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HomeMy WebLinkAbout2000-06-05 City Council (11)TO: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL .12 FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES DATE: SUBJECT: JUNE 5, 2000 CMR: 266:00 IDENTIFICATION OF FUTURE COMMUNITY NEEDS AND INTERESTS CABLE-RELATED RECOMMENDATION Staff recommends that Council conduct a public hearing to obtain input from the Joint Powers Agreement (JPA) communities regarding future cable-related needs and interests. BACKGROUND In 1983, a JPA was entered into by Palo Alto, Menlo Park, East Palo Alto, Atherton, and portions of San Mateo and Santa Clara Counties, for purposes of obtaining cable, television service for the residents, businesses, and institutions within these jurisdictions. The JPA gives the City of Palo Alto sole authority to grant and administer tire cable television franchise on behalf of all the JPA member communities. In 1986, a cable television franchise agreement was executed with Cable Co-op; the agreement was then amended in 1991. This agreement will expire on March 24, 2001. In July 1998, Cable Co-op requested that the City of Palo Alto commence formal proceedings to determine whether or not to renew the franchise. Since the fall of 1998, staff has been working on the renewal project, including hiring a cable communications consultant, The Buske Group, to assist with the process, and retaining the services of a law firm that . specializes in cable communications law. The City has undertaken a three-phase franchise renewal process. Phase One, which has been completed, focused on education and timeline development. Phase Two, which is underway, establishes the basis for negotiating a new or renewed franchise .agreement and includes an assessment of the physical plant, an evaluation of the past performance of the cable operator, and an identification of future community cable related needs and interests. Phase Three, which is also underway, establishes the desired outcomes for the renewal process and includes actual negotiation of a new or renewed franchise agreement. CMR:266:00 Page 1 of 5 The purpose of this report is to focus on the identification of future cable-related needs of the community, which is also the purpose of the public hearing. An earlier public hearing was conducted on the past performance of Cable Co-op (CMR 200:00, Attachment A). DISCUSSION The process of identifying the community’s future cable-related needs relies on a variety of information-gathering techniques. By utilizing multiple techniques, the City is able to ensure that the needs assessment reflects input from a broad cross-section of the community and that the City obtains informed opinions, .which is especially important when handling issues surrounding new technologies. The methods being used include a telephone survey; focus group workshops; collection and analysis of strategic planning documents; a telecommunications survey; and a public hearing. The components of the process are discussed in greater detail below. Statistically Valid Telephone Survey: Approximately 400 cable subscribers and non- subscribers in the franchise area were telephoned, at random. All were asked for their opinions regarding a number of future services that could be offered by a cable operator. The phone survey was conducted by Group W Communications, an organization with extensive experience in the arena of public opinion polling and strategic planning. Focus Group Workshops: A series of nine focus group workshops were conducted throughout the franchise area over a ten-day period. Each workshop was organized around a different aspect of community life, such as churches and faith-based institutions, education, arts, businesses, and nonprofit organizations. Each workshop provided a grounding in the current nature of cable services, including video, voice, and data; discussed current industry developments; and summarized laws and regulations that relate to the cable franchise process. This was followed by a brainstorming session to determine the services that participants would like to see continued or added to the cable system. Finally, each participant was asked to complete a questionnaire to identify user needs related to a future franchise. Strategic Planning Documents: The Buske Group is collecting and analyzing strategic and long-range plans, technology plans, general plans and communication plans prepared by ¯ government agencies, educational institutions, business groups, and community groups. These provide another way to assess future needs of the community. Telecommunications Survey: These surveys are being distributed to x;arious government and educational agencies to assess the current telecommunications infrastructure in the franchise area. They are used to help determine the need, if any, for an institutional network. Public Hearing: This is designed to supplement the Focus Group Workshops and telephone survey, and to collect information from the public. It also allows the City to comply with the Cable Act renewal requirements related to public hearings. CMR:266:00 Page 2 of 5 Several components of the needs assessment process are still underway, and the information already gathered is still being analyzed. In the meantime, City staff has prepared a preliminary summary of issues that are important to the community. This summary is based on information derived from the focus group workshop brainstorming sessions and from. feedback staff has received from the public, the Needs Assessment Task Force, and the JPA Working Group (Attachment B). This information is being utilized as staff negotiates with AT&T. Some of the most important issues are discussed in more detail below. Support for public, education, government, (PEG) and community access: The community has expressed the need to increase support for Mid-Peninsula Access Corporation (MPAC), to retain PEG channels at their current location; and to link schools, libraries, public buildings, and community centers to each other and to the cable system for video, voice, and data communications. The community has also identified: the need for more training, outreach and production assistance to PEG users; the need for additional promotional services to increase community awareness of PEG access resources and services; and the need for effective program guides for all PEG channels. Concern was expressed regarding the creation of the nonprofit (SVCC) through the sales agreement between AT&T and Cable Co-op, and what implications it will have for MPAC. Bandwidth: Strong support has been expressed for the broadest possible bandwidth, and the ability to continue to operate home businesses via cable modems. Currently, the cable modem services offered by AT&T in other communities are for casual, residential use and do not allow for servers of any kind. Digital Divide: Support was expressed about finding ways to address the digital divide, and ensure that all the JPA communities have similar access to technology. FM Radio Services: Strong support has been expressed for a continuation of the FM radio services currently offered by Cable Co-op. Although staff will attempt to negotiate for this . service, the radio service currently provided by Cable Co-op (broadcast channels, both local and from other communities) differs from the digital radio service offered by AT&T in other locations. Open Access: Support has been expressed for open access for cable modem services. AT&T has sued other communities, including Portland, Oregon, that have required open access. Staff can negotiate for open access or for language that triggers a franchise re- opener depending on the outcome of the pending litigation. Channels and Rates: Support has been expressed for the continuation of certain channels currently offered by Cable Co-op. In addition, concern was expressed regarding future rates for cable services. Federal law prohibits the City from requiring certain stations, or banning others. In terms of rates, the City is only allowed to regulate the lowest-cost tier of cable CMR:266:00 Page 3 of 5 services, which generally includes locally broadcast stations and PEG channels. Federal law prohibits the regulation of rates in any other tier of service. RESOURCE IMPACT The cable franchise renewal proceedings involve an examination of future community needs and interests. The information obtained from this examination will be used to negotiate a new franchise agreement..The new agreement will include various forms of compensation (e.g., franchise fees, funding for PEG access service.s, etc.) for the use of the public’s streets and rights of way. POLICY IMPLICATIONS . This report does not represent any change to existing City policy. TIMELINE The purchase agreement between AT&T and Cable Co-op requires that an amended or a new franchise agreement be in place by the end of June, before the sale can close. Because of Cable Co-op’s financial situation, the City has committed to attempt to meet this timetable. This has significantly accelerated the City’s consideration of a new franchise agreement. The City had originally planned to negotiate a new agreement by March 2001, the expiration date of the current franchise. City staff and AT&T have been meeting since April to negotiate a new franchise agreement, and the June 26, 2000, Council agenda has been tentatively reserved for consideration of a new agreement. At the same time, staff is discussing other options with Cable Co-op and AT&T, should the parties not be able to agree upon a mutually acceptable franchise agreement in such a short time period. These options include: extending the current agreement for a period of several years; negotiating an interim agreement with AT&T which addresses the major elements of the new franchise agreement to allow the sale to close in June; and assisting Cable Co-op in obtaining an extension of the due dates on its loans. Staff will keep Council informed regarding the negotiations as they progress. ENVIRONMENTAL REVIEW This is not a project under the California Environmental Quality Act. ATTACHMENT: Attachment A: Attachment B: CMR: 200:00 Matrix from Community Input PREPARED BY:Melissa Cavallo, Assistant Director, Administrative Services Shannon Gaffney, Senior Financial Analyst CMR:266:00 Page 4 of 5 REVIEWED BY:Grant Kolling, Senior Assistant City Attorney DEPARTMENT HEAD: Director Services CITY MANAGER APPROVAL: HARRISON Assistant City Manager cc:Mro Ms. Ms. Mr. Ms. Mr. Ms. Ms. Mr. Russell Averhart, Director of Administrative Services, City of East Palo Alto Walter Callahan, Deputy Director, Public Works, San Mateo County Uma Chokkalingam, Finance Director, City of Menlo Park Jan Dolan, City Manager, City of Menlo Park Ralph Freedman, City Manager, Town of Atherton Monica Hudson, City Manager, City of East Palo Alto John Maltbie, County Executive, County of San Mateo Jan Thomson, Stanford University Salani Wendt, City Clerk, City of East Palo Alto David Wheaton, Asst. City Manager, City of Menlo Park Mr.Richard Wittenberg, County Executive, County of Santa Clara Mr.Ron Kirkeeng, CEO & General Manager, Cable Co-op Ms.Nicolasa A. Bloom, Director of Government Affairs, AT&T Broadband & Internet Services Ms. Susan Ritchie, AT&T Broadband & Internet Services Pacific Bell Needs Assessment Task Force members The Buske Group CMR:266:00 Page 5 of 5 TO: ATTACHMENT A City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL 6 FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE:APRIL 10, 2000 CMR:200:00 SUBJECT:REVIEW OF CABLE CO-OP’S PAST PERFORMANCE RELATED TO THE 1986 FRANCHISE AGREEMENT, AMENDED IN 1991 This is an informational report and no Council action is required. BACKGROUND In 1983, a JPA was entered into by Palo Alt0, Menlo Park, East Palo Alto, Atherton, and portions of San Mateo and Santa Clara Counties, for the purpose of obtaining cable television service for the residents, businesses, and institutions within these jurisdictions. The JPA gives the. City of Palo Alto sole authority to grant and administer the cable television franchise, on behalf of all the JPA member communities. In 1986, a cable television franchise agreement was executed with Cable Co-op, and amended in 1991. This agreement will expire on March 24, 2001. During the period that begins thirty-six months prior to the expiration of a franchise.agreement, the cable company may request that the franchise authority commence proceedings to determine whether or not to renew the franchise. In July 1998, Cable Co-op made this request and in September 1998, the Palo Alto Council adopted a resolution agreeing to begin renewal proceedings. After conducting a competitive proposal process, the City retained the services of a cable communications consultant, The Buske Group, to assist City staff with the franchise renewal proceedings. In addition, the City has contracted with a law firm that specializes in cable communications law. The City has undertaken a three-phase franchise renewal process. Phase One includes development of a renewal plan and timeline; and education of. City staff, elected officials, and key members of the community regarding the process, applicable laws, and regulations.. This phase has been completed. Phase Two establishes the basis for negotiating a new or renewed franchise agreement. It includes an assessment of the cable plant, an evaluation of the past performance of the cable operator to identify problems if any, and an analysis of future community cable related needs and interests. The City is currently in Phase Two. CMR:200:00 Page 1 of 4 Phase Three, building upon the information gathered in Phase Two, establishes the desired outcomes for the. renewal process and includes actual negotiation of a new~ or renewed franchise agreement. The purpose of this report is to focus on the review of Cable Co-op’s past performance, which is part of Phase Two of the franchise renewal process. DISCUSSION The past performance evaluation has .many components including: a detailed evaluation of Cable Co-op’s compliance with the existing franchise agreement; a review of customer satisfaction with the services provided by Cable Co-op; an audit of franchise fee payments; and a technical assessment of the cable system. The City’s cable communications consultant, The Buske Group, is coordinating the various components of Phase Two, and has hired a number of experts to assist with the process. The components of the past performance review are discussed in greater detail below. Contract Compliance Review: The contract compliance review consists of a compilation of all Cable Co-op’s obligations under the existing franchise agreement and an examination of whether Cable Co-op has met those obligations. A key part of this review includes an- assessment of its compliance with its obligations related to public, education and government (PEG) access and local origination channels. The contract compliance review is important to the franchise renewal process because it can result in immediate improvements in service. In addition, one of the reasons a franchise renewal request may be denied is because of significant past noncompliance. .Customer Satisfaction: The process of ascertaining customer satisfaction with the current cable provider includes.a review of all available complaint files held by the City and Cable Co-op, an analysis of how Cable Co-op tracks and responds to customer complaints, a statistically valid telephone survey, and a public hearing. During the recently completed telephone survey, approximately 400 people in the franchise area, selected at random, were asked questions about their satisfaction with Cable Co-op. Those individuals that were not Cable Co-op subscribers were asked to describe why they do not subscribe. The phone survey was conducted by Group W Communications, an organization with extensive experience in the area of public opinion polling and strategic planning. The public hearing provides the community with another opportunity to comment on the past performance of Cable Co-op, including but not limited to performance related to picture and sound quality, cable modem services, and customer service matters. The public hearing is integral to the franchise renewal process because it identifies issues that matter to the customers in the delivery of cable services, information that can be used in negotiating a renewed or new franchise agreement, regardless of the provider. CMR:200:00 Page 2 of 4 Franchise Fee ~.~udit: The franchise fee audit conducted by KFA associates has been completed. KF,~’~, Associates has assisted several city and county governments in ongoing monitoring and regulation of cable television systems, including financial performance and franchise fee payment reviews. Franchise fee payments to the JPA communities were $582,667 in 1996, $617,884 in 1997, and $695,516 in 1998. The franchise fee payment review identified underpayment of franchise fees of-an average of $57,000 from 1996 to 1998.. Some significant areas of underpayment include Cable Co-op’s treatment of itemized franchise fees, its not including late fees in its calculation of gross revenues, and its exclusion of advertising sales revenue from its calculation of gross revenues. The City has issued a demand for payment of the amounts owed. (The letter to Cable Co-op requesting payment and KFA’s report are included as Attachment A). Technical Assessment: The assessment of the cable plant is currently being conducted by Columbia Telecommunications Corporation, a nationally recognized engineering firm that specializes in telecommunications engineering. Its work includes on-site examination of the existing cable system, inspection of all key electronic facilities, and analysis of Cable Co- op’s required proof of performance testing data. RESOURCE IMPACT The examination of past performance of Cable Co-op has identified an underpayment of franchise fees in the amount of $214,364 for the period January 1, 1996 through September 30, 1999. The City is pursuing payment of the amount owed. POLICY IMPLICATIONS This report does not represent any change to existing City policy. TIMELINE The information gathered in Phase Two of the franchise renewal proceedings, which includes the past performance review, will be used to begin negotiating a new franchise agreement. Staff plans to complete Phase Two in May ~2000 and begin negotiations at that time. ENVIRONMENTAL REVIEW This is not a project under the California Environmental Quality Act (CEQA). ATTACHMENTS Attachment A: Letter and KFA Report CMR:200:00 Page 3 of 4 PREPARED BY: Melissa Cavallo,-Assistant Director Shannon-Gaffney, Senior Financial Analyst REVIEWED BY: Grant Kolling, Senior Assistant City Attorney DEPARTMENT HEAD: C~T~S; Director Ad/thinistrative Services CITY MANAGER APPROVAL: Y HARRISON Assistant City Manager Ms. Ms. Mr. Ms. Mr. Ms. Ms. Russell Averhart, Director of Administrative Services, City"of East Palo Alto Walter Callahan, Deputy Director, Public Works, San Mateo County Uma Chokkalingam, Finance Director, City of Menlo Park Jan Dolan, City Manager, City of Menlo Park Ralph Freedman, City Manager, Town of Atherton Monica Hudson, City Manager, City of East Palo Alto John Maltbie, County Executive, County of San Mateo Jan Thomson, Stanford University Salani Wendt, City Clerk, City of East Palo Alto Mr. David Wheaton, Asst. City Manager, City of Menlo Park Mr. Richard Wittenberg, County Executive, County of Santa Clara Mr. Ron Kirkeeng, CEO & General Manager, Cable Co-op Ms. Nicolasa A. Bloom, Director of Government Affairs, AT&T Broadband & Internet Services Ms. Susan Ritchie, AT&T Broadband & Internet Services CMR:200:00 Page 4 of 4 Attachment B Community Input Matrix Community Needs and Interests Retention of preferred television channels Open access Ability to ’run businesses out of homes via cable modems Address the digital divide Support for MPAC through facilities, equipment and channels; concern about what SVCC means for MPAC Keeping PEG. channels at current numerical locations Desire to continue to receive FM radio service Comments City prohibited from regulating channel lineup in any way, outside of PEG channels Continues to be an evolving issue and the subject of current litigation; AT&T has included language in other franchise agreements that can trigger a reopener depending on what the Courts decide Not provided by AT&T; its service is for residential, casual use only and does not support or allow servers of any kind from the home; however, AT&T will honor the terms and conditions of the existing contract with the ISP Channel, the current high-speed Internet service provider for an undetermined period of time Can negotiate for I-Net and equipment Can be negotiated for Can be negotiated for Can be negotiated for; however, not provided by AT&T in other communities Support for Institutional. Network linking schools, Can be negotiated for libraries, public buildings for voice, video and data communications Receipt of broadest bandwidth possible Local customer service office Need for deliberative and thorough process for negotiating new franchise Maintain subscriber rates (concern about how rates will be affected by the sale to .AT&T) Establish a Council-appointed Community Review Board with authority Can be negotiated for Required in proposed enabling ordinance Process is accelerated impacting JPA and community input The City has the right to regulate the lowest tier of cable services, which generally includes television stations broadcast locally and PEG channels. Federal law prohibits the City from regulating any of the other tiers of service. Policy decision for Council