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HomeMy WebLinkAboutStaff Report 136-08City of Palo Alto City Manager’s Repor TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES DATE:FEBRUARY 11, 2008 CMR: 136:08 SUBJECT:STATUS OF AT&T’S CARRIAGE OF PUBLIC, EDUCATION AND GOVERNMENT ACCESS CHANNELS This is an informational report and no Council action is required. BACKGROUND In 1983, the cites of Palo Alto, Menlo Park, East Palo Alto, the Town of Atherton and portions of San Mateo and Santa Clara counties entered into a Joint Powers Agreement (JPA) for the purpose of obtaining cable television ser,,ice within these jurisdictions. The JPA gives Palo Alto the sole authority to administer the cable franchise process on behalf of its members. On September 29, 2006, the Digital Infrastructure and Video Competition Act of 2006 (DIVCA) was signed into law. The purpose of DIVCA is to create a streamlined process for granting cable or video service franchises to promote broadband deployment, increased competition and expanded customer choice. Under DIVCA, franchises are granted by the California Public Utilities Commission (Commission) rather than by local franchising entities. AT&T obtained a state video franchise from the Commission in March 2007 and has begun to offer service in East Palo Alto. AT&T expects to begin providing service in Palo Alto in mid-2008. Although promoting competition and broadband deployment are among DIVCA’s primary objectives, DIVCA also contains several provisions specifically designed to preserve and protect the continued provision, quality, functionality and accessibility of local Public, Education and Government (PEG) access channels, such as those provided to JPA residents. CMR: t36:08 Page 1 of 4 On July 30, 2007, staff provided Council with an informational report on the status of AT&T’s deployment in Palo Alto (CMR:324:07). In that report, staff detailed its concerns regarding AT&T’s plans for carriage of the JPA’s PEG access channels. The pro-pose of this report is to provide the Council with an update on the issues that have arisen regarding AT&T’s approach to carriage of the PEG charnels. DISCUSSION AT&T’s method and format for delivering PEG access channels to subscribers is quite different from that of Comcast (the JPA’s incumbent cable operator) and from the PEG delivery methods of traditional cable operators. The PEG channels on AT&T’s system will be delivered as an Internet-based video stream, instead of as a dedicated video channel like its other basic service tier channels. This different treatment of PEG channels led to some concern by staff as to whether AT&T’s PEG solution was consistent with the PEG provisions of DIVCA. Staff feared that AT&T’s approach to PEG cham~el caniage would render the JPA’s PEG channels inferior (and not otherwise equivalent) to other video channels on AT&T’s system in terms of signal quality, functionality and accessibility to JPA residents. In mid-2007, staff and JPA representatives began a series of meetings and correspondence with AT&T on this subject. Subsequently, staff and JPA representatives attended demonstrations by AT&T of its PEG product at AT&T’s offices in San Ramon. These efforts failed to dispel staffs concerns about the adequacy of AT&T’s planned method of delivering PEG channels. On November 29, 2007, the JPA sent a letter to AT&T (Attachment A) summarizing its concerns, as follows: The JPA’s cun’ent PEG channels are located on channels 26, 27, 28, 29, 30, 75 and 76. DIVCA requires that, to the extent feasible, AT&T must not separate PEG channels froln other basic se~wice tier channels and must keep them on the same channel numbers as Comcast. Yet AT&T plans to move all of the JPA’s PEG channels (along with all other Bay Area PEG channels) to channel 99. Moreover, the JPA’s PEG channels will be retrievable only after the subscriber goes through several menus and submenus after reaching channel 99. DIVCA requires that each PEG channel be capable of can’ying a standard television signal. AT&T’s method of transforming all PEG channels into Internet video streaming, however, means that PEG channels will have 75 percent less data, and thus picture and resolution, than all other basic seradce tier channels provided by AT&T (or Comcast). Moreover, when originally accessed, PEG channels will be reduced to one-quarter of the screen size of all other basic tier channels. (The subscriber may enlarge the PEG channel by selecting the zoom option, but that would exacerbate the inferior picture resolution of the PEG channel.) DIVCA requires that PEG capacib~ must be of ~similar quality and functionality to that offered" by commercial channels on the basic tier. CMR: 136:08 Page 2 of 4 On AT&T’s system, PEG channels will be quite dissimilar from, and inferior to, all other basic channels provided by AT&T (or Comcast) in both quality and functionality. Among the deficiencies are inferior picture quality, latency of as much as a minute or more in retrieving a PEG channel tt~rough the channel 99 menus and submenus and the lack of many functions that are available on other channels provided by AT&T (or Comcast) and that subscribers have come to expect, including closed captioning, DVR capability, "last channel" capability, ~favorite" channel capability and picture-in-picture capability. DIVCA requires that AT&T must comply with the local emergency alert requirements of the Comcast franchise until the Comcast franchise would have expired (July 2010). Whether AT&T can comply is unclear, as it has recently asked the FCC for waiver of the FCC’s rules concerning the emergency alert system ("EAS"), because AT&T’s U-Verse system is not yet capable of delivering state or local emergency alerts. On December 21,2007, AT&T responded to the November 29 letter (Attaclm~ent B). AT&T takes the position that it is fully compliant with DIVCA. For the most part, AT&T does not dispute the differences and shortcomings of its carriage of PEG channels identified in the JPA’s November 29 letter. Instead, AT&T argues that these shortcomings do not mean that its PEG offering is not "similar" to its commercial channel offerings. AT&T also states that DIVCA requires compliance only to the extent feasible. AT&T asserts that it would be infeasible to replicate the cable PEG experience without significantly reengineering its network. To reengineer its network for PEG would be very expensive and would delay its ability to offer competitive video services. A key premise of AT&T’s response is that it believes the fact that its system enables JPA subscribers to retrieve any PEG channel in the entire Bay Area offsets the perceived inferior channel quality, functionality and accessibility that JPA subscribers will suffer in retrieving and viewing their own local JPA PEG channels. Staff does not share that view. By their nature, PEG channels are !ocal. Staff does not believe a JPA subscriber would prefer to sacrifice accessibility, quality and functionality in return for being able to access PEG access channels from, for example, San Jose or Oaldand. AT&T’s December 21st response does not alleviate staff s concerns about the many serious shortcomings of AT&T’s proposed carriage of the JPA’s PEG channels. Staff will evaluate the City’s options in response to AT&T’s PEG plan and report to Council on any developments. PREPARED BY: MELISSA CAVALLO Cable Coordinator CMR: 136:08 Page 3 of 4 DEPARTMENT HEAD APPROVAL: LALO PEREZ Director, Administrative Services CITY MANAGER APPROVAL: EMILY HARRISON Assistant City Manager ATTACHMENTS: Attachment A:November 29, 2007 Letter to AT&T Attaclvnent B:December 21, 2007 AT&T Response CMR: 136:08 Page 4 of 4 November ATTACHMENT A Divisions Admmist-rafion 650.329.2692 6ff0.SZ3.1741 [~x Budget 630.329.2260 630.323.1741 h’~mu’mation "IYedmnolo~, 650.329.2182 e~v.o~ .,~109 f~, Rea! Estate 6=~ 3~a ~%4 650.323.!741 f~x Purchasing~w.;..~9.22,, 1 65<,.3292 L~K~8 fax ~nves~ents 650.329.2362 650.323.8.3~6 fax Revenue Collections 650.320,2.317 650.617.3122 fax Parking Citations ~ettFe J. Sat<on; Ed.D. Central Coast ~’,eg.ien 40! VJ. Frap2iin St. Montere7, CA 93940 Subject: T_ write on behalf of the City of Palo Alto and the six-member cable television Joint Powers Authority (WPA’) concerning the manta_or of AT&T’s planmed deliver). of the .TPA’s puonc, ~ eeoc<< programming, a franchise emergency oveside information to subscribers, and <to apparent conflicts between that deliver7 and ~he requirements of the C~itbrnia Dfgita! infrastructure and Video Compethion Ac~ o5 2006 ("DIVCA’) and other applicable !aws or rules. As you Mn_ow, the SPA has previouslF sent you correspondence on these matters. Specifically, on June 13; I sent .You a letter, setting forth the JPA’s concerns that AT&T’s PEG implementation p!an appeared to fail to comply with DIVCA in several respects, including the PEG chaFme! number and replacement requirements of Public Utilities Code Section 5870(b), the PEG signal quality and ~nctionalh7 requirements o~ Section 5870(g)(J), and t~e ~ I S<-ce~ao~e ~’~-r= -~ believed its PEG implementation was consistent wltk DiVCA. To date. we have vet to receive any such written explanation. ,<.o,~s~.:_ . z, T_ wrote you.. . a=~,. __.~_~..._r~-~m ~ u~ ZPA’s cw~ .....~r_~t AT&T~ _ ~O FCC rules ~,~,,.~r~a u_e ctuse,_~-ccp~untng 0ohm~ti0~.b Oi ,-~I= 0oeratOT5 anu o<£¢r mulfichammel video programming distributors. with soy-based inks on 100% recycled paper ~rocessed without chlorine RO. Box 10250 Polo Alto, CA 94303 Aier I ~.-.t the Au£us~ 2 laker, v,;,.~ req~o~@~4 by. ..... : ..... on August 03 s~ confersnce call ’ ~ ...... ’ ~ ~-T ’ ~-, ¯ " September 6. ~PA representatives ~ ..... demonstration in San Ramon. % nne we c~K=~i, :: t~,. the .August ~ co.~=~. ~,~e-+%, ...... ~,~ and the Se>tember 6 demonstration. -=:~e in any. diminution or ahevmdon o~ the ]PA’s concerns about v,,,:~c,:~r"~-~’~-~ AT&T’s PEG Na~,< cem~,~,ed w~m D~VC i or od~ anN~b~ law. }~oreover. nenner occasion resulted in any explanation £rom AT&T as to no ~,~ its PEG plan was cons:sieur with th,~<e ~ ~ " I v,.Tote a thh’d letter to you on beha!f of the .~PA on September 12. That letter informed you of our view that the September 6 demonstration did not satisfy the JPA’s concerns about whether AT&T’s PEG implementation plan satisfied the requirements of DIVCA and other_ applicable taws and.~,:~.r"~ In aamc~on,’ "~" the laker pointed out that AT&T’s PEG system created substantial mobs~ms ~or the fPA’s De ,~_za College educational access chamnel, because AT&T’s system would not pass t~-ough the dosed-captioning that De ~,za by Ca!ifomia law is required to include in ks progrmmming, and because the reduced fo~.at and lack ofDVR capg~i!iD associated with AT&T’s PEG plan would render De .~a’ s programming of li~le or no use ~o its student viewers. The September !2 letter, therefore, requested thsx AT&T continue to work with De A~a College to ensure that De Anza’s >ro~min~ is camea by AT&T a._d to provide a proeosed timetable for -~ ~ :- - De Asians closed capioninz and other concerns. To date: the ]PA’s requests to AT&T concemin8 the De Asia channel have 8one unanswered. Although AT&T has not responded, in "~-iting, to my September t 2 letter, it did invite ]PA representatives to a~end a demonstration of AT&T’s caKiage of the JPA:s PEG channels in San Ramon on October ! 8. I, along with other ~rPA representatives, aKended that demonstration, and we appreciate AT&T’s hospitality in holding the demonstration. The October 18 demonstration did not.. however, allay the 7PA’s concerns that AT&T’s PEG imNementation may be ’ ~: *~ __~ncon~lstem with DIVCA and other apphca~:e rules or laws. To the contrary, it tended to co~irm those cone ....s On October 25. I e-mailed Tedi Vriheas of AT&T, setting. ±%rth the Emergency Alan System ("EAS") requirements of Palo A!to’s recent!y-adopted DIVCA implementation ordinance, Palo A!to Municipal Code ("P.A.M.C.’) § 2.11.110, and requesting continuation that AT&T’s video system will comply with those requirements. To date, I have received no response to my request from_ AT&T. Based on AT&T’s demonstrations and its lack of response to man)" of our =_’I,~qUe~LS, we can only conclude that AT&T% PEG and franchise emergency override Setrve .i. Ssxon... Ed.D. November 29.. 2007 implementation plans appear to fai! ~.o comply wi:h DiVCA in at leas: the tbilov,,’ing dif±%rent and independent ways: Channel Placement. The AT&T proposal uses a scheme of locating a!l PEG cha~mels beneath several menus and submenus on chanmel 99 using a media browser pla~%~, se~re~atin~ PEO cnsnmels imo a conten~ ~ea ~omHy separate ~rom ai! *~ " chanmels. The ;PA’s PEO chanme!s would not have ~he same designations as ~he7 do on ~he incumbent cable operatoffs system (charnels 26~ 27, 28~ 29~ 30, 7~ and 76). AT&T~s cu~ent channel 99 PEO ch~-mel placemen~ scheme does no~ appear issue of~ec!mical feasibiliT, b~ raier it is apparera!7 a business decision. There is no ~ecFmical reason why PEO ch~meis could no~ be ~reated in the same mamuer commercial broadcas~ chamuels, other ~han ~ha~ ~o do so mi~h~ leave AT&T STS~em design wii less b~dwid~h than AT&T would Iike to have non-video pu~oses. We believe that AT&T~s PEO model, which may have been consistent with the taw of anoier smt< appears ~o be out of compliance wi~h requiremems of DiVCA ~ud wil! require modification in order io be comp!ain~. Non-NTSC Complaint. Public Utilities Code § 5870(b) also requires that., when -~’- ~ u ~,=m.R~,~.s **; ,~’~ PEG channd .... ~: m~ holder of a storewide 9anchise must ensure tau ’Each "’cnanne~ sna~ be capable of carryi:~g a ~:iona~ Television ~vstem Committee (~;TSC) tdevision signaE’ Industry best practices and SMPTE define the digita! effaivalen~ of an NTSC standard video ~n~l as 648 x6~ ~486 (with sync and data lines eliminated). The standard viewable NTSC si~nai has 314,928 pixels, while AT&T’s proposal would only have 76,800 pixe!s for PEG ch~_els. This means that 75% of the PEG video si~nat would be discarded by AT&T’s transmission scheme. No amount of set-top "up- conversion" can compensate for such a drastic reduction 0£ original in%~mtion once it has been discarded. Additionally, an NTSC television siena! carnies both closed-captioning and secondary attdio (SAP) content. The AT&T PEG proposal discards this in£o~mion and has no provision to include it in the PEG chamue!s sent to subscribers. Siznal QualiU and Channel Functionati~. Public Utilities Code § 5870(g)(3) requires: "The PEG access capad~’provided shall be of simi!ar c/ua!iry andi%nctfonafio.~ 1o that qT]~%red by commercial char, nels on the ~..m,.~ ~. ~or the reasons stated in the ~Non-NYSC Comonan~ secuon above., a 7~%_, reducion in pr~compression PEG ch~r, el_. __ video inSom~.ation cannot be ot~r. ~_ commercial video cha~m_els on AT&T’s system will and functionalities ~’"ma~ PEG ch~mn~ do not: PEG channe!s are neither, available in the ,~-.~n...~ :ero~ram~ s~-’. d~_. ~ nor are the}.." Individual programs caKied on PEG charme!s are not listed in AT&T’s U-Verse system progra~m guide. PEG charnels cannot be recorded using DVR capability. PEG chamuels cannot be programmued into subscribers; cha.~me! "favorites:’ on theirr~.mo~.s, ~ ~ nor will subscribers be able to return to PEG ch~meis prompdy via ~;last ch~meF; capability on their remotes. o Other standard U-Verse features, such as picture-in-picture and page-dov~.w~ ±orruncuonan~:, are not supposed ~" PEG chamue!s. Unlike the case with local broadcast chamue!s and other comrnercia! video charmels on AT&T:s system, subscribers c~mnot enter individual chanmd numbers in their remoras to access any PEG chanmsi. Instead, they must go to chapmel 99 and so~ tMough several menus rand subm_enus to find a pa~icul~r PEG chanmd. Moreover, the latency involwd in loading channel 99 and thereafter retrieving and so~ing tMough the PEG mmnus ~.d submenus is significm~t - ~n)-whsrs from a minimum of over 25 seconds up to wel! over a minute, d~p~nding on how ~st A~&Y’s program_ is running at the throe and/or how adept and tech-savvy the subscriber is. And the subscriber must endure this latency. ~ud menu-surnng~ ever) time he or she ~-~s to access a PEG channel. In addition, this already significant latency will only become wors~ I ~ r~’when, as we un~e_~tand, all of the Bay Area DMA PEG cha~me!s are added to the channel 99 menu. ~urthe~_ore, once the subscriber $inally succeeds in accessing the P~G chasmel, he or she must take yet another step - selecting the zoom ~unction - to m~e a PEG channe~ ~1! the ~V screen as broadcast channels do. (In dofn8 so, the P~G signa! quality will suffer for the reasons stated in the ~Non-NTSC Compliant" section above.) In sum, in vi~zuaily every way imaginable; 9ore signal quaii<F to £nctiona!itv to accessibility, subscribers: experience in retievinS and <towing the 7PA’s c],~anne!s on ATAT’s system wil! bs <u}~<~~-¢{~Uv diffsrs~t ~%om. and far interior their ....: ....in " *’;~,:~ ’ ,’;=v~,~ !,-~c~! ~ ....~"~+ ~tz~o~ and eth~r comm_ercia! video chznmels on AT&T’s system. DiVCA Emsrzsncy Override Obligations° Public Utilities Code § 5,~$0 provides: "A~k’provisio:4 f~ a Zoc~df>, cmthorizi~g Zocn[ entities ro provid~ foca! emergency no@?cations ... ~olders ~f a smte-issz~ed y?a~ckise i~ the sarqe ZocaZ crecy, for ~he durario~ Janitor7 1, 2009, w/hichever is ~ater." Comcast’s i?mnchise, which is scheduled to expire July 25, 20 i 0, has such ~n emergency ove~ide provision~ and thus P.A.~’!.C. ¯ 2.11.110 inco~orates mat D!%’ CA obligation and imposes k on state ~razcmse holders like AT&T until Ju!y 25, 2010. We are aware that AT&T recently filed with the FCC a Petition for Limited Waiver of the FCC’s EAS rules with respect to AT&T’s U-Verse mukichanmel video service. That waiver request, however, does not absolve AT&T of its emergency franchise ove=ide ob!igations under Public Utiiities Code § 5880 and P.A.M.C. § 2. I 1. ! i0, got several reasons. First, the FCC has ruled that its EAS rules do not preempt local franchise emergency override requirements.~- Second, the FCC’s EAS rules require cable operators and other wireiine video serdce providers to provide state and !oca! EAS capability, 47 C.F.R. § ! 1.2!, yet at least based on AT&T’s Waiver Petition, it is on!y working to have federal government EAS capability, not state or local EAS capability. Third, at least as described in its \Vaiver Petition, AT&T’s planned EAS capability does not appear to be able ~o distribute local emergency a!ens. And fourth, again, at least as described in its Waiver Petition, AT&T wii! not even offer override capability on many of the cha~mels on its system, including PEG charmeis, until some later date. While the JPA certainly looks forward to the Ir_ultichanme! video competition that AT&T intends to bring to JPA area residents, we camnot accept that AT&T:s _~,.,.ra~,.-cl~s~*~ g~ ~- treatment of the JPA’s PEG chapme!s, and its aoparent, failure to provide !oca! EAS capability, are a price that shou!d be paid, or which DIVCA pe**m~ to oe paid, for that compefftion. It is ore reluctant, but definite an~ ineluctable, conclusion that AT&T’s PEG and EAS implementation do not complF with DiVCA. ~Emergenc2 Broadcast 5yste~r,, Second Report and Order, 12 FCC Rcd 1~50~, 15520 (1 o~3 Bettye J. Saxon, :_:d.D. Pase 6 November 29,200.~ The JPA: ~herefor% requests that AT&T i~ediately t~<e whatever steps ~. ~p ~-.necessary ~o make ks PEG and EAS delivery in ~.~ _~ ~ sea come mzo cormhance wkh DIVCA ~nd o<her applicable rules and !aw, and [o keep <he ]PA apprised of AT~T:s p~os~s. ...... ~o ~he exten~ ~h~ ATAT disagrees wi~h any c,~" our ~onc~u~o~ .... ~nd believes i~s PEG or .... ~&~ impiemen~a~ion, in ihe. ]~&_ _ ~rea commies w:’~’u~ D~%r and all o[her applicable rules ~]d law: ~he ]PA requeszs ~ha~ AT~ promptly provide ihe ]PA wiih ~ de[aiied wrkien expianaiion of i!s poskion and ie }acma~ and reasonin8 ~enmd k. IfAT~T f@ils io @o so, ihe YPA wi!! have no "~ ~-,= bu~ oonsider ks ]e8~l options [o compel A~T to come into compii~nce with DIVCA other ~pplic~ble hws ~nd rules. I look ~brward to your prompt and complete response. Sincerely~ Mehssa Cavallo Joint Powers Authority Cable Coordinator Scott J. Alexander Director, AT&T - Municipal ASairs PPA Members Ed Breault Bob Drewes Amie Folger M~y Kahn Grant Koliing C~s Pearce Lalo Perez David Ramberg Carl Yeats Michael A. Rodriguez Senior Vice President and Associate General Counsel ATTACHMENT B AT&T West 2600 Camino Ramon Room 4CS100 San Ramon, CA 94583 T: 925-543.1567 F: 925-355.1423 michaei.rodriguez@ art.corn Melissa Cavallo Joint Powers Authority Cable Coordinator City of Palo Alto 250 Hamilton Avenue, Mezzanine Floor Palo Alto, CA 94301 December 21, 2007. Dear Ms. Cavallo: Ms. Bettye J. Saxton forwarded your letter of November 29, 2007. In that letter; you suggest that AT&T California’s plan for public education and government ("PEG") carriage does not comply with the requirements of the Digital Infrastructure and Video Competition Act of 2006 ("DIVCA") regarding channe! placement, NTSC, signal quality and channel functionality. You also suggest that AT&T’s franchise emergency override implementation plan fails to comply with DIVCA at the present time. For the reasons set forth herein, AT&T California disa~ees with your conclusion that AT&T California’s Internet-sourced PEG Product and emergency override implementation plan may violate the law. t DIVCA envisions competitive providers will use a variety of technological choices to provide video sen,ice. Specifically, to promote competition, the statewide franchising process is designed to "allow[] market participants to use their networks and systems to provide video, voice, and broadband service." §5810(a)(1)(C). Thus, DIVCA presupposes that statewide franchise holders will put their existing networks to new uses. The Act recognizes that the networks of new video service providers developed differently from those of incumbent cable operators, and that new entrants’ provision of PEG pro~amming may not be identical to what is provided by cable. AT&T is a new entrant and our PEG Product is different from traditional cable PEG products. AT&T has designed a PEG Product that distributes PEG content to its viewers over a much larger geo~aphical reNon than does a traditional cable system. But with this new design and the supporting technology comes a different presentation of the ~ While AT&T California submits this written response to your letter of November 29, 2007, this is obviously not the first time that AT&T has discussed our PEG Product nor addressed the JPA’s concerns. Throughout the implementation process, AT&T hosted several conference calls with JPA representatives. Indeed, AT&T has hosted the JPA at two demonstrations of the PEG product. AT&T California takes exception to the inference in the letter that we have been unresponsive to the JPA’s concerns. Ms. Melissa Cavallo December 21, 2007 Page 2 PEG Product, a different viewer experience. Primarily, because AT&T’s U-verse system does not insert content physically into its network at the local level, as currently done by incumbent cable operators, the look and feel of AT&T’s PEG Product does not reinor the cable PEG presentation. But DIVCA does not require that a new entrant’s provision of PEG be identical to that of the cable operator and for the reasons detailed below, AT&T’s PEG Product does provide the functionality the law requires while satis~Ting the public objectives behind PEG pro~amming. AT&T California recognizes the importance of PEG and welcomes the opportunity to help bring the next generation of community access progamming to cities. AT&T California’s PEG Product represents a new and innovative way of delivering content that will benefit the communities and our customers. Consumers, for the first time, can access PEG progamming from their own city as well as from other California communities. AT&T is providing competitive choice and options to consumers. We are not only investing in our existing in~astructure and in the communities we serve, but also making improvements that offer our customers powerful enhancements to broadband capabilities and a new, competitive video service. Before addressing your specific concerns, I want to provide you with some important backgound information regarding AT&T’s Lightspeed network upgade and a description of AT&T’s PEG Product as it now exists and as it may evolve. This backgound information will explain the technoloNcal differences between AT&T’s U- verse product and a traditional cable system and the reasons why AT&T is delive~ng PEG content to U-verse TV customers using an application instead of a linear channel. Background on Lightspeed AT&T is investing up to $1 billion by mid-2009 upgading its telecommunications network in California. Attracting such capital improvements to California was one of the Legislature’s enumerated goals in enacting DIVCA. Section 5810(a)(1)(B) states "[i]ncreased competition in the cable and video service sector provides consumers with more choice, lower prices, speeds the deplo~vrnent of new communication and broadband technoloNes, creates jobs, and benefits California’s economy." This investment will bring fiber closer to AT&T customers’ homes, continuing the company’s aggessive network build in California. More fiber in the pound, closer to customers, will make it possible for AT&T to provide new, next- generation IP-based services over its existing network. These services will include High- Speed Internet, IP telephony (VoIP), and AT&T’s IP-based TV service called AT&T U- verse TV. AT&T’s U-verse service is an unprecedented deplo?nnent of new communication and broadband technology. Using a client-server delivery model, and its proprietary compression and modem technology developed specifically for U-verse, AT&T will deliver hundreds of television channels (dozens of them in high definition) to California consumers over a largely copper wire network oriNnally desig-ned to carry telecommunications service only. The possibilities presented by this breakthrough Ms. Meiissa Cavallo December 21, 2007 la_e3 achievement are enormous, and U-verse TV at its current stage of development has only be~n to realize its potential. Moreover, AT&T’s PEG Product itself deploys new communication and broadband technology in keeping with the Legislature’s goals. For the first time, with AT&T’s PEG Product, viewers will receive televised content through a computer application resident in the provider’s servers and accessed by the viewer’s set top box. Again, the potential of this new technology is vast. While today viewers will receive all PEG content that ori~nates in their designated market area (which is itself a significant improvement over cable’s typical PEG system), tomorrow this technology may be deployed to offer access to even broader PEG content choices. The $1 billion earmarked for California includes a portion of the $4.5-$5 billion AT&T plans to spend nationwide on its Lightspeed initiative before the end of 2008. To put things in perspective, Lightspeed and the deplo~vment of U-verse TV within California alone represents the largest rollout of IPTV to date in the AT&T’s Internet-sourced PEG Product In order to appropriately respond to the concerns mentioned in your letter, it is first appropriate to more fully describe how AT&T’s PEG Product is delivered. You may recall that coincident with the product launch in July of 2007, AT&T established various demonstration locations, including one in San Ramon, where cities could experience AT&T’s PEG Product on the U-verse system, even if they are not ready yet to request or implement PEG. I understand that you had the opportunity to attend PEG demonstrations in San Ramon in September and October of this year. Discussions at these demonstrations have enabled AT&T to include city input in the product launch and development. Although AT&T’s PEG Product as desig-ned is fully compliant with DIVCA, AT&T has accepted cities’ suggestions for reasonable enhancements and improvements. As discussed herein, two improvements already have been developed and others are being actively pursued and investigated. End User Experience AT&T’s PEG product operates as an application that intewates content obtained via a secure Internet-based link, for example a "stream" of live community video, and delivers that content to the end user’s television via the U-verse set top box (’°STB"). In addition to delivering municipal content, AT&T intends to use the same technology to support the delivery and introduction of new or ’niche’ commercial video content sources that hopefully will appeal to California’s diverse communities. See §5810(a)(1)(D) which states that video competition "should increase opportunities for pro~amming that appeals to California’s diverse population and many cultural communities." AT&T has desig-nated Channel 99 as the location on its U-verse channel gnaide dedicated exclusively to PEG programming. Customers who subscribe to any U-verse TV package can tune to Channel 99 to access PEG pro~amming or can go straight to Ms. Melissa Cavallo December 21, 2007 Page 4 PEG prograrnming from their main menu by selecting the Local Public Education and Government button. After selecting Channel 99, a customer presses the °ok’ button to access all of the PEG chalmels available in the Designated Market _Area ("DMA"). The selection of Channel 99 launches a Remote Desktop Protocol ("RDP"), an application running on the network which organizes and displays the PEG content via the STB that connects to the customer’s television. Customers will see an alphabetical listing of all the cities with PEG pro~amming available in their area. Once a city is selected from that menu, customers then are able to choose from a list of channels available for that city. While watching, customers can choose to display a navigationa! bar on screen to select different PEG programming at any time. This allows a straightforward change from one PEG channel to another. Alternatively, customers can choose to "hide" the navigational bar and watch full screen PEG pro~amming. Source Content The source content from a local community is connected to a VC-1 (WM9)2 encoder that streams the live content via Hypertext Transfer Protocol to a device in AT&T’s Video Hub Office ("VHO") referred to as the Internet Mediation Device. Once the subscriber selects the PEG content, an application is launched and an Internet Group Management Protocol join message is issued for the relevant multicast stream. AT&T’s PEG product includes an administrative tool that allows the city or its designee to create text (e.g., titles or labels) describing each stream of PEG content for display in AT&T’s PEG application. In other words, cities can describe their progamming how they choose, including by using the channel number that may appear on the incumbent cable operator’s progam guide (e.g., "Channel 24 - City Council"). AT&T’s method for PEG carriage differs from legacy cable and has several inherent benefits. First, PEG progams are available to much larger audiences because distribution is not limited to town borders. This is not only a major public benefit, it also furthers the explicit purposes of DIVCA. In particular, §5810(a)(1)(A) states that "access to a variety of news, public information, education, and entertainment progamming" benefits all Californians. AT&T’s PEG Product promotes variety of PEG pro~amming by geatly increasing the amount of PEG content available to subscribers. Unlike most typical cable customers, U-verse subscribers will be able to keep track of events in surrounding communities, where they might work or family members might live. Second, since PEG progamming from multiple municipalities in a geographical aea can be viewed, the new service brings them together in an easy-to-remember channel location - Channel 99. AT&Thas assembled a very robust promotional campaig-n to notify AT&T subscribers that PEG content will be found on Channel 99 so that subscribers wil! quickly know where to go to find PEG progamming. AT&T will promote Channel 99 ? VC-1 is the informal name for the Windows Media Video 9 video codec initially developed by Microsoft. Ms. Melissa Cavallo December 21:2007 Page 5 on the air on Buzz Channel 300 and the Help Channel (Channe! 4! 1) on the U-verse Service; online through the U-connect web site (uverse.att.com/uconnect) and the U-talk discussion board (utalk.att.com); and in print through promotional flyers and AT&T U- gnaide updates. In short, through Chai~ne! 99, AT&T subscribers get the ability to see PEG content from neighboring communities and the convenience of having it all in one place. In addition, AT&T’s PEG product potentially enables cities, at marginal cost, to provide PEG content over the web because now al! of the city’s PEG content will be in the digital form widely used for delivery over the public Internet. Thus, if a city chooses to do so, it can present digitized PEG content on its municipal web site so that anyone (an?~,’here) with access to the public Internet can view it. Use of this technology will empower cities by enabling more viewers to access their PEG. AT&T’s Response to Your Specific Concerns 1. AT&T’s Channel 99 Designation does not violate §5870(b). Before addressing why AT&T’s Channel 99 designation does not violate DIVCA, it is important to understand why AT&T designed its PEG product as it did and, in particular, how AT&T’s IP network differs from a traditional cable network. AT&T designed its PEG product based on several practical, technical, and economic considerations. While legacy PEG evolved to fit cable networks, AT&T is using its traditional ~elecommunications network to carry video and its PEG product must ride on this network. There are fundamental differences in network design which presently make it infeasible for AT&T to "mirror" the cable delivery of PEG channeling. Differences in physical network delivery- lack of local insertion capability In a cable network, PEG is generally provided as an analog signal inserted locally in each municipality at a point downstream from the cable headend. This enables the cable operators to provide differing content on the same channel number within a DMA (i.e., viewable content can vary by area within the DMA). In AT&T’s case, all traffic is acquired at the VHO that serves the entire DMA. AT&T’s IP network does not have physical insertion points in its network downstream from its VHO Wen that AT&T does not distribute content using analog RF spectrum that can be layered onto its service at various points in the field. Therefore, AT&T cannot simply allocate three channel numbers for PEG (for example) and reuse them throughout the DMA relying upon local insertion of the RF signal as is the case on a typical cable network. The last physical insertion point on AT&T’s IP network is at the VHO. As a result of this network difference, AT&T is not able to provide PEG progamming only to the locality in which it was produced. b.AT&T’s Software Solution Ms. Melissa Cavatlo December 21, 2007 Page 6 AT&T has received suggestions that our PEG Product would be ’°improved" by making just a particular city’s PEG offerings available to AT&T subscribers located only within that city. But limiting viewers’ access to PEG by locality would require AT&T to invest enormous resources to increase processing power, only to provide consumers less PEG progamming than they otherwise wi!l receive on Channel 99. This is the case because each channel provided over AT&T’s system is effectively a stream of video "mapped" via software to a channel number that lists that content on the electronic progamming guide (EPG). In this context, the channel number is not associated with a frequency or MHz but to a multicast IP address corresponding to a stream of content. Because this mapping occurs back in the network via the network middleware, continuous "balancing" must occur to manage the number of subscribers that are added, the number of content sources that can be mapped to individual channel numbers, and the availability of necessary processing power in AT&T’s VHOs in order to deliver service. IP tectmology provides the potential for virtually limitless access capacity and content choice, but there are currently practical limits at the VHO on the quantity of channels and differing channel maps that AT&T can Support simultaneously. Committing resources to allocate more separate channels to PEG, where the number of supportable channel maps is finite, would work against AT&T’s goal of providing consumers with a competitive and attractive choice for commercial content, and would result in consumers having access tofe~¢,er sources of PEG content. For these reasons, we believe our approach to PEG is both a sound business decision and one that benefits consumers. c.The AT&T PEG Experience AT&T’s desig-n and chosen software provides a different experience for the PEG viewer and AT&T cannot replicate the cable PEG experience exactly without significantly reengineering its network. To reenNneer the AT&T network for an identical PEG experience would be very expensive and delay AT&T’s ability to offer competitive video services. In addition, the practical impact very likely would be undesirable to AT&T’s viewers. As noted, a cable operator locally inserts PEG content so that a viewer only sees on his or her progam g-uide the channels offered in their municipality. (The JPA, according to your letter, offers seven channels). AT&T, were it to mimic cable in its PEG solution, would be forced to send viewers many more channel numbers on the EPG and a very larger number of these would be consumed by PEG. In larger DMAs, such as San Francisco, Los Angeles, and Chicago, this could mean literally 100 (or more) separate PEG channels would be presented to AT&T’s subscribers as individually mapped channels, appearing on the EPG. We believe the result would impair viewers’ experience without making it any easier for them to find or navigate to individual PEG channels. AT&T seeks to provide a commercially attractive alternative to cable. We provide a mix of high definition and standard definition content along with premium channels. Our most inclusive package today consists of over 400+ channels in order to compete Ms. Melissa Cavallo December 21, 2007 Page 7 "¸Iwith satellite and the incumbent cable operators. In those markets wltn 100 (or more) total PEG channels, our channel g-uide would be overwhelmed were AT&T required to map all PEG channels to a unique cham~el number. Since we can map to only a limited number of channel numbers, 20% (or more) of the available channels would be used solely for PEG. (By comparison, cable providers typically allocate just a handful of channels for PEG; tl~_ese are reused for varying locally inserted content tb~roughout a DMA.) Allocating such a high percentage of available channel numbers to PEG would frustrate viewers, cause confusion for AT&T’s customer base and would detract from the consumer appeal of what AT&T intends - and DIVCA expects - will be a competitive offering. d.AT&T does not violate § 5870(b) Section 5870(b) requires that ~to the extent feasible, the PEG channels shall not be separated numerically from other channels carried on the basic service tier and the channel numbers for the PEG channels shall be the same channel numbers used by the incumbent cable operator unless prohibited by federal law." The ~extent feasible" clause modifies both the numerical separation requirement and the Same channel number requirement. Therefore, AT&T must meet both the numerical separation requirement and the same channel number requirement of § 5870(b) only to the extent feasible considering techno!ogical, legal, economic and other factors. As discussed above, the lack of local insertion points in AT&T’s network, combined with the constraints on AT&T’s channel map imposed by its processing power and middleware, make it infeasible for AT&T to provide PEG in the form of linear channels listed individually on its pro~amming g-uide. 2.AT&T’s PEG product complies with the NTSC requirement. Section 5870(b)’s requirement that each channel be capable of"car~?’ing a NTSC television signal" cannot be read to require the video provider to deliver progamming using a NTSC television signal. NTSC is an analog standard that is not compatible with a digital network, like AT&T’s IP-based network. Because the NTSC si~onal relates solely to analog technology, if this provision is read as you suggest, it would mean that an all-diNtal provider, such as AT&T, would have to convert to analog simply to carry PEG pro~amming. Not only would that be an unwise business decision, it would run counter to the Legislature’s stated goal in DIVCA to °~promote widespread access to the most technologically advanced cable and video ser~,ices." See §5810(a)(2)(B) (Emphasis added). Instead the proper reading of the statute is that while AT&T must accept PEG content provided in NTSC form (if the city does not maintain it in form compatible with our network), it has no duty to deliver it to its customers in that form. Section 5870(g)(1) affirmatively Nves AT&T the right to change the form of the transmission to make it compatible with its chosen tecl~nology. AT&T, consequently, can change the form of the transmission (i.e., NTSC) to make it compatible with its tP network (encode per AT&T’s PEG spec sheet). Section 5870(g)(1) does not say that AT&T must accept and deliver content "in the same manner or form that is standard in the industry" as it was submitted Ms. Melissa Cavallo December 21, 2007 Page 8 by the loca! entity to AT&T. To read §5870(lo) to require that, as the JPA does, would render §5870(g)(1 ) meaningless. 3. AT&T’s PEG Product provides si~iar qualiU~ and functiona!iD; to that offered by cornmercial channels. Section 5870(g)(3) states that the "PEG access capacity provided shal! be of similar quality and functionality to that offered by commercial channels on the lowest cost tier of service unless the signal is provided to the holder at a lower quality or with less functionality." AT&T’s PEG Product complies with this requirement. a.Quality. In interpreting the word "similar," California courts look to the word’s common usage and hold that "’ [s]imilar does not mean identical.’" Russ t?uilding Partnership ~. City and Count’ of San _Francisco, 44 Cal.3d 839, 849,750 P.2d 324, 329 (1988). Applying the common usage meaning of "similar" to §5870(g)(3), the viewing experience for PEG content on Channel 99 is similar, although not necessarily identical, in material respects to commercial content on U-verse. b.Functionality. For the reasons stated above concerning AT&T’s IP network desig-n, AT&T is providing PEG content via an application on Channel 99. AT&T is providing similar functionality compatible with its technology. For example, although individual PEG channels are not available individually on the top level EPG, charnel-specific information wi!l be available to the viewer once he or she selects Channel 99. Moreover, PEG channels, unlike an?: individual commercial channel or application, are promoted on AT&T’s main EPG menu. The menu functionality for PEG is thus similar though not identical. Any minor effect on the viewer’s experience due to having to take a second step to locate PEG progamming is off-set by the fact that the viewer has easier access to PEG from the main EPG menu and will be able to access a much geater variety of PEG programming, which is one of the stated purposes of DIVCA. See § 5810(a)(1)(A).3 Additionally, the AT&T U-verse PEG product includes open captioning functionality. With open captioning, the captioned text is embedded within the video stream (i.e. within the video viewport). If the source (city) activates open captioning, it is "on" for all viewers, all the time. The FCC has found that open captioning is an appropriate substitute for closed captioning: its regulations provide that open captioning 3 Contrary to your assertion, there will not be any adverse effect on the time to launch the application on Channel 99 as additional cities are added to the Channel 99 menu. Ms. Melissa Cavallo December 2!, 2007 Page 9 may be used "in lieu of closed captioning," 47 C.F.R. §79.1 (e)(2), to meet federal requirements. Currently, there is no pre-scheduled DVR functionality for PEG. This means a customer cannot schedule his or her DVR to record a PEG progam on U-verse. That does not create a legal issue, however, because the statutory language ties the test of sirnilar quality and functionality to the quality and functionality of the video service provider’s lowest cost tier of service. Although PEG will be provided by AT&T on all tiers of the U-verse service, AT&T does not offer DVR functionality as part of its lowest cost tier of service and, based on information and belieg neither do the incumbent cable operators. In any event, a customer can add his or her own VCR or TiVo-Iike device and record a PEG progam while they are watching it. In addition, AT&T is working on potentially providing an archiving feature. Thus, in the future, it may be feasible to allow cities to maintain a selection of recorded PEG content accessible on demand. This enhancement will provide a DVR-like time-shifting functionality for cities. This functionality is currently under assessment. In sum, in assessing whether AT&T has met the "similarity" requirement,, one should evaluate compliance by looking at the system as a totality. AT&T’s PEG Product - viewed as a totality - provides PEG access capacity with similar quality and functionality to commercial charmels offered on AT&T’s basic tier. That said, AT&T constantly assesses its products and ser~’ices for areas where improvements can be made. The tectmology underlying AT&T’s PEG product is new and is improving - more features are on the way. For example, in response to municipal suggestions, AT&T added a PEG Menu Tab on the U-verse menu. In addition to accessing PEG at Channel 99, an end user can access PEG Channel 99 from the main EPG menu screen by selecting the Local Public Education and Government button. No other channel on AT&T’s system has this capability. This feature has been certified for use and will begin to be rolled out in December 2007. AT&T also is working on an up~ade that will decrease the time associated with launching the PEG application. Additionally, AT&T is working on installation of a "cookie" that would allow an end user one-click access to their "favorite" city PEG content from the menu of cities providing PEG content within a DMA. 4.AT&T’s PEG Product satisfies the emergency override requirements of §5880.4 Section 5880 provides: Holders of state franchises shall comply with the Emergency Alert System requirements of the Yederal Communications Commission in order that emergency messages may be distributed over the holder’s network..~kny provision in a locally issued franchise authorizing local entities to provide local emergency notifications shall remain in effect, and shall apply to all holders of a state-issued franchise in the same local area, for the duration of the locally issued franchise, until the term of the franchise would have expired were the franchise not terminated Ms. Melissa Cavallo December 21, 2007 Page 10 AT&T recognizes the importance of providing public safety information and will provide lEAS alerts on its U-verse system in compliance with applicable FCC rules and regulations and §5880 of DIVCA. AT&T currently provides state and local alerts, e.g., National Weather Sere’ice alerts, to its subscribers by reVransmitting alerts from local broadcasters. In the Federal Communications Commission’s !Emergency A!ert System (lEAS) Second Report & Order.s, the FCC ordered wireline providers such as AT&T to participate in EAS. Among other obligations, participants in tEAS must provide Presidential alerts on the channels that they offer to their subscribers.6 The requirement becomes effective 60 days from the ConFess’ receipt from the FCC of a report on its EAS modifications pursuant to the ConFessional Review Act. v The Second Report & Order also requires participants to provide State Governors’ alerts within 180 days after the Federal timergency Management Agency ("FEMA") adopts the protocol,a To date FlEMA has not acted to adopt the protocol. There is no requirement in the EAS for participants to carry local alerts. While §5880 obligates AT&T to honor any local override capability contained in an existing incumbent’s franchise, AT&T disa~ees with your intel-pretation of the statutory requirement. Many local franchise a~eements in California first require the provider to provide an EAS fully compliant with the FCC’s EAS requirements and then, after that EAS is functional, allow that EAS to be overridden by the city in the event of a local emergency. This is the case with TCI/Comcast a~eement.9 In this situation the local override capability is a "bolt-on" to the federally mandated EAS. AT&T’s obligation to provide the local override would be conditioned on its first implementing the federal EAS. There are however certain local franchise agreements that require local override capability separate and apart from any federally-mandated EAS. In order to provide the pursuant to subdivision (m) of Section 5840, or until January 1, 2009, whichever is later. ~" Re~,’iew ofrhe Emergency Alert System, Second Report and Order, 22 FCC Rcd 13275 (2007) ("Second Repor~ & Order"); see also Erratum, 22 FCC Rcd 17023 (2007). v Icl. at ¶83 (as modified in Erratum). On November 14, 2007, AT&T requested, to the extent necessao’, a time-limited waiver (until July 3 t, 2008) of the Second Repor~ & Order. s ]d. at¶55. 9 7.14.1 TCt shall install and maintain an emergency alert system (~’EAS") in conformance with FCC regulations. The EAS shall be remotely activated by telephone and shall allow an authorized representative of each of the members of the Joint Powers to override the audio and video on all channels on the Cable System that may be lawfully overridden, without the assistance of TCI: for emergency broadcasts from a location designated by each Joint Powers member in the event of a civil emergency or for reasonable test. Testing of the EAS shal! occur at times that will cause minimal Subscriber inconvenience. Ms. MeIissa Cava!lo December 21, 2007 Page 11 local ovemde capability in these jurisdictions, pending f~ll deplo?~ent of AT&T’s gAS, AT&T has developed a "short term" oven-ide capability that will allow AT&T persor~nel, at the request of a city, to manually enter a multicast message containing a local emergency alert message. The message will appear on all of AT&T’s channels, including Channel 99, as a text overlay on the screen and wil! be distributed to subscribers residing in the impacted county. Long term, as AT&T deploys its EAS, AT&T will move to an automated process to support the loca! overrides in those cities with the local override reqnirement. While the JPA’s local franchise does not mandate an t~AS capability separate and distinct from the federally mandated t~AS, AT&T would be happy to discuss further AT&T’s short term local override solution and enabling that solution for the JPA’s use pending the roll out of the federal EAS. AT&T California appreciates the opportunity to address your concerns. AT&T’s PI~G Product meets the requirements for PEG carriage in DIVCA and will provide our subscribers with more viewing options for PEG content than they have available today.. Sincerely, \A~, ~, - cc: Bettye Saxon COLUMBUS 1405090 v.01