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HomeMy WebLinkAbout2003-04-21 City Council (11)TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES DATE: SUBJECT: APRIL 21, 2003 CMR: 226:03 VIOLATIONS OF CABLE TELEVISION CUSTOMER STANDARDS BY TCI SERVICE This is an informational report and no Council action is required. BACKGROUND In 1983, a Joint Exercise of Powers Agreement (JPA) was entered into by Palo Alto, Menlo Park, East Palo Alto, Atherton, and portions of San Mateo and Santa Clara counties for the purpose of obtaining cable television services for residents, businesses, and institutions within these jurisdictions. The JPA gives Palo Alto the sole authority to grant and administer a cable television franchise on behalf of all of the JPA member jurisdictions. In July 2000, the Council approved a franchise agreement with TCI Cablevision of California, Inc. (TCI), a wholly-owned subsidiary of AT&T Corporation (AT&T). In July 2002, the Council approved the transfer of control of TCI from AT&T to AT&T Comcast Corporation. The transfer of control was consummated in November 2002, and AT&T Comcast has since been re-named Comcast. In May 2000, prior to entering into the franchise agreement with TCI, the Council adopted a cable television ordinance. The ordinance, which amended and added new provisions to Chapter 2.10 of the Municipal Code, imposes uniform requirements on all cable providers franchised by the City. One of the key provisions of the ordinance is the establishment of a comprehensive set of customer service standards. The City’s franchise agreement with TCI (Section 14) establishes procedures for resolving Municipal Code and franchise agreement violations. These procedures require CMR: 226:03 Page 1 of 5 the City to notify TCI in writing of alleged violations. The notice must describe the violation and direct TCI to cure the violation. If the City concludes, after reviewing TCI’s response, that TCI has failed to cure the violation, the City may schedule an administrative hearing where TCI will be asked to show why it should not be found in violation. TCI must be given 30 days’ prior written notice of such a hearing. If, after conducting the hearing, the Council determines that TCI has failed to satisfy its obligations, it may issue an order assessing liquidated damages on TCI. The franchise agreement (Section 16) specifies liquidated damage amounts to compensate the JPA for damages resulting from TCI’s failure to comply with its franchise agreement obligations. The liquidated damage amounts for customer service standard violations that are measured quarterly are $1,250 per quarterly breach. For customer service standards that are not measured quarterly, the damages are $250 per day. DISCUSSION Telephone-Answering Requirements In January 2003, the City initiated a formal notice of violation process relating to TCI’s non-compliance with some of the telephone-answering customer service standards. In its January 7, 2003 letter to TCI, the City cited that TCI did not comply with two telephone- answering customer service standard requirements during the third quarter of 2002. These violations involved telephone answer and hold times. The City requested that TCI cure these violations in accordance with the requirements of the franchise ageement. The City expected that TCI’s cure would include: 1) promptly coming into compliance; 2) payment of liquidated damages for the period of time (the third quarter of 2002) that the violation occurred; and 3) the implementation of corrective actions to assure future compliance. In 2002, the City had initiated a formal notice of violation process against TCI for similar telephone-answering compliance issues that occurred in the fourth quarter of 2000 and in all four quarters of 2001. This process resulted in a settlement that included: !) TCI’s payment of the amount of $80,500 to the JPA; 2) TCI’s agreement to implement specific corrective actions to assure future compliance; and 3) more frequent reporting on telephone customer service standard performance (quarterly instead of annually) to provide for more effective monitoring and accountability. The recurring nature of TCI’s apparent non-compliance with the telephone-answering standards is of the utmost concern to the JPA because of the impact it has on cable customers and because it indicates that the actions TCI agreed to take to address the 2000 and 2001 compliance issues have not corrected the problem. CMR: 226:03 Page 2 of 5 On February 6, 2003, TCI responded to the notice of violation. TCI did not deny that it violated the telephone-answering customer service standards in the third quarter of 2002. TCI merely stated that it fully complied with the telephone-answering customer service standards in the following quarter, the fourth quarter of 2002, and in TCI’s view, that cured the violation. TCI discussed several specific actions it is taking to assure future compliance. These actions include eliminating the outsourcing of customer calls to a third party and bringing back customer service calls to the Bay Area market, under Comcast leadership. As part of its proposed cure, however, TCI did not offer to pay liquidated damages to compensate the JPA for TCI’s substandard telephone customer service in the third quarter of 2002. TCI’s response failed to provide the JPA with an adequate cure for its customer service violations. Consequently, on March 2!, 2003, the City provided TCI with 30 days’ written notice of an administrative hearing before Council. At the hearing staff planned to recommend that the Council consider assessing the following liquidated damages as provided for in the franchise agreement and Municipal Code: $!,250 for violation of telephone answering time in the third quarter of 2002 $1,250 for violation of telephone hold time in the third quarter of 2002 Total $2,500 On April 9, 2003, prior to the scheduled administrative hearing, TCI informed the City that it would pay the JPA this liquidated damage amount. Local Cable Office Requirement In early 2003, the City was faced with another TCI customer service problem. In early January, TCI informed the City that its local cable store, located on Rengstorff Avenue in Mountain View, would be moving to a new location in the same city at the end of the month. The franchise agreement and the Municipal Code require TCI to maintain an office within a radius of fives miles of the jurisdictional boundaries of Palo Alto to allow subscribers to pay bills, drop off and pick up equipment, and otherwise interact on cable service matters. On January 27, 2003, the City learned that the existing store had closed and there would be a delay before the new store would open. In the interim, TCI planned to direct customers to three other cable stores (in Sunnyvale, Foster City, and Cupertino). Neither the City nor subscribers received any advance notice of TCI’s closing of the Rengstorff Avenue store before the new store was ready to open. This action violated the City’s franchise agreement and Municipal Code and had a significant and detrimental impact on hundreds of cable customers who regularly visit the local store. The City CMR: 226:03 Page 3 of 5 received complaints from subscribers who went to the Rengstorff Avenue location to pay their bills, only to find that the office was closed. On January 31, 2003, the City initiated a formal notice of violation process for TCI’s failure to comply with the local office requirement in the franchise agreement and Municipal Code. The City requested that TCI immediately cure this violation in accordance with the requirements of the franchise agreement. In formulating an offer of cure, the City requested TCI to consider the payment of liquidated damages. On February 24, 2003, TCI responded to the notice of violation. TCI indicated that it opened a new cable store on February 18, 2003, at 1400 Terra Bella in Mountain View to replace the cable store on Rengstorff Avenue. TCI indicated that since the new store meets the !ocal office requirement in the franchise agreement and Municipal Code, it had cured the violation. TCI further explained that, due to extenuating circumstances (problems with the landlord), it was not able to secure the .new location as quickly as originally anticipated. TCI stated that through the extraordinary efforts of its facilities, IT and customer care personnel it was able to open the new store earlier than expected. Once again, TCI did not offer as part of its proposed cure to pay liquidated damages to compensate the JPA for the approximately 22-day period during which it was in violation of the loca! office requirement. Once again, TCI’s response failed to provide the JPA with an adequate cure for its customer service violations. Consequently, on March 21, 2003, the City provided TCI with 30 days’ written notice of an administrative hearing before Council. At the hearing staff planned to recommend that the Council consider assessing liquidated damages as provided for in the franchise ageement and Municipal Code, in the amount of $5,500 ($250/day x 22 days). On April 9, 2003, prior to the scheduled administrative hearing, TCI informed the City that it would pay the JPA the liquidated damages requested. Customer service has been a major area of concern for the JPA since TCI acquired the cable system in July 2000. Since that time, customer service complaints directed to City staff have increased by several hundred percent. The written agreement to pay the liquidated damages that was received from TCI on April 9, 2003, totaling $8,000, represents a measure of the JPA communities’ injury resulting from TCI’s non- compliance agreed-upon in the franchise agreement. Staff will continue to vigorously enforce customer service standards through the sanctions available in the franchise ageement. This approach in necessary to hold TCI accountable for the customer service it provides to subscribers in the JPA communities. Staff also plans to conduct periodic customer service performance compliance audits. These audits will be coordinated with the City Auditor, who already has the first of these audits on her approved 2002-03 work plan. CMR: 226:03 Page 4 of 5 ~SOURCE IMPACT The payment of liquidated damages in the amount of $8,000 ($2,500 for telephone- answeringviolations and $5,500 for local cable office violations) compensates the JPA communities for their damages resulting from these violations. This money will be allocated to JPA members on a pro-rata basis based upon subscribers. The JPA will fund contracted audit services. PREPARED BY: DAVID RAMBERG IT Manager, External Services DEPARTMENT HEAD APPROVAL :~’.~._~< "--~_/._..~ ~ Director, ~inistrative Services CITY MANAGER APPROVAL: HARRISON Assistant City Manager CMR: 226:03 Page 5 of 5