Loading...
HomeMy WebLinkAbout2003-10-27 City Council (2)TO: FROM: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL 14 CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE: SUBJECT: OCTOBER 27, 2003 CMR: 480:03 PUBLIC HEARING REGARDING COMCAST’S COMPLIANCE WITH FRANCHISE AGREEMENT AND CUSTOMER SERVICE STANDARD OBLIGATIONS AND AUDIT KICK-OFF REPORT IN BRIEF 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 Broadband to Comcast Corporation. In May 2000, prior to entering into the franchise agreement with TCI, the Palo Alto City Council adopted a cable television ordinance. The ordinance, which amended and added new provisions to 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. Customer service has been a concern for customers served by Comcast in the Palo Alto service area. In order to hold Comcast accountable to the customer service standards in the cable television ordinance, the cable franchise agreement with Comcast provides for a triennial review. This three-year review allows the City to audit Comcast’s performance in meeting the customer service standards and other requirements of the cable franchise agreement. As part of the three-year review, the franchise agreement also calls for a public hearing in which customers of Comcast can provide comment on Comcast’s performance before the City Council. Comments from the public will be incorporated into the City’s audit of Comcast’s performance and reported as part of the audit findings. CMR:480:03 Page 1 of 4 RECOMMENDATION Staff recommends that Council conduct a public hearing to obtain input from the Joint Powers Agreement (JPA) communities regarding Comcast’s compliance with the franchise agreement and customer service standard obligations and other issues related to performance. 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 purposes of obtaining cable television service 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 the JPA communities. The member communities share the costs of administering the franchise, proportional to the percentage of overall subscribers. As of June 30, 2003, the City of Palo Alto has 50 percent of the subscribers, Menlo Park 27 percent, East Palo Alto 11 percent, Atherton seven percent, San Mateo County two percent, and Santa Clara County (Stanford) three percent. In 1986, a cable television franchise agreement was executed with Cable Co-op. In July 2000, the Palo Alto City Council approved a transfer of the cable system from Cable Co- op to TCI Cablevision of California, Inc. (TCI), a wholly-owned subsidiary of AT&T Corporation (AT&T), and a new franchise agreement with TCI. 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 Palo Alto City 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. DISCUSSION Customer service has been a major concern for the JPA since TCI acquired the cable system from Cable Co-op. Following the acquisition, customer service complaints directed to City staff increased significantly. Staff has worked closely with Comcast to ensure corrective actions have been implemented to address known customer service issues. In addition, staff has relied upon sanctions available in the franchise agreement to enforce established customer service standards. During the AT&T Comcast transfer proceedings, Comcast paid the JPA $80,500 to settle customer service compliance issues that occurred during calendar year 2000 and 2001. In addition, in April 2003, the JPA received a liquidated damage payment of $8,000 from Comcast to cure customer service standard violations that occurred during calendar year 2002. CMR:480:03 Page 2 of 4 In order to hold Comcast accountable for the customer service it prov des on an ongoing basis, the JPA recognized the need to conduct periodic audits o customer service standards. The City Council approved undertaking the first of these audits as part of the City Auditor’s 2002-03 work plan. The audit scope includes the Triennial Review provided for in the franchise agreement. The Triennial Review, a review of Comcast’s overall performance, can be conducted during the third year of the franchise agreement (the year starting on July 24, 2003), and every third year thereafter. As part of this review, the City may consider: 1) whether Comcast has complied with its obligations under the franchise agreement and applicable law; 2) whether customer service standards, technical standards, and bond and security fund requirements have been met; and 3) other issues as may be raised by Comcast, the City, or the public. This process calls for the City to hold a public hearing to provide Comcast and the public the opportunity to comment on any of the items that will be considered during the Triennial Review. Community members in all of the JPA communities have been invited to participate in this hearing. The input obtained during the public hearing will be incorporated into the scope of the audit that was recently initiated by the City Auditor. Several of the key components of the audit include: 1) A detailed evaluation of Comcast’s compliance with the existing franchise agreement and customer service standard obligations. 2) A franchise fee payment review; franchise fee payments to the JPA were approximately $820,000 in 2001, $800,000 in 2002, and $400,000 through June 30, 2003. The reduction in franchise fee payments is due to a decline in gross revenues. 3)An assessment of compliance with public, education and government (PEG) access requirements including PEG fee payments; PEG fee payments to the JPA were approximately $275,000 in 2001, $260,000 in 2002, and $140,000 through June 30, 2003. 4)A review of customer compliant files held by the City and Comcast and an analysis of how Comcast tracks and responds to customer complaints. The City cannot review, however, the channel line-up or types of channels Comcast offers on the cable system. Under federal law, Comcast has the flexibility to choose the channels it offers and where those channels are placed in the channel line-up. Based upon the technical nature of certain aspects of the audit. The Buske Group, is working with the City Auditor in carrying out the audit. The Buske Group was selected because ef its vast cable communications experience and its JPA specific knowledge due to its participation in negotiating the Franchise with TCI and establishing the City’s existing customer service standards. CMR:480:03 Page 3 of 4 Staff expects to complete the audit in early 2004. However, to date, Comcast has been unwilling to provide the City with access to its records. The franchise agreement (Record Inspection Section 19) requires Comcast to produce records requested by the City, no later than thirty days after the request for production. If Comcast chooses not to comply with this section of the Franchise Agreement, it will delay the timely completion of the audit. RESOURCE IMPACT Comcast provides the JPA with two forms of compensation, franchise fees and funding for PEG access services, in exchange for the use of the public’s streets and rights of way. The audit will verify that Comcast is providing all compensation due the JPA. Any revenue recovered and the costs associated with conducting the audit, estimated at $20,000, will be shared by the JPA communities on a pro-rata basis based on subscribers. The franchise agreement requires Comcast to reimburse the JPA for its out-of-pocket audit costs if the audit results in a franchise fee increase which is two percent more than Comcast’s annual franchise fee payment to the JPA. POLICY IMPLICATIONS This report does not represent any change to existing City policy. PREPARED BY: APPROVED BY: DAVID RAMBERG IT Manager, External Services Cable Franchise Manager CAI~ YEATS -- Di~ctor, Administrative Services CITY MANAGER APPROVAL: SHARON ERICKSON City Auditor Assistant City Manager CMR:480:03 Page 4 of 4