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HomeMy WebLinkAboutStaff Report 292-10TO: HONORABLE CI1'Y COUNCIL FROM: CITY MANAGER DATE: JULY 12,2010 REPORT TYPE: Information DEPARTMENT: ADMINISTRATIVE SERVICES CMR: 292:10 SUBJECT: Current Status of Institutional Network Negotiations witb Comeast This is an informational report and no Council action is required. BACKGROUND In Scptember 2006, the Digital Infrastructure and Video Competition Act of 2006 was signed into law. This new law permanently changed the franchising and regulatory structure for the provision of cable television services in California. Under this law, franchises are granted by the California Public Utilities Commission (CPUC) rather than by local governments. On January 2, 2008, Comcast was granted a state franchise by the cpuc. As a state frdflchisee, Comcast is not obligated to provide Institutional Network facilities or services, after July 24, 2010, the date the local cable franchise will expire. For the past year, City staff representatives have negotiated with Comcast for the continued provision of the Institutional Network. Thus far, the prieing options proposed by Comcast exceed the financial means of the members served the Institutional Network. 111e City continues to explore options with Comeasl that would give the Institutional Network participants the continuing ability to use this network at an affordable cost. TIlls report provides the City Council with information on the current status of these ongoing negotiations. The cities 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 (Joint Powers) for the purpose of obtaining cable television service within these jurisdictions. The Joint Powers gives Palo Alto the sole authority to administer the cable franchise process on behalf of its members. On July 25,2000, the City entered into a franehise agreement with AT&T. In 2002, the Council approved the transfer of control of the franchise to Comcast Corporation. As tlle administrative agency for the Joint Powers, the City is responsible for oversecing and enforcing the franchise with Comcast. CMR:292:1O Page 1 of5 The 2000 franchise agreement required Comcast to complete an upgrade of the cable system, which included the construction of a dark fiber optic Institutional Network. This network connects 70 public schools, public buildings and community centers in the Joint Powers service area. Comcast fmalized construction of the Institutional Network at the end of2005. In 2006, the Joint Powers designed the network arehitecture and purchased equipment (in the amount of $1.1 million) for the Institutional Network. Since 2006, selected locations have gradually added electronics to activate their portion of the Institutional Network. Stephen Stuart, a Palo Alto resident, provided significant no-fee consulting services in the development and roll­ out of the Institutional Network. Mr. Stuart currently operates the Institutional Network for the Joint Powers at no charge. The Institutional Network enables voice, video and data communication internally and between sites. At the present time, 51 of the 70 Institutional Network connections are active, as follows: City of Palo Alto (I connection) City of Menlo Park (5 connections) City of East Palo Alto (5 connections) Palo Alto Unified School District (20 connections) Ravenswood City Elementary School District (12 connections) Menlo Park City School District (4 connections) Las Lomitas Elementary School District (3 connections) Sequoia Union High School District (1 connection) The heaviest users of the Institutional Network are the schools in the Joint Powers service territory, which havc approximately 80 percent of the active connections. The Institutional Network has allowed schools to eliminate leased line telecommunications costs, and gain significantly greater bandwidth and network performance. The schools utilize the Institutional Network as their primary telecommunications network. The Institutional Network also supports local broadeast and video eapabilities with the local area Media Center. The Media Center is responsible for operating and managing the Joint Powers' local public, education, and governmental access charmels and facilities. DISCUSSION The Digital Infrastructure and Video Competition Act contains several provisions specifically designed to preserve and protect the continued provision of local public, education, and governmental television channels. On October 16, 2009, the Joint Powers formally requested that Comcast acknowledge and accept its Digital Infrastructure and Video Competition Act obligation to provide Institutional Network capability to all locations that broadcast local public, edueation, and govemmental programming, free of eharge. The Joint Powers currently broadeasts local programming from 22 Institutional Network locations. On November 12,2009, Comeast sent a letter to the Joint Powers, stating that it would continue to provide Institutional Network services to local programming origination locations at no charge. (Attachment A). For the past year, Joint Powers representatives have been meeting with Comcast to discuss the transition of the remaining Institutional Network facilities. During these meetings, Comeast has CMR:292:10 Page20fS discussed two options that it plans to make available to jurisdictions with expiring Institutional Network obligations: a new Managed Ethernet Service network and a dark fiber lease. On November 16, 2009, staff presented information on these two options to the Council ( CMR:422:09). The Managed Ethernet Service option would require the Joint Powers to transition to a new network that would be owned, developed and operated by Comcast. Under this option, the Joint Powers would abandon the Institutional Network, and Comcast would take back the dark fibers. This option would require the Joint Powers to tum over management, operation, and control of its telecommunications network and future telecommunications needs and costs to Comcast. It would also mean that the Joint Powers would walk away from the millions of dollars that have been invested in existing Institutional Network equipment. The Joint Powers does not view this option as desirable. With respeet to the dark fiber lease option, Com east gave the Joint Powers a ballpark cost estimate, which was an amount that was several times the cost of the Managed Ethernet Service option. In early December 2009, the Joint Powers (and Institutional Network users) met with Comcast to discuss their concerns regarding the future of the Institutional Network. The Joint Powers asked Comcast to consider various alternatives for the continued use of the Institutional Network at the expiration of the franchise in July 2010. On Febrnary 23, 2010, the Joint Powers sent a lctter to Comcast (Attachment C) asking for a concrcte and affordable proposal on the Institutional Network. On February 24, 2010, Comcast told the Joint Powers that it was developing a firm proposal to present to the Joint Powers members. Comcast explains that its work in developing the processes, terms and pricing that will apply to municipal Institutional Network is evolving. In the meantime, Com cast agreed that it will not begin billing the Joint Powers for the Institutional Network as long as the parties are making reasonable progress towards a mutually acceptable agreement and, in any event, not until Comcast has first given the Joint Powers 60 days' prior written notice (Attachment B). On May 27, 2010, the Joint Powers held another meeting with Comcast. Comcast presented a price estimate on the dark fiber lease option of $75 per fiber mile per year, or a total of approximately $2.5 million armually for two fibers to every Institutional Network location. Comcast also provided firm pricing on the Managed Ethernet Service option of $450 to $900 per month per site depending on the connection speed (100 Mbps to 1 Gbps). The preliminary pricing proposed by Comcast for the dark fiber lease option significantly exceeds the proposed price for the Managed Ethernet Service option. During the meeting, the parties agreed to continue to negotiate the technical elements, terms and pricing of these options. At the same time, the Joint Powers asked Comcast to consider alternatives that would lessen the financial burden on Institutional Network users. The following table provides a summary of how the cost of the two Comeast options would be allocated to Institutional Network users: CMR:292:IO Page 3 of5 PREPARED BY: MELISSA CAVALLO Cable Coordina DEPARTMENT HEAD APPROVAL: CITY MANAGER APPROVAL: ~ JAMES KEENE City Manager ATTACHMENTS: Attachment A: Attachment B: Attachment C: Letter from Comcastdated Novettiber 12,2009 Letter from Comcast dated February 18,2010 Letter to Comcast dated February 23, 2010 cc: Joint Powers Members Lee Ann Peling, Com cast CMR:292:10 Page 5 of5 @omcost. Ms, Melis,sa Cavallo Cable Coordinator Mdl'~J\,-'J!Y~l!9.(Lik~fjJ'II()nlt{)~lJ:g Palo Alto Joint Powers Agency p,O, Box 10250 Palo Alto, CA 94303 RE: Joint Powers Agency H!et Dear Ms. Cavallo: ATT ACHMENT A NoV'etnbet 12, 2009 Callfomta Reglon 301m Comcilst Place live""ore, CA 946~1·9659 I am in receipt of yow: lett¢! of Octobex 16" regarding the Institutional Network C'I-Net'') serving the Joint Powe!ll Agency CJPA")and the Cities of Palo Alto, Menlo Park, Atherton, East Palo, Alto and portions of San Mateo and Santa Chua counties. 1 apologize for the frustration expressed in your letter regarding the progress, 01' lack thereof, regarding the ttansition of the JPA's I-Net As you know, the frl1n.cbis,e agi:eement iliat covers these communities docs not expite until July of next year, and we arc stUl deV'eloplrig the processes, tertns, and pricing that will apply to these municipal I-Nets. I unde!lltand that there have been some preliminary discussions xegarding this transition, and that some ballpark cost estimates were provided, but that no definitive proposal has been provide.;! tq the JP A, Please let tne know if that is not the case. Fitst and foremost, with respect to your' concero regarding transmission of PEG progtanun1ng from the origination points .. detlliled in yout letter, Comea5t clearly understands and recognlzes its obligation under DIVCA to provide for PEG origination. • If, upqn the expiration of ow: 10C1li franchise agreen:ient,all the of locations delineated in yow: letter are dell'l'eril1g PEG progtanunlng to the Media Center for distribution on any of the JP A-designllted PEG channels, tbe trarJs!):tission of that PEG programming will be at no charge to the )pA, 1'hi$ is consistent wlth our xecent conversations regarding the Stanford Channel. With respect to I-Net sites that are not transrnittin~ PEG programming, those IQcations will h.ve to be addressed as .. sepamte matter. The school locations iliat are 1,1tillzing thc I-Net are eligible for B-rate discollnts!pcicil1g, and those ratel! are cPlupetitive with other service providers' rates. As to the City locations, our rates are discounted fox the Cities in recognition of the Mancial burden that market rate services. might il:npo.e on City finances. The rates for these services are also comparable to the rates offered by other providers fQr simi!Ju services. .. fifs.fifelissa()avallo Joint Powers Agency ~ovetnbct12,2009 Page 2 In light of the different cost struct1ll:es for the School Districts and the JPA member Cities, I believe we should set up two sepamte meetings to addtess this transition. We remain ready, willing, and able to meet with you at your earliest convenience to discuss your concerns. We continue to believe that We will be able to reach an agreement with the JP A ond the member cities on these issue3, and that we will be in.ft position to ensure a smooth transition by July 2010. Please contact me or I..ee-Ann Peling to identify times for some further meetings to move' OUt discussions fo.tward. Should you have any questions about the items presented in this lettet, r would be happy to discuss them with you. dr;;J,~ JOhnnie~~ Regional Vice President California Region Cc: Lee-Ann Peliug -Comeast Easy Bay : ~athan Woodard -Corncost Business Semces Ms. Melissa Cavallo Cable Coordinator Palo Allo Joint Powers Agency 1'.0. Box 10250 Palo Alto. CA 94303 ATTACHMENT B February 18, 20 I 0 ())mcasl Catro Ha5 llO/SIlllt¢ BI.I San Francisco, rA 94124 OHrr,e: 41G,715.0000 Fax: 41fi.lll).0579 WVft¥.(:(lrt1cas[.com RE: ll,lint [,owers Ag~IW.Y J·Nol Dear Ms, Cavallo: I wnnted to follow up on an issue that J understand is of great concern to the Palo Alto JPA and.specifically, the entities currently utilizing the I·NET, As you know, the current local Ihmcllise agreement between Comeast and the Palo Alto JJ'A cities are set to expire on July 24'h, 2010, and the I·NET obligations set forth in those lranchise agreement do not transfer to our state tl'anchise, We are aware of the importance of the I·Nello the cities and school districts. We have and will continue to work with the JPA to develop a business relationship that is acceptable for both parties, We believe that the parties are working towards a mutually acceptable armngcment, and we hope that such agl'ccmcnt will be in place by the end of July. Please be assur~'\llhal Comeast will nol begin immediate billing for I·Net use, so long as we arc makong reasonable progress towards a Illutually acceptable agreement In any event, Comeasl will provide at minimum of 60 days notice before billing the JPA for continued usc Qf ComeRst's facilities, In the event the City desires to transition instil\ltional services to an aiternative network, Comcast will make every effort to assist ill that transitioll, [hopc this allays any CQncerns that the l'ul() Alto JI'A hal; regarding this issue, but ifnot, please do nol heSitate to contact Ille, Vcry truly yow's, , ') "j.~""" L ,/jll.:a/ (''''1' <: ./ olmnic Oiles 'I Regional V ice President California Region Divisions . Administration 650.329.2692 650.32.3.17411"" Budget 650.329.2260 650.32.3.1741 fax Information Technology 650.329.2182 650.617.3109 fax Real Estate 650.329.2264 650.323.1741 fax Finance 650.329.2264 650.32.3.1741 fax Acrotmting 650.329.2264 650.32.3.1741 fax Purchasing 650.329.2271 650.32924681 .. Investments 650.329.2.362 650.32.3.BJ56 fax Revenue Collections 650.320.2317 650.617.3122 fax Farking Citations 650.329.2252 ATTACHMENT C February 23, 2010 Mr. Johnnie Giles Comcast Cable Regional Vice President California Region 1485 Bayshore Blvd. San Francisco, CA 94124 RE: Joint Powers Agency I-Net Dear Mr. Giles: Qty9fP.~o_Alt9 Administrative Services Department Thank you for your letter of February 18, 2010. As you are aware, the JPA met with Corneast on December 10, 2009, to discuss our concerns related to the future . of the I-Net (attached is the agenda from that meeting). As part of the discussion, the JPA asked Comeast to consider alternatives beyond the development of the new Managed Ethernet Service network proposed by Comeast. The JPA proposed various options for the continued use of the I-Net at the expiration of the franchise in July 2010. During the meeting, Comeast committed to get back to the JPA with a response to its concerns and the alternatives discussed at the meeting. To date, Comcast has failed to respond to the issues raised at the meeting and to provide the promised feedback about altemati ves that would move our discussions forward. Due to the lack of a concrete and affordable proposal from Comcast regarding the I­ Net, most of the school locations that are using the I-Net were unable to meet the deadline for filing E-rate program discounts for fiscal year 2010-2011. In addition, as you can weli imagine, it is very difficult for our JPA cities and schools to obtain approval for new budget appropriations in tIus economic environment. Also, even in good economic times, the public sector budget approval process is lengthy and must occur well in advance of the payment window. Given these circumstances, it is imperative that the JPA have Comcast's commitment not to eharge for I-Net use until a mutual1y acceptable agreement has been reached and I-Net users have obtained the necessary budget authority. While we appreciate your February 18 letter, the JPA has considerable concern about you!' comment in that letter regarding Comcast giving the JPA 60 days notice before staliing to bill for use of the I-Net facilities. This comment is unsettling when there is no agreement in place, it would take the schools and/or JPA members more than 60 days to appropriate funding, and reasonable options that would provide the IP A with the ability to continue to use the I -Net have yet to be P.O. Box 10250 PaloAllo, CA 94303 Prlnlod wIth ~oY'''Il$ed lnk~ on 1000/0 recycled pupllr proc~msed wIthout ;:hlorlne identified. We hope Comeast would agree that no billing should occur until a mutually acceptable agreement has been reached. The JPA remains hopeful that such an agreement, for the continued use of the I-Net, can be reached. We are ready. willing and able to meet with you at your earliest convenience to continue to discuss this matter with Comcast. Sincerely, ~(\"'-/ Melissa Cavallo Joint Powers Authority Cable Coordinator cc; Lee Ann Peling Nathan Woodard JPAMembers ATTACHMENT 2 I-Net Transition Meeting December 10,2009 at 2:30pm Media Center, 900 San Antonio Road, Palo Alto I. JP A Concerns/Discussion Items • JPA's wants to keep the I-Net (millions invested in deployment; established to meet JPA networking needs into the future including bandwidth requirements and interconnectivity between jurisdictions) • Comcast options cost prohibitive • Will Coroeast consider other options beyond the proposed dark fiber leaselManaged Ethernet Service charges? • Comcas! has already recovered the costs of building the I-Net through its cable rates; would Comeast consider the option of leaving the I-Net in place and entering into an agreement to cover I-Net maintenance costs? II. PEG programming links • Will existing PEG I-Net links be left untouched? • Will we be able to use existing equipment (encoders/decoders)? • How would PEG links be integrated with the Managed Ethernet Service network? III. Dark Fiber Option • Status of quote IV. Managed Ethernet Service Option • Any updates to terms or pricing? • Connection to ISC in Redwood City for free Internet service (can users share a link to ISC?) • Interconnectivity between jurisdictions; how will it be accomplished and how many ports will be required? • Will we be able to use existing equipment?