HomeMy WebLinkAbout2001-02-12 City Council (10)TO:
City of Palo Alto
City Manager’s Report
HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
FEBRUARY 12, 2001
CABLE RATES REGULATION
CMR: 133:01
This is an informational report and no Council action is required.
BACKGROUND
On July. 24, 2000, Council approved a Cable Television Franchise between the City, on
behalf of the Joint Powers, and TCI Cablevision of California, Inc., marketed as AT&T
Broadband. The Franchise Agreement became effective on July 25, 2000. During
negotiation of the Agreement, AT&T committed it would not make any rate changes
through the end of 2000. On January 2, 2001, AT&T provided legal notice in local
newspapers of its intention to implement price adjustments effective February 1, 2001.
In late January, subscribers received direct mailers announcing the rate changes. The
price adjustments are shown on Attachment A.
DISCUSSION
In response to questions about the rate increases, staff has looked into the process by
which the City could regulate cable rates.
Since the 1992 Cable Act, cable equipment and "basic" tier cable rates have been subject
to regulation by local franchising authorities, such as the City, in those areas where
effective competition was absent. For regulatory purposes, basic tier service includes all
local ~television broadcast channels (commercial and non-commercial); public,
educational and governmental (PEG) access channels; and other video programming a
cable operator chooses to place on the basic tier. Basic tier service is the lowest price tier
of service that all subscribers receive. Typically,5 to 10 percent of subscribers select the
basic tier of service. Most subscribers select expanded basic service, which includes
more channels. At this time, there is only one tier of service in Palo Alto. The current
basic service includes a channel line-up more like the expanded basic service in other
CMR:133:01 Page 1 o13
communities. However, AT&T plans future channel line-up changes, including offering
the "leaner" basic service with fewer channels at a lower cost. Under Federal law,local
governments cannot determine the number of services or the number of channels on each
tier of service.
In order to regulate basic service rates, local franchising authorities must be certified by
the Federal Communications Commission (FCC). This requires filing a written
certification with the FCC (Form 328 Certification of Franchising Authority to Regulate
Basic Cable Service Rates and Initial Finding of Lack of Effective Competition) that the
local franchising authority: 1) has the legal authority and personnel necessary to regulate
rates; 2) will adopt rules consistent with FCC rules goveming the basic service tier; and
3) will adopt procedural rules providing for notice and comment in rate regulation
proceedings.
Once the City becomes certified to regulate rates, the first step in the process would be to
establish a benchmark rate. The benchmark rate is derived from basic cable rates in
competitive environments. AT&T would then file the appropriate forms with the City,
justifying its proposed rate change and showing how it was developed. After that the City
would analyze the rate increase and compare it to the benchmark rate to ensure it was
justified. This process can be complex and convoluted and would require a subject
matter expert, who is familiar with FCC proceedings. The cost of these contractual
services could cost the City approximately $8,000 to develop the benchmark rate and
$10,000 annually to analyze rate changes.
As stated above, local, franchising authorities have regulated the basic tier service since
1992. The FCC regulated rates on all other levels of service until March 1999, when all
rates for all service except for basic service were deregulated. With today’s regulation
process, if a local franchising authority determines that a rate increase is not justified, the
cable company can move the rate increase to the next tier of service (a deregulated tier).
Because Of this and because of the small number of subscribers in the lowest tier of
service, most local franchising authorities no longer participate in rate regulation. Those
that have participated have found the rate regulation process, which can be lengthy and
expensive, to be futile. Therefore, absent Council direction, staff does not plan to
recommend that the Council pursue rate regulation at this time.
ATTACHMENTS
Attachment A:Notice of Price Change
CMR:133:01 Page 2 of 3
PREPARED BY:
"JANET FREELAND
Senior Financial Analyst
DEPARTMENT HEAD APPROVAL:
I~ireA~ctor,YF~~ve Services
CITY MANAGER APPROVAL:
EMI ON
Assistant City Manager
CMR:133:01 Page 3 of 3
Notice of Price Change
Palo Alto, Atherton, East Palo Alto, Menlo Park, Portions of San Mateo County and Stanford
Effective with February I, 2001 bills, AT&T Broadband will make the following price changes in the
communities listed above.The service price increase(s) reflect updated inflation, applicable franchise
related costs and programming fees, among other factors.
Current Price New Price
Basic Service
HBO
Showtime
Cinemax
The Movie Channel
Standard Converter (Non-basic only) *
Unwired Install
Prewired Install
Additional Outlet - at Initial Install
Additional Outlet - Separate Trip
Relocate Outlet
Upgrade of Non-Addressable Services
Downgrade of Non-Addressable Services
Up/Downgrade of Addressable Services
VCR Connection - at Initial Install
VCR Connection - Separate Trip
Purchase A/B Switch
Unreturned Standard Converter
Service Call due to Cable Problems
Insufficient Funds Charge
$34.95 $36.50
$7.95 $9.50
$7.95 $9.50
$7.95 $9.50
$7.95 $9.50
$0.79 $1.85
N/A $4O.95
N/A $22.50
¯ N/A $13.95
$32.24 $18.95
N/A $18.95
N/A $14.95
N/A $8.95
N/A $1.99
N/A $5.95
N/A $12.95
$5.75 $5.00
N/A $ 100.00
No Charge $27.00 (hourly)
$15.00/check $25.00/check
*Available to customers who subscribe to services beyond the Basic level of service (i.e. StandardCable, Digital or Premiums).
For customers receiving service through commercial accounts, bulkrate arrangements with multiple
dwelling owners, or similar arrangements, some of the product, pricing and other information
contained herein may not apply. Please refer to the terms and conditions documents reflecting such
separate arrangements. Where such are inconsistent with information in this pricing structure, the
terms and conditions of such separate arrangements will apply.
Please call us for complete details about services and prices.You must subscribe to Basic Service to
receive other optional video services.To receive certain optional services, you must rent a converter
and remote control for a separate charge. Installation, equipment, additional outlet, change of service,
programming access and other charges may apply. Franchise fees, regulatory fees, taxes and other
franchise related fees may apply with .the actual amount depending on location and services ordered.
Pricing, programming, channel location and packaging may-change.
Currently, and to the extent required by law, after notice of a retiering of our services or price
increase, you may change your level of service at no additional charge for a period of 30 days.
Otherwise, changes in the services you receive which are requested or caused by you will be subject
to upgrade and downgrade charges.
If you have questions please contact us at:
AT&T Broadband ¯ 1-650’856-818 I
3200 Park Blvd.
Palo Alto, CA 94301
CUID# CAI437, 1434, 1433, 1435, 1436, 1438, 1523 RM30045- 68 12/00