter of Credit requirement may, in the unilateral discretion of the City, be increased by up to three times its original amount if there is an assignment, transfer, and /or change of control of the Franchise and /or Cox. C. The Letter of Credit required by this Section satisfies the financial security requirements of this Franchise Agreement and is in lieu of a Security Fund or Faithful Performance Bond pursuant to Section 5.44.060(B)(1)(a) of the NBMC. 6. Insurance. Within ten (10) days of the Effective Date of this Franchise, Cox, at its sole cost and expense, for the full term of this contract (and any extension thereof), shall obtain and maintain at minimum all of the following insurance coverage: A. Types of insurance and Minimum Limits. The coverage's required herein may be satisfied by any combination of specific liability and excess liability policies. 1. Workers' Compensation and Employers Liability Insurance in conformance with the laws of the State of California (not required if Cox has no employees). 2. Cox's vehicles, including owned, non -owned (e.g., owned by Cox's employees and used in the course and scope of employment), leased or hired vehicles, shall each be covered with Automobile Liability insurance in the minimum amount of two million dollars ($2,000,000) combined single limit per accident for bodily injury and property damage. 3. Cox shall obtain and maintain comprehensive or commercial General Liability Insurance coverage in the aggregate annual amount of two million five hundred thousand dollars ($2,500,000) combined single limit, including bodily injury, personal injury, and broad form property damage. Such insurance coverage shall include, without limitation: a. Contractual liability coverage adequate to meet Cox's indemnification obligations under this Contract; and b. A cross - liability clause. C. Cox shall obtain and maintain Slander /Libel /Defamation Liability Insurance in the aggregate annual amount of one million dollars ($1,000,000). 0 Cox -CNB Franchise Agreement Page 7 B. All required Automobile Liability insurance and Comprehensive or Commercial General Liability Insurance shall contain the following endorsement as a part of each policy: "The City of Newport Beach is hereby added as an additional insured as respects the operations of the named insured pursuant to cable television franchise as granted by the City and said insurance shall specifically cover the acts and omissions of Cox and the acts and omissions of its employees, agents and subcontractors in the performance of work hereunder." C. Within thirty (30) days from Effective Date of this Franchise, Cox shall furnish proof to City that a satisfactory insurance policy for all insurance required by this Franchise so that the City can ensure that the insurance is in place. The insurance policies for vehicles shall be in effect prior to usage and the City may, from time to time, reasonably increase the required amount of said insurance so long as said increased coverage is reasonably available at reasonable prices. D. The insurance required of Cox pursuant to this Franchise shall be primary and no insurance held by City shall be called upon to contribute to a loss under this coverage. E. All insurance policies shall provide that in the event of material change, reduction, or cancellation or non - renewal by the insurance carrier for any reason, not less than thirty (30) days written notice will be given to City by registered mail of such intent to cancel, materially change, reduce or not renew the coverage. An authorized agent of such insurance carrier shall provide to City, on such schedule as is requested by City, a certification that all insurance premiums have been paid and all coverage's are in force. If for any reason Cox fails to obtain or keep any of such insurance in force, City may (but shall not be required to) obtain such insurance, in which event Cox shall promptly reimburse City its premium cost therefor plus interest at the City's portfolio rate until paid. F. All insurance shall be contracted through companies licensed to do business in California. G. Any deductible or self - insured retentions must be declared to and approved by City. At the option of City, insurer shall reduce or eliminate such deductible or self - insured retention as respects City, its officials, officers, employees and agents, or Cox shall procure a bond guaranteeing payment of losses and related investigations, claims, administration and defense expenses. 7. Defense and Satisfaction of Claims. A. Cox shall, at the sole cost and expense of Cox, upon demand by City, defend City, its officers, boards, commissions or employees, in any and all suits, actions, or t4 Cox -CNB Franchise Agreement Page 8 other legal proceedings, whether judicial, quasi judicial, administrative, or otherwise arising out of the negligent or willful acts or omissions of Cox, its employees, subcontractors and agents. Where Cox is required to provide legal services to City under this paragraph, and chooses to utilize joint counsel, the parties shall make a good faith effort to cooperate and agree upon litigation strategy and implementation thereof. In the event that Cox's litigation strategy or choice of legal counsel create a conflict of interest, or result in inadequate representation to protect the City's interests and separate counsel is necessary for the representation of City, City may obtain separate legal counsel chosen by City at Cox's cost and expense provided, however, that if City obtains separate legal counsel as set forth above, Cox is only obligated to pay an hourly amount for legal services which does not exceed one hundred percent (100 %) of the highest hourly rate that City has paid for legal services within the twenty -four (24) month period prior to obtaining legal services as provided in this paragraph. City shall submit to Cox on regular basis statements for attorney's fees which shall be paid to City within sixty (60) days of Cox's receipt of said statement. B. Cox shall cause to be paid and satisfied any judgment, decree, or order rendered, made, or issued against Cox, City, its officers, boards, commissions, or employees, and hold City harmless therefrom, arising out of Cox's negligent or willful acts or omissions in connection with the construction, operation, maintenance, or other activities in relation to Cox's cable television system including, but not limited to, damages arising out of copyright infringement, defamation, personal and property liability; and antitrust liability, whether or not said damages are compensatory or punitive, provided, however, Cox shall not be required pursuant to this paragraph to hold City harmless for actions relating to programming decisions outside of Cox's control. Such indemnity shall exist and continue without reference to the amount of any bond, policy of insurance, deposit, undertaking, or other assurance; provided, however, City may not enter into any compromise or settlement which imposes any obligation on Cox without Cox's consent, which consent shall not be unreasonably withheld, and Cox shall not make or enter into any compromise or settlement of any claim, demand, causes of action, suit, or other proceedings which settlement involves anything other than the payment of money by Cox without contribution by City, without first obtaining the written consent of City, which consent shall not be unreasonably withheld. C. The indemnification provided pursuant to paragraphs 7(A) and 7(B) above shall apply to all damages and claims for damages of any kind suffered by reason of any of the aforesaid operations referred to in those paragraphs, regardless of whether or not City has prepared, supplied, or approved the plans and /or specifications for the operation or regardless of whether or not any insurance policies shall have been determined to be applicable to any of such damages or claims for damages. 6 Cox -CNB Franchise Agreement Page 9 8. Liquidated Damages and Other Remedies. A. Damages for Violation of Technical Standards, Customer Service Standards and Other Violations. In addition to, and without limiting the damages for delays as specified in Section 4 of this Franchise, City may impose any of the other liquidated damages described below for the violations and in the amounts described below: 1. Technical Standards violations. If more than ten percent (10 %) of the locations tested pursuant to FCC regulations fail to meet the FCC technical standards, City may impose liquidated damages in an amount equal to two hundred dollars ($200) per day, if Cox does not cure the violation in accordance with Section 8(B)(1) below. 2. Customer Service Violations. If Cox violates, in any material way, any of the customer service standards specified in the NBMC or this Franchise, City may impose liquidated damages in the amount of two hundred dollars ($200) per violation per day if Cox does not cure the violation in accordance with Section 8(B)(1) below. 3. Other Violations. For all violations and breaches specified in the Franchise or the NBMC, the City may impose liquidated damages in the amount of two hundred dollars ($200) per day if Cox does not cure the violation in accordance with Section 8(B)(1) below. 4. Reduction of Damages and Letter of Credit. If City does not impose any damages on Cox for delays in violation of technical standards, violation of customer service standards or for other violations in the four (4) year period which shall commence on the date which is sixty (60) days from the Effective Date of this Franchise, after such four (4) year period, the penalties contained in Sections 8(A)(1) and 8(A)(2) above shall be reduced to one hundred fifty dollars ($150) per day per violation, and the letter of credit contained in Section 5 above shall be reduced to seventy -five percent (75 %) of the original amount thereof; provided however, that the original, penalties and the original amount of the letter of credit, as increased as allowed herein upon transfer, assignment or change of control, shall be immediately reinstated if (a) City imposes two (2) penalties on Cox in any twelve (12) month period, and/or (b) if Cox assigns, sells, leases or otherwise transfers this Franchise or control of the System. This entire paragraph shall immediately cease to It Cos -CAT Franchise Agreement Page 10 have any force or effect if City imposes a penalty or penalties on Cox within the four (4) year period which commences sixty (60) days from the Effective Date of this Franchise Agreement. B. Payment of Damages. 1. Cure. In the event that City has reason to believe that Cox has failed to comply with any material provision of this Franchise or the NBMC and therefore desires to impose damages on Cox as stipulated above and /or in the NBMC City shall notify Cox in writing of the provision or provisions which City believes may be in default as well as the applicable cure period. Cox shall, upon receipt of said Notice: a. Cure the alleged violation within the cure period provided by the NBMC, or if no cure period is provided, within five (5) working days of said notice. In the event that Cox does not correct said violation within the applicable cure period, said liquidated damages may be imposed from the date of original violation; or b. Respond to City in writing during the cure period contesting City's assertion of violation and providing such information or documentation as may be necessary to support Cox's position and/or request an extension of the cure period. The decision to extend the cure period shall be within the sole discretion of the City; however such request for an extension of the cure period shall not be unreasonably withheld by City. 2. Appeal and Payment. In the event Cox fails to respond to said notice of violation, or to cure the violation within the applicable cure period, or provide an explanation for failure to cure acceptable to City, City or its designee shall schedule a hearing no sooner than ten (10) days after written notice to Cox of the expiration of the cure period and the scheduling of said hearing. Cox shall be provided an opportunity to be heard at such hearing, including the right to present evidence, cross - examine witnesses, and be represented by counsel. Within thirty (30) days after said hearing, City shall determine whether or not Cox is in violation and submit written findings of facts supporting such determination. The hearing described above may be conducted, at City's selection, either before the City Council or before an administrative officer or commission selected by the City Council. In the event that said hearing is not held before the City Council, Cox shall possess the right to appeal said determination to the City Council within ten (10) days of issuance of the statement of decision and findings of fact. The City Council shall decide said appeal pursuant to a hearing at which Cox -CN6 Franchise Agreement Page 11 Cox has an opportunity to be heard and the right to present evidence, examine witnesses and be represented by Counsel. Cox shall have the right to appeal the City Council's decision to a court of competent jurisdiction within ninety (90) days of any final decision by the City Council. In the event a court orders repayment of said liquidated damages from City to Cox, interest on such amounts shall be included at the rate paid by the Local Agency Investment Fund to the City for City Investments. All liquidated damages shall be due and owing thirty (30) days after the final decision by either the City Council or the hearing officer in the event of no appeal to the City Council. The aforesaid assessment may be levied directly against the letter of credit and collected by City thirty (30) days from date said damages are due and owing. Such assessment shall not constitute a waiver by City of any other right or remedy it may have under the Franchise or under applicable law including, without limitation, its right to recover from Cox such additional damages, losses, costs and expenses, including reasonable attorneys' fees, as may have been suffered or incurred by City by reason of or arising out of such breach of the Franchise. Nothing in this paragraph is intended to waive, modify or otherwise affect Cox's rights under the NBMC, this Franchise, or any applicable law, except for the specific procedures expressly provided herein, including without limitation the right to judicial review of the legal rights and obligations of the parties with respect to each other, Cox's right to challenge the decision of City under applicable legal standards, and/or any issue of performance or breach by either party to this Franchise. C. Validity of Liquidated Damages. The parties acknowledge that it would be impractical or extremely difficult to fix actual damages in the case of Cox's default, and that the amount of damages specified above is a reasonable and complete estimate of City's damages. Cox recognizes that Cox's prompt development and offering of cable television service for which penalties can be imposed is of critical importance to City. City: Cox: (Initials) (Initials) D. Sole Financial Remedy. No financial penalties will be applied pursuant to Ordinance or other similar document for the same offenses to which the liquidated damages apply. 12 Cox -CN6 Franchise Agreement Page 12 9. Cox Support for Development of Technology and Programming. Cox shall provide the following support for the purpose of technology development and implementing non - commercial public, benefit uses of the Cable System. The provision of the support items listed herein shall be considered as binding commitments of Cox within the terms of this Franchise, and if not provided, shall subject Cox to applicable remedies and penalties for violations of the Franchise. Cox shall provide the following support: A. Channel Capacity Requirements. Cox Support for Public, Educational or Government Access "PEG Access ": 1. Cox shall designate three (3) channels for the exclusive use of the City ( "PEG channels "). The PEG channels shall be under the exclusive management and editorial control of the City and shall not be shared with other cities. The City may designate a representative, such as a non - profit entity, to use and administer to said channels, with all of the attendant rights and obligations provided to the City hereunder. In the event Cox is required by federal law, regulations, or otherwise to change the channel number of a PEG channel, Cox shall provide thirty (30) days advance notice to the City and its customers. Should Cox desire to change the channel number of a PEG channel that is in use by a PEG user within the criteria set forth in Section 9(A)(2) for any other reason, Cox shall provide the City with the reason for change at least ninety (90) days prior to the proposed change, advertise the change to customers on its website, in at least three (3) bill messages prior to the change, and in a television spot announcement that Cox shall carry on its system for at least six weeks prior to the change. Cox shall also reimburse the City for its actual costs for reprinting any materials such as program guides or other promotional materials occasioned by the change in an amount not to exceed $7,500.00 for its costs of remarketing the channel. 2. Cox shall make available additional PEG channels designated for use exclusively by the City pursuant to the following criteria: a. The initial governmental channels must be in use and programmed with non - commercial PEG programming, of which no more than ten (10) hours can be character generated programming, during at least 80% of the weekdays for at least 80% of the time during any consecutive 6 -hour period for ten (10) consecutive weeks. b. The initial public and educational channel must be in use and programmed with non - commercial and at least 50% locally produced programming, of which no more than ten (10) hours per week can be character- generated programming during at least 80% irr' Cox -CNB Franchise Agreement Page 13 of the weekdays for at least 80% of the time during any consecutive 6 -hour period for ten (10) consecutive weeks. C. No more than 33 -1/3% of the aggregate hours utilized for PEG programming during such ten week period can represent repeat programming. d. Any additional PEG channel shall be made available within 180 days following the City's written request and verification of compliance with each of the foregoing conditions. e. Whenever such additional PEG channels but not the original three PEG channels, are programmed for less than ten (10) hours per day for six (6) days per week for a continuous period of not less than twelve (12) consecutive weeks, the City may permit Cox to utilize unused channel capacity on that channel under the following conditions: (i) Any request from Cox to use any fallow capacity designated for PEG Access must be submitted in writing to the City. (ii) The City shall approve the request from Cox to use fallow channel capacity if it finds that: (i) the utilization of the channel is as represented; (ii) Cox has not acted in violation of any of the provisions of the Franchise regarding utilization of the channel; and (iii) there are no special circumstances which would justify the denial or delay of implementation of the use of the channel. After approval, Cox may continue to utilize the channel for any other purposes it so chooses, consistent with the Franchise, until it is required to be designated for PEG purposes pursuant to the provisions hereof. (iii) Unless Cox receives written notice within one hundred and twenty (120) days that the City disapproves Cox's request, the City's approval shall be deemed granted. f. The maximum number of access channels which may be required under this Franchise shall be five (5), subject to the City's right to exchange channels, as set forth herein. On six months notice to Cox, City may exchange each analog PEG channel for four (4) digitally compressed channels upon satisfaction of the following conditions: 2-q Cos -CNB Franchise Agreement Page 14 (i) Cox provides digitally compressed channels which offer at least as many services as are available by analog charmels on the system; and (ii) Digital decompression terminal devices are installed in the homes of a least 50% of Cox's subscribers, and are used to receive Cox's services; and (iii) City provides six (6) months notice to Cox. (iv) City provides written waiver of any state or federal laws pertaining to requirements for the placement of such channels. As used in this section, a "digitally compressed channel" shall mean a data stream capable of delivering video programming on a basis comparable to the delivery of other digitally compressed video programming. 3. The City shall have sole responsibility for the administration and programming of the Governmental channel(s) provided by Cox, including without limitation, the carriage of programming on the channel(s) to include trafficking of tapes and playback and the establishment and administration of all rules, regulations and procedures pertaining to the use and scheduling of the programming presented over the channel(s). The channels) shall be used for noncommercial, public, governmental or educational programming. In relation to the public access channel(s), Cox shall continue its current practices of providing studio facilities, equipment, trafficking of tapes, playback, for public access users in a quality and quantity generally consistent with that provided over the past franchise term. 4. City and Cox acknowledge that there are certain logistic and technical issues that remain unresolved as of the Effective Date due to the fact that two separate cable companies provide cable service in the City of Newport Beach and the City Hail main operation for PEG Channels) resides in the cable service area of another cable service provider. Cox agrees to work in good faith to resolve any logistic and technical issues to ensure seamless quality and continuity of PEG channel(s) access by the City's citizens including but not limited to: a. Allowing physical playout equipment and signal to remain at Cox's Rancho Santa Margarita facility or arranging for transfer of decks and racks in the City Hall area at a mutually agreeable location; b. Ensuring that signal transmission/reception mutual exchange across cable service boundaries is accomplished; and Cox -CNB Franchise Agreement Page 15 C. Ensuring continuation of transmission/reception across the two cable systems. B. A Grant in the amount of sixty dollars ($60.00) per Basic Service Tier subscriber ( "BST ") of Cox in the City as of the Effective Date ( "Threshold Subscribers ") shall be paid by Cox to be utilized for any capital or non - capital purposes (the "Initial Grant'). Said Initial Grant shall be paid by Cox within thirty (30) days of the Effective Date of this Agreement. C. On January 1, 2010, the City shall provide Cox with a list of newly constructed residential units which have been constructed in the City subsequent to the Effective Date, if any, (the "Construction List'). Within thirty (30) days of receipt of the Construction List, Cox shall determine and report in writing to the City the number of newly constructed units which are BST Subscribers as of that date (the "New Construction Subscriber List'). Cox shall also report to the City the number of BST Subscribers contained in the City other than those subscribers set forth on the New Construction Subscriber List (the "Continuing Subscribers "). Within ten (10) days thereafter, Cox shall pay to the City an additional grant (the "Additional Grant") equal to the number of New Construction Subscribers, less the difference between Threshold Subscribers and Continuing Subscribers times $30.00 per subscriber. D. City and Cox agree that said Initial Grant and Additional Grant are neither franchise fees nor offsettable against franchise fees, irrespective of how they are expended, for the purposes of the Cable Act. City shall waive normal permit fees, but not inspection fees, for residential dwelling units, constructed subsequent to the Effective Date in new subdivisions where Cox installs its cable television plant in otherwise open trenches along with other utilities at the time of new subdivision construction. Other than the waiver of normal permit fees as provided above, Cox will comply with all other City requirements. E. In the event any dedication to PEG Programming required by this Franchise is deemed by a legislative body, administrative body, or court of competent jurisdiction to constitute a payment which must or may be offset against the franchise fee, City hereby reserves the right, but is not required to do so, to terminate said program and /or requirement so as to provide the maximum allowable franchise fee. Cox shall not offset any charge, of any kind, against a franchise fee or other payment due City without prior written consent of City. Nothing in this Franchise is intended, and shall be so construed, to confer any third party beneficiary rights on any party(s), and no rights are created by this Agreement other than rights in City and Cox. 10. Governmental and Institutional Drop Policy, Provision of Live Local Insertion Locations. A. Drops to City Facilities. �u Cox -CN6 Franchise Agreement Page 16 Within one hundred eighty (180) days of written notice provided by the City, Cox shall provide, without charge, up to four (4) cable drops, as determined by City, for all levels and all tiers of Cable Service per building, excluding premiums and pay - per -view, a cable modem drop, and cable modem service (residential speed of up to 3 mbs) per drop for those buildings, institutions and facilities on Exhibit "A ", plus those buildings, institutions and facilities which are constructed subsequent to the Effective Date of this Franchise Agreement, as designated by City in writing. Except for a City Hall which shall be served irrespective of distance if it is located in the Service Area, existing or future, which Cox shall construct at its sole expense, drops to all buildings, institutions and facilities which are constructed subsequent to the Effective Date of this Franchise Agreement shall be limited to 250 feet from the closest point to Cox's distribution system. In the event that requested drops exceed said distance, Cox shall determine the incremental cost beyond said distance and the City shall pay such incremental costs to Cox upon completion of construction. Cox shall not impose programming or other charges for any additional outlets within said buildings. Installation and maintenance of interior wiring of said building(s) beyond the four (4) drops per building shall be the responsibility of the building owner, provided that if Cox is requested to install such wiring, it will do so within a reasonable time at its actual cost of labor and materials. B. Live Insertion Locations. Within one hundred eighty (180) days of written notice provided by the City, Cox shall provide live insertion points at the locations set forth on Exhibit `B" by way of fiber connection so that the City can insert and transmit audio, video, and digital programming from said site to Cox's headend for retransmission over one or more of the PEG Channels specified in Section 9(A) (collectively, the "Return Feeds "). The Return Feeds shall be constructed pursuant to technical standards mutually agreed upon by Cox and the City (the "Design Specifications "). The City shall possess no obligation to insert programming upon the Governmental Channel pursuant to Section 9(A) (3) until such time as the Return Feeds are constructed and activated pursuant to the Design Specifications. Within one hundred and twenty (120) days of the completion and activation of the Return Feed, any playback of local government programming or insertion of audio, data or other information on the Government Access channel shall be the sole responsibility of the City. I I . Services and Broad Categories of Video Programming. Cox should provide, at a minimum, the following broad categories of services and video progranuning: local broadcast, public affairs, satellite services, news, sports, cultural, foreign language programming, general entertainment, and children's. If any listed broad category of service or video programming shall become unavailable, or is commercially, impractical, or cannot be provided under existing FCC regulations, Cox should provide substitute programming of the same category if reasonably available. City may request Cox to cooperate with City in developing and distributing a printed PEG channel guide at 2O Cox -CNB Franchise Agreement Page 17 City's cost. Said printed guide shall be of a reasonable weight and size and could include, but is not limited to, a printed guide distributed through the bills, via direct mail, or included in local newspaper or Cox's printed guide, all at City's cost, if any, but shall not include advertising. If City requests Cox to distribute a printed guide through the bills, Cox shall comply so long as City produces said guide at its own cost for production and insertion and provides Cox sufficient advance notice and there is room for said guide in Cox's billing envelopes, and said guide does not take the place of other inserts desired by Cox. City shall have complete responsibility for the content of any information included in said guide. The payments by City referred to in this Section shall be limited to reimbursing Cox's actual incremental cost of providing and distributing the guide. 12. Minimum System Design and Capacity Requirements. A. Channel Capacity. The cable television system shall be constructed with hybrid fiber coax ( "HFC") architecture and engineered to deliver signals at forward frequencies up to and including a minimum bandwidth of seven hundred and fifty (750) megahertz (MHz) on the Residential Network. The System will be engineered to allow simultaneous downstream delivery of no less than one hundred ten (110) analog video channels and shall be constructed pursuant to the specifications and routing described herein. B. Interactive Capacity and Services. The cable television system shall be two -way activated in all of the distribution plant. C. Minimum Design Criteria. In addition to the requirements of Section 12(A) -(B) above, minimum system construction requirements shall be as follows: Cox shall at all times maintain equipment capable of providing standby power for the entirety of the cable system for a minimum of two hours. 2. Emergency Override System. a. Cox shall provide, install, activate, and maintain an emergency override system which includes audio override on all analog channels of Cox's system and character generated message capabilities on a designated channel, receivable only within the City. City shall be able to activate, provide audio programming, and terminate such emergency audio override via dial -up or dedicated telephone control upon system upgrade. City shall use the audio override and character generated system only in emergency situations, as declared by the City Council or the City 116 Cox -CNB Franchise Agreement Page 18 Manager when there is threat to the public welfare, health or safety. b. In addition to subsection (a) above, and in accordance with the provisions of FCC Rules and Regulations Part 11, Subpart D, Section 11.5(h)(1), and as such provisions may from time to time be amended, Cox shall install and maintain an Emergency Alert System (EAS). As allowed by FCC Order FCC 97 -338, Paragraph 33, Cox shall transmit all national, state, and local activations of the Federal EAS, utilizing the four -part message protocol specified in FCC Rules and Regulations Part 11, Subpart B, or successor protocols. This shall include such local and state -wide situations as may be designated to be an emergency by the Local Primary (LP), the State Primary (SP) and/or other authorities identified and defined within FCC Rules and Regulations, Part I I or the Local and State Plans provided for under those rules. 3. Cox shall provide subscribers, upon request, with a parental control locking device or digital code or other means that permits inhibiting the viewing of parental designated channels. 4. All new underground trunk and distribution cables shall be in conduit. 5. Minimum Technical Standards for Forward (Downstream) and Reverse (Upstream) Directions. The minimum technical standards shall be those adopted by the FCC from time to time. To the extent that no FCC standards exist, the standards shall be those FCC technical standards in effect on the Effective Date, or, if none, those established by City. 13. Universal Service. Cox shall design, construct and maintain the cable television system in such a manner as to pass by every existing single or multiple - family dwelling unit in the City and shall make the system available on an identical basis to all single or multiple family dwelling units constructed during the term of this Franchise. For new construction in residential and industrial areas, Cox shall make the system available at the, same time as the units, residential, or otherwise, are constructed. Nothing herein shall preclude Cox from providing service to multi - family dwellings and other residential developments on a discounted bulk - billing basis. 14. System Extension Policies. Description of Service Area(s). A. The service area shall constitute that portion of the City set forth on Exhibit "C" (the "Service Area "). P Cox -CNB Franchise Agreement Page 19 B. All subscribers, residential, or otherwise, within one hundred twenty -five (125) feet from the closest public right -of -way or easement, shall be provided service for the standard installation fee. Subscribers located beyond one hundred twenty - five (125) feet from the closest public right -of -way or easement will be connected upon the payment of Cox's time and materials for that portion of the installation which exceeds one hundred twenty -five (125) feet. 15. Provision of Service. Unless the subscriber requests otherwise, Cox shall deliver initial service within seven (7) business days after receipt of a subscriber order so long as the subscriber is within the existing Service Area. Service additions or deletions shall be made within twenty -four (24) hours of a subscriber request, unless additional terminal equipment is required, in which case Cox shall make such service change within seven (7) calendar days. Cox shall provide all subscribers, prior to the initiation of cable service and thereafter, with the ability to subscribe to only Basic Service. 16. Technical Standards Testing. A. Cox's cable television system shall be periodically tested by Cox, at Cox's sole expense, at the times, and pursuant to the procedures, described in the then applicable rules and regulations of the FCC or, if no such rules and regulations exist, in the manner prescribed in rules and regulations in effect on the Effective Date. B. Reimbursement of City Expenses. City shall bear all costs associated with its attendance, either directly or through an independent consultant, in the initial testing but not retesting procedure described herein except as provided below: Upon written request by the City and based on a pattern of customer complaints to the City regarding system performance, Cox shall measure and report to City the number of service complaints, which related to customer dissatisfaction with the quality of the picture excluding partial or total system outages. The number of said complaints over the first twelve (12) month period after the Effective Date shall be divided by twelve (12) and constitute the "base year average monthly subscriber complaints" for the purposes of this paragraph. 2. At the conclusion of said twelve (12) month period, Cox shall calculate and report to City monthly the number of subscriber complaints relating to the quality of the picture ( "Monthly Subscriber Complaints "). Said information shall be provided to City within fifteen (15) working days of the last day of each calendar month. 3. So long as Monthly Subscriber Complaints, as defined herein, remain within twenty percent (20 %) of the base year average monthly subscriber complaints, as defined herein, City shall bear all costs relating to its 3O Cox -CNB Franchise Agreement Page 20 participation in the technical standards testing process defined herein. However, if, for any given two (2) consecutive months or any three (3) nonconsecutive months in any six (6) month period, said Monthly Subscriber Complaints increase more than twenty percent (20 %) over the base year average Monthly Subscriber Complaints, Cox shall reimburse City for City's actual and reasonable cost of supervising and /or participating in the technical standards testing for a three (3) quarter period commencing upon the occurrence of the contingency(ies) provided herein if the unsupervised periodic testing, as defined herein, indicates that Cox's system during said period is operating in conformance with the technical performance standards provided by Section 12 hereof. Cox shall reimburse City for any and all costs incurred by it in monitoring Cox's technical standards testing for twelve (12) months subsequent to a determination by City that liquidated damages pursuant in Section 8(A)(2) may be imposed. 4. Subscriber Complaint Log. Cox shall maintain a written or computerized record of subscriber complaints, including: loss of signal requiring a field visit, non - receipt of programming or services ordered, billing disputes, missed appointments, unsatisfactory performance of maintenance, malfunctioning signal traps on blocked channels, and unresolved or chronic technical problems. Said record shall indicate: a. Date and time of Subscriber complaints; b. Street name of complainant; C. Nature of complaint; d. Cox's action(s) to resolve complaint; and e. Date(s) and time(s) actions(s) taken. Said record shall be kept at Cox's local office for a period of two (2) years. A copy of said Subscriber complaint record shall be submitted by Cox to City within ten (10) working days following receipt of a written request by City. 5. To the extent that Cox maintains and provides Subscriber complaint information consistent with the above requirements, it shall be deemed to have maintained and provided sufficient Subscriber complaint information as required by this paragraph. 17. Equipment in Rights of Way. A. Design and construction requirements, permit and other fees, public and customer notifications, requirements for public communication, and other oversight requirements by City imposed on Cox shall be consistent to the extent legally h� Cox -CNB Franchise Agreement Page 21 permissible and technically feasible, with those requirements imposed upon other users of the public rights -of -way and easements within the City. B. The Cable System shall be constructed or installed in the City only after the express written approval of the City and only at such locations and in such manner, design, and size as shall be approved by the City. In granting such approvals, the City shall exercise reasonable discretion in accordance with applicable law. Upon Cox's written request, City staff shall meet and confer with Cox in order to develop a process for expediting City processing and approval of proposed Cable System installation of multiple "like- kind" facilities. C. The Cable System shall be placed underground or where all other utilities are located in all areas which are subject to the provisions of the NBMC unless otherwise approved by the City Engineer. Such approval shall not unreasonably be withheld. D. All construction or maintenance work shall be conducted in a good and workmanlike manner consistent with industry standards. Installation of new facilities shall occur, whenever practical, concurrent with the installation of subdivision public improvements. E. Upon its receipt of reasonable advance notice, not to be less than five (5) business days, Cox shall, at its own expense, protect, support, temporarily disconnect, relocate in the Public Way, or remove from the Public Way, any property of Cox when lawfully required by City by reason of traffic conditions, public safety, street abandonment, freeway and street construction, change or establishment of street grade, installation of sewers, drains, gas or water pipes, or any other type of structures or improvements by the Franchising Authority; but, Cox shall in all cases have the right of abandonment of its property. 18. Franchise Term. The term of this franchise shall commence upon its approval by the City Council (the "Effective Date "), and shall expire on April 1, 2011. At Cox's written election filed with the City no later than January 1, 2010, Cox may extend the Initial Term by seven (7) additional years so that the Franchise will expire on April 1, 2018. 19. Most Favored Nations Review. A. At any time and at City's request, Cox shall provide information on any Cable Services not being provided in the City which are being provided on an operational basis in systems operated by Cox, or any affiliate thereof in the States of California, Arizona and Nevada (the "Comparison Systems "). For purposes of this section, "operational basis" means that Cox has offered a Cable Service to all Subscribers in the Comparison Systems for at least six (6) months, but does not include Cable Services that are offered on a trial or test basis to a limited number of subscribers. $1 Cox -CNB Franchise Agreement Page 22 B. If Cox is providing Cable Services on an operational basis in any Comparison Systems, City may require Cox, and Cox shall comply, to provide said Cable Service(s) within one (1) year of the City's written request, and to upgrade its Cable System, if necessary, to provide said Cable Service. Further, City shall reasonably consider not requiring such service based upon information supplied by Cox but, after considering said information, may still require the provision of these Cable Services. C. After the Effective Date of the Franchise, if Cox, or any affiliate, parent, or subsidiary thereof, enters into any renewal, franchise extension, of a franchise or a new franchise to provide cable television service to any city located within Orange County or the County of Orange itself, within thirty (30) days thereof, Cox shall provide to the City a copy of the Other Franchise. D. In the event that the City concludes that the Other Franchise contains terms, conditions or provisions regarding Public, Educational or Government access (the "PEG Access Provision "), including, without limitation, the financial support thereof) or Cable System Technology (i.e., channel capacity, services offered, etc.) (hereinafter the "Technology Provision "), as originally contained therein or as modified that are more favorable than those contained in the Franchise, when considering the Franchise and its requirements as a whole, then the City may, at its sole discretion, require Cox to provide the more favorable PEG Access Provision and the more favorable Technology Provision, or either of them; provided, however, (1) the City must notify Cox in writing of its election to require Cox to provide the more favorable provision within one hundred eighty (180) days of the City's receipt of the Other Franchise or the City shall be deemed to have irrevocably declined to impose such requirement; and (2) any requirement imposed pursuant to this paragraph of the Franchise to incorporate the more favorable PEG Access Provision and the Technology Provision, or either of them, shall also include, upon Cox's identification and request, the imposition of any and all other terms or conditions in the Other Franchise which are more favorable to Cox than those contained in the Franchise when considering the Franchise and its requirements as a whole, (by way of example, if the Other Franchise contains a franchise fee less than the franchise fee in the Franchise or has a term longer than the term of the Franchise, then the Franchise shall be modified to include such more favorable terms to the City at the same time that the Franchise is modified to include the more favorable PEG Access Provision or the more favorable Technology Provision). E. Cox shall provide the same Cable Services to customers in the City as it provides to customers in communities served off the same headend as of the date of this Agreement. In the event Cox deploys new or different Cable Services as a result of a Cable System upgrade in one or more of the communities served off the same headend as of the date of this Agreement, then Cox shall deploy those new or different services within 24 months to customers in the City provided however Cox may request an extension for good cause and the City may or may not in its discretion consent to the extension. 35 Cox -CNB Franchise Agreement Page 23 20. Construction Responsibility. Cox shall be responsible for the acts and omissions of its contractors, subcontractors and employees. Only authorized employees and/or agents of Cox shall apply for and be issued all necessary permits and building authorizations. Cox shall designate to City a construction manager who is an employee of Cox to be contacted regarding all cable construction issues. 21. Compliance with Construction Standards. Cox shall not construct any portion of its cable television system in City streets and rights -of -way without obtaining all necessary City building permits and paying in addition to, the franchise fee, all then applicable fees to the extent legally and practically feasible to be required of all users of the public rights -of -way and public utility easements and shall only construct said system in accordance with City standards for methods of construction in public rights -of -way. 22. Compliance with all Laws, City Orders and the NBMC. A. Cox shall at its own cost and expense comply with all statutes, ordinances, regulations and requirements of all governmental entities, including federal, state, county or municipal, whether now in force or hereinafter enacted. In addition, all work prepared by Cox shall conform to applicable City, county, state and federal laws, rules, regulations and permit requirements. B. Cox shall promptly comply with all lawful City orders, resolutions and the NBMC related to Cox's operation of the System, including all lawful rate orders. Failure to so comply shall be considered a breach of this Franchise and shall subject Cox to (1) all liquidated damages contained in this Franchise and the NBMC, and (2) all other actions, remedies and penalties available to City as a result of such failure to comply. C. In accepting this Franchise, the Company agrees that the commitments indicated in Section 9 above are voluntarily entered into and shall not be charged against any Franchise Fees due the City during the term of the Franchise. The Company agrees to meet all of the commitments of Section 9 above, through the term of the Franchise. 23. Performance Audits. City may require, at its option, that performance audits of the System be conducted every two (2) years by an independent technical consultant selected and employed by City at its sole expense to verify that the System complies with all technical standards and other specifications of the Franchise. 3µ Cox -C'N6 Franchise Agreement Page 24 24. Franchise Construction. This Franchise shall be construed according to the internal laws of the State of California and all federal laws of the United States. Any action brought relating thereto must be brought exclusively in the state or federal courts located in Orange County, California. 25. Notices. Any notice required to be given by this Agreement shall be presumed given five (5) days after deposit in the United States mail, properly addressed by certified mail and return receipt requested, as follows: To City: City Manager City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 With a COPY to: City Attorney City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 To Cox: Cox Com, Inc. Cox Communications Orange County 29947 Avenida de las Banderas Rancho Santa Margarita, CA 92688 Attn: Vice President, Government Affairs With a COPY to: CoxCom, Inc. Attn: Director, Government Affairs 1400 Lake Hearn Drive Atlanta, GA 30319 26. Pass - Through of Expenses. Cox will not separate out, line itemize, or surcharge the cost of the Initial Grants and the Additional Grants described in Section 9 or any other cost related to this Agreement (except the franchise fee) as a line item on City customer's cable bills. Additionally, Cox shall not impose rates and charges on subscribers which are higher for like -kind services or of packages of services than those imposed upon subscribers in any of the cities of Mission Viejo, Laguna Hills, Tustin, Rancho Santa Margarita, and Aliso Viejo. 15S Cos -CNB Franchise Agreement Page 25 27. Possessory Interest. By accepting this Franchise, Cox acknowledges that notice is and was hereby given to Cox pursuant to California Revenue and Taxation Code Section 107.6 that use or occupancy of any public property pursuant to the authorization herein set forth may create a possessory interest which may be subject to the payment of property taxes levied upon such interest. Cox shall be solely liable for, and shall pay and discharge prior to delinquency, any and all possessory interest taxes or other taxes levied against Cox's right to possession, occupancy or use of any public property pursuant to any right of possession, occupancy or use created by this Franchise. Cox shall not be barred from challenging such try on any amounts assessed pursuant thereto. 28. Rates. City may, without amendment of this Franchise, regulate Cox's rates, charges, and prices to the maximum extent permitted by law. 29. Force Majeure. In the event Cox's performance of any of the terms, conditions, obligations or requirements of this Franchise is prevented or impaired due to any cause beyond its reasonable control and not reasonably foreseeable, such inability to perform shall be deemed to be excused, and no penalties or sanctions shall be imposed as a result thereof. Such causes beyond Cox's reasonable control and not reasonably foreseeable shall include, but not be limited to, any acts of God, civil emergencies, labor unrest, strikes, inability to obtain access to an individual's property and any inability of Cox to secure all necessary permissions or permits to utilize necessary poles or conduits so long as Cox utilizes due diligence to timely obtain said permissions or permits. 30. Meet and Confer. Prior to exercising any rights of audit or inspection upon Cox pursuant to Chapter 5.44 of the NBMC, City and Cox shall reasonably attempt to meet and confer to achieve voluntary compliance. 31. Interpretation. The terms of this Franchise shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of the Franchise or any other rule of construction which might otherwise apply. 32. Successors and Assigns. All provisions of this Agreement shall apply to any lawful successors and assigns. 3b Cox -CNi Franchise Agreement Page 26 33. Severability. If any provision of this Agreement or the application of such provision to any circumstance is rendered unconstitutional or otherwise invalid by any law, ordinance, regulation or court of competent jurisdiction, the remainder of this Agreement or the application of the provision to other circumstances, shall not be affected thereby. 34. Riehts Cumulative. The rights and remedies of the parties pursuant to this Franchise are cumulative, except as otherwise provided in this Franchise, and shall be in addition to and not in derogation of any other rights or remedies which the parties may have with respect to the subject matter of this Franchise. 35. No Waiver. A waiver of any right or remedy by a party at any one time shall not affect the exercise of said right or remedy or any other right or other remedy by such party at any other time. The failure of the City to take any action in the event of a material breach by Cox shall not be construed or otherwise be deemed to constitute a waiver of the right of the City to take such action at any other time in the event that said material breach has not been cured, or with respect to any other material breach by Cox. 36. Declaration of Invalidity. In the event that, after the Effective Date of this Franchise, any court, agency, commission, legislative body, or other authority of competent jurisdiction: (A) declares that this Franchise is invalid, in whole or in part; or (B) requires Cox either to: (1) perform any act which is inconsistent with any provision of this Franchise or (2) cease performing any act required by any provision of this Franchise, City shall reasonably determine whether said declaration or requirement has a material and adverse effect on this Franchise. When Cox intends to exercise its rights pursuant to such declaration or requirement, Cox shall so notify the City Manager's Office of said declaration or requirement. If the City determines that said declaration or requirement does have a material and adverse effect on this Franchise, then Cox shall then enter into good faith negotiations with the City to amend this Franchise to eliminate any inconsistency or conflict between said declaration or requirement and the provisions of this Franchise and to meet the original intent of the parties as the circumstances warrant. 37, Time of the Essence; Maintenance of Records. In determining whether Cox has substantially complied with the Franchise, the City and Cox agree that time is of the essence. As a result, Cox's failure to complete construction, extend service, seek approval of transfers, or provide information in a timely manner shall constitute substantial breaches of material terms of the Franchise. Maintenance of records and provision of reports in accordance with the Franchise is also an essential part of this Franchise Agreement. V Cox -CNB Franchise Agreement Page 27 38. Exhibits. Exhibits "A" through "C" are an integral part of this Agreement and these Exhibits are incorporated herein by reference. All references to this Agreement shall include all Exhibits. In recognition of the obligations stated in this Agreement, the parties have executed this Agreement on the date indicated above. APPROVED AS TO FORM: Aaron C. Harp, Assistant City Attorney for the City of Newport Beach ATTEST: C LaVonne Harkless, City Clerk CITY OF NEWPORT BEACH: A Municipal Corporation Don Webb, Mayor for the City of Newport Beach COXCOM, INCORPORATED A Delaware corporation dba Cox Communications Orange County By:_ Title: (Corporate Officer) Print Name: By: (Financial Officer) Title: Print Name: -0 Cox -CN Franchise Agreement Page 28 I�:ffi:3Y�1 Drops to City Public Buildings, Institutions and Facilities 1. Central Library — 1000 Avocado Avenue 2. Police Department — 870 Santa Barbara Drive 3. Fire Station 3 — 868 Santa Barbara Drive 4. Fire Station 5 /Corona del Mar Library — 410 & 420 Marigold Avenue 5. Fire Station 8 — 6502 Ridge Park Road 6. Big Canyon Reservoir— 3300 Pacific View Drive 7. Oasis Senior Center — 800 Marguerite Avenue. 8. Grant Howald Park/Community Youth Center - 3000 Fifth Avenue 9. Newport Coast Community Center —NP Coast Drive & San Joaquin Rd 10. Between the Police Facility and Newport Coast Fire Station 11. Andersen Elementary — 1900 Port Seaboume Way �h Cox -CNB Franchise Agreement Page 29 EXHIBIT B Live Local Insertion Locations 1. Police Department Emergency Operations Center 2. Central Library Friends Meeting Room 3. Oasis Senior Center Community Meeting Room 4. Newport Coast Community Center Meeting Room ao Cox -CN6 Franchise Agreement Page 30 EXHIBIT C Cox Service Area s Cable TV Franchise Areas'•, 4 City f Ne port & h _..... ._.. ... /. t e �1 k i S•e n r •, -•rh ffl�x /y w r'`'>t f i "" X 2 L:.r� ' SAS ONt y � v� * � �itr�,� �tth'�3� •u'�rii� �S+j"r n t c ci em,m� ! r` t! �} 1 „�'�Ss# kw,�l9Cispa. {�'�t+g�?,'1 tl[hn t�'sE )'4a'yh�eX Lti�j! {�!y41er4(�; m �SM �rp�, �� l��f i'e � �i''°i•C , tR t a� CITY OF NEWPORT BEACH COUNCitEDA CITY COUNCIL STAFF REPORT 1� % -as 0(;- Agenda Item No. S16 July 11, 2006 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, Assistant City Manager 949/644 -3002 or dkiff @city.newport- beach.ca.us SUBJECT: CABLE TELEVISION: RESOLUTION NO. 2006- EXPRESSING THE CITY'S INTENT TO ADOPT A FRANCHISE AGREEMENT WITH COX COMMUNICATIONS ISSUE Should the City prepare to adopt a Franchise Agreement with Cox Communications? RECOMMENDATION: 1 ? Adopt Resolution No. 2006 - expressing the City's intent to adopt a Cable Communications Franchise Agreement with Cox Communications during a public hearing. DISCUSSION: The City Charter (Section 1301 - see below) directs us to notice and conduct a public hearing in advance of considering a new franchise. Because City staff intends to bring to Council a draft Cable Communications Franchise Agreement (and its related ordinance) with Cox Communications on July 25°i, the action proposed in this staff report meets the requirements of Section 3101 relating to a Resolution of Intention for the public hearing. Section 1301. Resolution oflntention. Notice and Pub lic Hearing. Before granting any franchise, the City Council shall pass a resolution declaring its intention to grant the same, stating the name of the proposed grantee, the character of the franchise and the terms and conditions upon which it is proposed to be granted. Such resolution shall fix and set forth the day, hour and place when and where any persons haying any interest therein or any objection to the granting thereof may appear before the City Council and be heard thereon. It shall direct the City Clerk to publish said resolution at least once, within fifteen days of the passage thereof, in the official newspaper. Said notice shall be published at least ten days prior to the date of heanng . At the time set for the hearing the City Council shall proceed to hear and pass upon all protests and its decision thereon shall be Erna/ and conclusive. Thereafter it may by ordinance grant the franchise on the terms and conditions specified in the resolution of Resolution of Intent— Cable Franchise Agreement July 11, 2006 Page 2 intention to grant the same, subject to the right of referendum of the people, or it may deny the same if the City Council shall determine that changes should be made in the terms and conditions upon which the franchise is proposed to be granted, a new resolution of intention shall be adopted and like proceedings had thereon. Committee Action: None. Public Notice: This agenda item may be noticed according to the Brown Act (72 hours in advance of the public meeting at which the City Council considers the item). Submitted by: — 1��- (46 Dave Kiff Assistant City Manager Attachments: Resolution 2006- Resolution of Intent— Cable Franchise Agreement July 11, 2006 Page 3 RESOLUTION NO. 2006- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH DECLARING ITS INTENTION TO CONDUCT A PUBLIC HEARING TO CONSIDER THE GRANTING OF A NON - EXCLUSIVE CABLE SYSTEM FRANCHISE TO COXCOM INCORPORATED WHEREAS, the City Council finds and determines that providing cable service within the City is a vital public service and is a matter of great public concern because cable providers use the public right -of -way, provide Public, Educational, and Governmental ( "PEG ") access within the franchise area, and collect personal information regarding subscribers creating a need to protect the rights of subscribers; and, WHEREAS, non - exclusive franchises for use of the public right -of -way to provide cable services will promote the public health, safety, and welfare by promoting permanence and stability among those businesses wishing to provide such service and l accountability to the City for compliance with current and future state and federal 1 mandates; and, WHEREAS, pursuant to Article XIII of the City Charter and pursuant to Newport Beach Municipal Code section 5.44.030, the City is authorized to grant a franchise to provide cable service with private cable service providers; and, WHEREAS, CoxCom Incorporated ( "Cox") has requested a non - exclusive franchise to provide cable service. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: A public hearing shall be conducted on July 25, 2006, at 7:00 p.m., or as soon thereafter as practical, in the City Council Chambers, 3300 Newport Boulevard, Newport Beach, California, to consider the granting of a franchise to Cox pursuant to the following terns and conditions: a. Franchise effective date: The franchise will be effective upon approval of the City Council. b. Franchise fee: Five percent (5 %) of gross annual revenue. Resolution of Intent— Cable Franchise Agreement July 11, 2006 Page 4 c. Grant: Sixty dollars ($60.00) per basic service tier subscriber of Cox in the City as of the effective date with an additional grant of thirty dollars ($30.00) per basic tier subscriber located in newly constructed units as of January 1, 2010. d. Term of Franchise: From the effective date to April 11, 2011 with an option to extend the initial term for seven (7) years to April 1, 2018. e. PEG access: Three (3) PEG channels with the option to increase the number of channels up to five (5) PEG channels depending upon demand. f. Letter of credit: Seventeen dollars and twenty five cents ($17.25) per subscriber, but not less than one hundred thousand dollars ($100,000.00). g. Laws: Franchisee shall comply with all State, Federal laws and regulations, terms and conditions of the franchise agreement, and City Charter and Municipal Code. Section 2: The City proposes to offer a non - exclusive cable service franchise to Cox which is presently licensed and permitted to conduct business in the City. Persons who have an interest in or objection to the proposed franchise may appear before the City Council and be heard on the date and time listed above. Section 3: This Resolution of Intention shall be published in the City's official newspaper within fifteen (15) days of its adoption and at least ten (10) days prior to July 25, 2006. ADOPTED this day of 200_ Don Webb, Mayor ATTEST: LaVonne Harkless, City Clerk