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January 6. 1394
The Honorable City Council
Palo Alto, California
Attention: Policy and Services Committee
cable Rat. IequlatioD
Members of the Council:
!-norte in. Jri,ef
This repol:t transmits additional information on cable rate regulation
requested by the Policy and Services Committee at the November lO~ 1993
meeting. Included are the minutes of that meeting and the previous
~taff reports CMR:572:93 and OMR:48S:93.
Diwey.asign
on November 10, the Policy and Services Committee voted to continue the
matter of cable rate regulation and have staff return with additional
information as follows:
What would be the impact on rates. programming and customer
service if tbe City chose to regulate or not?
"'bat are the regulatory responsibilities and opportunities the
City has now and how do they compare with the Cable Act of
1.992'1
Are there opportunities for t.he City to part.icipate more
actively or 'fo~ally in the decision making process by Cable
Co-op:
Would the Joint Po'were be required to participate in approving
Council' B decision to regulate or not?
Impact on Rates Progra.IIJning and Cust.omer Service
The impact on rateB, progr~ing and customer service if the City chose
to regulate is diffieulc to predict, as this is a new re~~lation and
there are no historical trends. According to the National Association
of Telecommunication Officers and Advisors (NATOA} , muniCipalities that
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have tiled for certification have. seen cable rat.es d.ec.t"ease 3. 6 per~en~,
uSing the benchmark method. The FCC's rnte requla't-icns c:stabl ishes a
formula by which cable operators detenr.ine their rcltes for-basic and
cable programming service, and then compare t.hem against a bench:nark.
rate derived from baSic and cable progra.rnrning service rates in
competitive cable enviro!W.ents. The benc:!" .... -na:dt rr.ethod of rate
calC".llatioos is being used by over 80 percent of cable systems.
However. cable systems, that do not have competitive benchmark rates,
like Cable Co·op. are permitted to utilize the cost-of-ser~ice method,
which could sho'~ that rates higher than the benchmark rate are
justified. At this time. no figures are available on cable operators
USing the cost-of-service method. Cable Co-op argueEl that fully
employing the cost-of-service method could raise its ra't<es to as higb as
$33/month, but it plans to i!1crease them only to $29 _ 9.5 from the current
rat-e of $26.95, when the rate freeze is lifted. on February 15, 1994_
Because cable Co-op proposes to use the cost-at-service methodology to
set ratea, and the City's staff presently does not possess the expertise
to interpret the cost-of-3ervi~e regulations; added cose for consultant
aseistance request to ar~lyze the data from Cable Co-op in relation to
those regulations is anticipated.
If the decision to regulate rates is an affirmative one, rates may be
regulated in either an active or passive manner. Under the staff
recommended passive regulation approach, o.~ly bona fide co..TTlplaints about
rates would require investigation. T'ne City's relationship with Cable
Co-op regarding rate regulation would be changed only if Cable Co·-op
increased rates in a manner that result~d in bona fide citizen
complaints and ~here the City deterrr~ned the rate increase was
unwarranted under the cost-of-service provisions~ This passive
regulator approach would promote avoidance of additional administration
costa. The City could reduce anticipated costs further by requiring
cable Co-op to submit an audited Cost-ot-service fir~ing; with a letter
from the auditing firm 8tatL~g that Cable Co-op's rate setting mechanism
is in compliance with the Feels rules and regulations.
Sta~f believe~ that passive rate regulation approach positions the City
to deal with bona fide complaints in an eftective and timely mar~!er;
but, a no regulation approach would not penl:iit t:.he City to activate the
certification and notificaticn processes when a bona fide complaint is
filed in an effective and timely manner. The processes could take 60 to
150 days. Although the passive rate regulation approach could cost more
to implement in the absenc.e of rate regulation, it would be less
expensive to administer thaD an active rat.e regulation approach. as seen
in the ·COst to Regulate Cable Rates r chart below. Under the active
rate regulation approach, a half-~ime admdnistrator would be needed to
proactively verify and implement the FCC regul.ations; in addition,
consulting service costs would be needed to analy~e Cable CO-op's cost
of-service filings.
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Council time requi~ed
to revi~w and set
policy
Additional etaff time
r~~ired to implement
Consultant costs
programming
Active Regulation
policy « Services
Cornmittee and
Council ~~eting8
as infractions are
found
Ha.lf -time person
{cost est. $25Kl
Full audit annually;
request Co-op to
submit audited cost
of-service analysis
and use consultant
to review and analyze
(cost est. $lOK)
K~ssive Regulatjop
policy , services
CO.r.ID'litteo::! and
Council meetings
only if complaints
filed at time of
rate increase
Absorb into current
duties of Cable
Coordinator and
Director
Request Co-op to
su.btnit audited
financial report for
cost-of-service. and
use consultant h~lp
if complaint is
received
(coat est. $10K)
Under both the ~984 and 1992 Cable Acts, cable lineup and the choice of
programs are not subject to regulation by the local franchising
autbority. Indirectly~ the rates that cable Co-op is able to charge may
detenrlne the types of prograna:ning it can provide. If Cable Co-op is to
maintain its current approach to programming. Cable Co-op believes it is
justified in increasing rates whether or not the rates are regulated.
Therefore~ the decision whether to regulate rates should haVE no direct
impact on programming.
Under the cable Act of :199:2. CongreBs eet basic C"olstomer B8rvice
standards to which cable cO!IIpanies must adhere ~ The Cable Act also
allows local franchising authorities to enforce the current customer
service standards. if they are more beneficial to the cable subscriber,
or to enhance them if both parties agree. A copy of the FCC Customer
Service Standards is attached to 0!R.:488:93~ Cable Co-op is required to
meet these standards and the standards in the current Franchise
Agreement, wbether or not the City decides to regulate rates.
A swrmary of the estimated costs to regulate is shown in the above
table. and Exhibit 1 ShOW6 the pros and cons of rate regulatiop,.
CMR: 102:94 3
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Regulatory~~onsibilities
The curl."ent CQmmunity Antenna Television Franchise ""as a-""arded in Mar·:t..
1986. The Cable Act of 1584 governed the rules under ·.".hich the
franchise was issued. This period in cable regulation history is
characterized as the "unregulated-era. The Cable A.::t of 1994
prohihited franchising authorities from regulating rate$ and
programming. Customer service standards were neg::;.tiated as a part of
the franchise and not mandated by t.he FCC. F .... lrthermore. state law
filled the vacuum by requiring cable operators to cOluply with minimum
customer service standards. Man:r of the responsibilities in the City' '9
franchise centered around the construction of the cable system. The
C3l::1e Act. of 1992 has ended the "un.regulated era". A summary of the
cu::-rent franchise policy 3.nd administrative responsibilities and a
comparison to the Cable Act of ~992 are shown in ~,ibit 2.
Fartjcipation on Cable CQ-Co BoarQ
During the November 10 meeting. Cable Co-op Board President ~ohn Kelly
indicated there might be a po3sibility or opportunity for the City to
participate mor~ actively or formally in Cable Co-op's decision making
precess. Staff was concerned that as the franchising authority there
may be a conflict of interest for a staff member to sit on Cable Co--op' E;
Board. if the Board, in fact, approved that idea. Staff has asked the
City Attorney to respond to this issue. It should also be noted that
the FCC has specifically stated that any -informal" understanding
between a cable operator and local fI:anchi6ing authority is not
enforceable by the PCC.
Joint Powers Partikipa~icn
The 1983 Joint Exercise of Powers Agreement establi~hed the
aWninistrative responsibil i.ties of the City. Included in the document
is the autbority to make decisions affecting rat.es. services and
renegotiations~ The City is required to provide informat.ion to the
joint powers members; therefore, all joint powers members were notified
of che meetin9~ and were asked to respond in writing as to what position
they recommended. Only the Town of Atherton responded~ It is staff's
recoaanendat-ion that the decision of the Policy and Services Committee be
fDrwarded to each ~~er for approval or disapproval. Any responses
received would be included with the Conmittee' B recommendation to
Council in February. Based on the powers vested in the City under the
Joint Rxercise of Powers, t.he Joint Operating Agreement and the 1990
Ame~ded and Modified Franchise Agreement~ the approval of the individual
joint powers members is not required prior to the rendering of any
council deCision to regulate or not.
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The City, as the franchising authority. may file for certification t~
regulate rates by following certain proced~ral steps, or the City may
choose Dot ~o certify. Prese~cly~ rates may be increased by Cable Co-op
after February ~5, 1994 witho'Jt approval from the City, unless the City
:l.ot.ifies cable Co-op of its int-ent to certify a:'ld files FCC Form 328
prior to that date. If the City subsequently certifies, the City could
not legally requir~ Cable Co-op to roll back the rate increases enacted
before the City obtained its certification.
Rates may be regulated in an active or a passive manner. The City may
actively monitor Cable Co-cp's rate changes on an ongoing basis, or it
may regulate only when valid complaints about rates are registered.
Staff recommends regulating in a passive manner and working
cooperatively with cable Co-op. A decision to regulate passively would
allow the City to regulate in a tiIr.ely and effect:ive manner if
subsequent events "''arrant active regulation, and minimize administration
costs.
Jrz==dation
Staff recommends that the Policy and Services Committee approve the
recO!III1endatJons from CMR:4aa:93 as restated. below:
1 ~ Adopt the resolution determining t.hat the cable television
system operating withic the Joint Powers service area is oot
subject to effective compet.it.ion and authorize the regulation of
basic cable service rates;
2. Authorize the City Ma~ger or her aesignee to file with the FCC
Form 328, -Certification of Franchising Authority to Regulate
Basic cable Service Rates and Initial Pinding of Lack of
Effective Competition-; and
3~ Approve notificaeioc to Cable Co-op of the intent of the City to
enforce FCC Customer Service Standards and/or continued
enforcement of the customer service st.andards in t.he Amended and
Modified Pranchise Agreement Section 9 --Additional SubBcrib~r
RightS. whicheVer method of enforcement is more beneficial to
the subs c riber .
In additiOD. staff recommends that policy & Services Committee direct
staff to passively administer the FCC regulations and work cooperatively
with Cable Co-cp~ Should. consultant services be necessary in the
administration of the regulations, slaff would ret'.Jrn 1.0 Council with an
agre~-nt and Budget Amendment Ordinance at that time.
CMR,102:94 5
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Respectfully eubmitted,
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Directc-r~ Infonnation Resources
Attachments: Exhibit 1 Pros and Cons of Rate Regulation
~~ibit 2 Summary of ~e~~latory Responsibilities
Excerpt Minutes of November 10. 1993
CMR:S72:93. Referral of Cable Rate R~gulation
c::r.G.;48S:93. Reeolut:i,oD to Regulate Basic Cable Rates
City Atto.ney~s Report -Regulation of Basic Cable
Servi ce Ra tes
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~egllJitlc
Cable
Servk~
EXHIBIT 1
Pros and Cons of Rate Regulation
/~K~ con certify I"er
no oumide ooP5L1lting cost£;
infofl\lal understanding 01
"side agreement" possible
r.l\ter. unreg.ulated
no authOrity 10 respon<! to
citizen complaint" ~bout ratts
"inlhnnal" understanding '110\ enforceable under FL'C
~P(l1>
i / ru;\i-'e1r < ~K ~
citizen advocate
proactive prevention against
ullwanllnted rate increase
burden 01 cumpliance on tbe cable
operator re'ldew alt pricing practices
(not Ju~t basic rale)
.-on.
pro.
pll.SIIiYl:ly
oons
additional staff time. to montkn'
consultant sewices approx. $10K 10
$25K ',IDually
seen 8S advets3nal (Q cable company
~itioned to If-sct if va'~ compJainl "
filed on rates
no "informal" undentandjn, or "side
agr.eemeaf' nee\..ied
don't lose ability to reBulate in timely
fashion in the future
revrew all pricing practi\'C:s
may require additional staff time
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Rate Reouiation
Channel Line-up
In5tallooo" and
equrpment costs
aill ltemiza1;ion
Discounts
Customer Service
Renewals
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EXHIBIT 2
Summary 01 Reguiatory Responsibilities
Fmnchia
None
Unrogulaled
Unregu latad
Franchise & taxes
Operater option
unragula!ed
Standards for office
hours, Iolepho,.e
Iv.nability ,
instanation, cutages~
service cans~ billing
and refunds
36 months prior 10
and of franchise; formal
or informa r process can
be used
Cabft Act Changes
Permits after certification
U nreg u!ated
P~rmits after certification
Add cost of pubnc,
educatjon and
government access and
other costs imposed by
local government
Opera"'.ar's option to;
seniors a nd other
economicany
disadvantaged groups
only
Minimal national
standards in same areas
now covered by
Franchise. Fral1Chisfng
authority retains right to
establish or enforce
standards that exceed
fCC standards. Requires
cablo operator to provide
30 day written notice of
any program changes
Oporator must provide
written notice to invoke
formal process; Court
can't overturn franch:sing
authority's decision to
deny a renewal if based
on infraction of
procedural requirements
Damage Immunity
Multiple Franchises
Must Carry
Municipal Ownership
Consumer Ektctronic
Equipment
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Franchise
None
Anows for multiple
franchises
Traditional must
carry-no cost
None
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{:ableMt Changes
Immunity from monetary
damages in lawsuits
challengi'1g the tight of
frar!chising authority to
regulate cable system
Prohibits exclusive
franchises
Anows broadcasters.,
every Ulree years, to
choose between
rnar.datory carriage or
payment for
retransmission rights;
allows cable operator to
carry non-commerciar or
low power stations on
unused public, education
and government channels
subject to approval by
r.anchising authority
Municipality can optJrate
cable system without :a
franchise
Assur'3 compatibility
between TV'. and VCR's
and cable system
Section II ~ Oversight and RegLilation from the amended and Modified Franchise
Agreement is enclosed. This section details the City's rights to oversee. regulate
and periodicany inspec-t the cab!e system. It also details what is required in the
annual written report f'om Cable Coop.
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SECTIO"1 11 --OVERSIGHT AND REGULATION'
11.1 The city council shall have the right to oversee,
regulate, and periodically inspect the construction, operation I and
maintenance of the System, and all parts thereof, in accordance
with the prOVisions of this Restated Agreement.
11.2 The city council may, from time to ti~e$ adopt or
issue such reasonable rules, regulations~ oraers, or other
directives qoverninq the Company or tne Syst~m as it shall find
necessa.ry ot" appropriate in the exercise of its police power,
provided that such rules, regulations, orders, or other directives
are not materially in conflict with the provisions of or privileges
qranted in this Restated Agreement. The City )tanager may. from
ti.e to timer issue such orders governing the company or the System
as he shall find reasonably necessary or apprcpriate pursuant to
and. in furtherance of the purposes of this J:::estated Agreeonent. The
Company agrees to co:cply with all such rules, regu1ations or orders
lawfully l:Iinding upon the Company, or other directives issued
purSllant to this Restated Agreement. No such rule, :--egulatiol1,
order, or ()t..ller directive issued pursuant to this Section 11.2
shall constitute an amendment to this Restated Aqreement~
11.3 periodic Evaluation and Hearings
11.3.01 l~nually, net later tha~ sixty (6~) days
after ea.ch anniversary of this Restated Agreement, the Com.pany
~~all submit to the City Manaqer a written report, in reasonable
detail, covering the significant events related to the Company's
performance or nonperformance of the terms and conditions of this
Restated Agreement during the previous year .. Such reports may, for
example I cover significant events related to the following:
(i) compliance with, and any modification
necessary with respect to, the financial
plan required by Section 2 .. 5 .. 08 hereof;
(ii) compliance vith the requirements regard
ing system characteristics and technical
performance anQ testing requirements, as
provided in Appendix A to this Restated
Agreement:
(iii) compliance with the construction terms,
standards, and schedule, as provided in
Appendix B to this ~estated Aq~eement:
(i V) a description of the changes lrIade or
contemplated to the mix, level and quali
ty of programmil"lg in the broad categories
of video proqramminq or other services en
the System as provided in Appendices C
and D to this Agreement: in accordance
with Section 3.10 of this Restated Agree
ment, nothing in this paragraph (l.v)
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shall imply any regulatory authcrity or
power of censorship over the content of
programming on the company Channels or
the Leased Channels:
(v} the status of the State-of-the-Art of
Broadband communication Facility technol
ogy, the Company's activities to enhance
or advance said technology in connec~icr.
with the System~ and the Company's com
pli~nce with its ·continuing obligation,·
as provided in Section 3.9 hereof;
(vi) a description of the facilities and
equipment provided to the CAO by the
Company, as provided in section ~.) he~e
of and Appendix E to this Rest~ted Agree
ment:.:
(vii) the status of development and use of the
Institutional Cable, as provided in Sec
tion 4.5 hereof and Appendix F to this
Restated AgreeE~nt;
(viii) compliance with, and any modification
nece&sary with r~gpect to. the Company's
plan for ensuring ~aximum practical
availability of its Services and facili
ti~s to handicapped persons, as provided
in Section 4.6.01 hereof:
(ix) compliance with, and any modification
necessary with respect to, the Engineer
ing Desiqn .and System Architecture for
the System, as provided in section 6.14
here.of and Appendix A to this Restated
Aqreement;
(xj compliance vith. and any modification
necessary with respect to, tbe plan for
interconnection, as provided in Section
6.15 hereof, including ~4e Company's
activities pursuant to said plan!
(xi) compliance ~ith, and any modifi~ation
necessary 'With respect to, the plan tor
recruitment~ education, training. and
employment of residents of the Service
Area, as provided in Section 8.2 hereof;
(xii) compliance 'With, and any modif'ication
necessary with respect to~ the Company's
privacy protection policies, as provided
in section ~.1 hereof~
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{xiii)
(xiv)
(xv)
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a summary of
interruptions,
hereof;
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all significant Ser~ice
as provided in section 9.2
~ 6u~~ary of all significant and repre
sentative subscriber complaints and the
actions taken by t~e Company in r.esponse
thereto, as provided in Section 9.3 here
of; and
oth"er e'Vents which the Company believes
the City may find 5igl~ificd.[l.t.
11.3.02 within sixty (60} days after receipt of
the Company's repo:r.t, the. City Manager may r-equest additional
informati.on en specific topics which the company shall $uppl)'
within thirty (30) days of such request. ThE', City Manager ma:,r
review the company's performance to determine whether the company
has complied with the tenns alld conditions of this Restated
Agreement and shall, following, completion of such review, if any,
file the Company's report with the ci~y Council together with such
findings and reco~endations as he deems appropriate. Nothing in
this section 11.3 shall affect City's remedies provided elsewhere
in this Restated Agreement.
1.1.3.03 The City may ret.ain, at. its own cost,
technical and other experc.s and conSUltants on a periodic basis
throu9hout the term ~f this Rastated Agreement for the purpose of
overseeingr testing, and inspecting the construction, ope~3tion,
and maintenance of the System, and all parts thereof, to ensure
co.pliance with the provisions of this Restated Aqr~ement~
11.4 Other Reports
11.4.01 upon the request of the City Councilor
the City Manager, the Company shall, subject to the provisions cf
Sec.tion 11.6.03 hereof with r-espect to pI'"oprletary information,
promptly make readily available at the reasonable times to the
requesting party any reasonable information regarding the Company,
its business and operations. or ar.y ~ffiliate.d person, \lith respect
to the system., any Service distributed over the System, or any
service Related Activity~
11.4..02 The Company shall make readily available
at reasonable ti~es to L~e City Manager proqcess reports describ
ing, in detail, the status of construction of the system in
accordance with the stanaards, ter.ms l and schedule for construc
tion, as provided in Appendix B to this Restated Agrecment~
11.4.03 The Company s!1all submit to the City
Manager,. not later than three (3) months after the end of its
fiscal years, with respect to the fiscal year just ended: (i)
copies of all unaudited income statements, balance sheets,
statements of chanqes in tinancial position for the System and
other financial statements given to investors and lenders of the
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company, pursuant to a non-disclosu~e agreement consistent with the
procedures described in section 11. E. OJ of this Restated Agreement;
provided, however, that if t~e city Manager reasonably Getermines
such informatlon is insufficient, the Compa~y shall provIde to the
City, no more than once a ye:ar, and not until at least six {6'
mon~s after the end of its fiscal year, state~ent5 and balance
she~ts which have been audited by an independent certified public
accountant; (ii) a statistical sllmmary of thl!:'! operations of the
System for the fiscal year just ended incl'J.din; the nwnber of
Subscribers added, and penetration rates; and (iii) a breakdown of
tne annual Gross Revenue frOD'l the system; and (iv, if requested by
the City Manager, an update of the financial plan required by
section 2.5.08 hereof, as amended.
11.4.04 Within thirty (30) business days after the
C01l:!pany has received fro-:u or submitted to any qovel'"!1tlental, state,
County, or federal agency or official any report, petition, .or
OthB1:' significant filing 10thich materially pertains to or-in any way
~aterially affects the System or any Service Related Activity, the
Company sha21 sUbmit to the city Manaqer a copy of such report~
petition, or other communication. A copy of each response thereto
submitted to or received from such governmental. state, County, or
federal agency or o.f.ficial by the Company, shall likelol'ise be
submitted promptly to the City Manage?
11.5 Company Office
11. 5.01 Throughout the term of this Franchise, the
Company shall maintain an office in the service Area. The Company
hereby designates said office as the plaCe where Subscriber
complaints~ any notice, direction, order, request J or other
communication trom the City. and any other cotmllunication to the
Company including, without limitation, a request fo~ any Service,
may be served, or delivered. The cotrlpany sha~i promptly notify the
City Manager, in writing. ~nd shall provide notice to each
Subscriber and other user of the System, of the initial location
and telephone number, and any change in the location or telephone
number, of said office. The Company shall be entitled, in its
discretion, to utilize a regional customer service office; provided
that, such office is within five (5} miles of the Service Area and
that the Company provides a local telephone number within the
Sero.'ic@ Area for contacting Such office.
11. 5. 02 The office required by Section 1.1. 5. (11
hereof shall be open to the public during all normal business hours
and sha11 have a publicly listed telephone nuuber. Staff or other
service.s shall be available to: (i) receive Subscriber complaints
or requests for Service or repairs and to initiate action with
respect to System or Service outages on a full-time basis, twenty
four (24) hours a day, seven (1) days a ~eek; and (ii) initiate
Service in~tallations, undertake normal repairs, and initiate
action with respect to Subscriber complaints en Monday through
FridaYT .from 8:)0 a.m. to 5:00 p.m., 3nd at such ether times as may
be necessary to accommodate special circumstances.
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11.6 Books and Records/Audit
11.6.01 Throughout the term of this Franchise, the
Company shall maintain, either in the offic~ required by Section
11.5 hereof or elsewhere ~ithin the city, or shall ~ake availabl~
at said office ~ithin five (5) business days after receipt of a
written request by the city Manager or the City Auditor, complete
and accu~ate books of account and reco~ds of the business,
ownership., and operations of the company io."ith respect to the
System, any service distrib~ted over the system, and each servjce
Related Activity, in accordance ~ith section 9.1 hereof.
11.6.02 The Company shall maintain. in said office
or as otherwise specified in this section lL 6, accurate and.
compete records indicating all uses of, and suppliers of Services
on, all Channels on the System.
11.6.03 The City Council, the city Manager, the
City Auditor, or their designated representativ2s~ shall have the
riqht to inspect, examirLe, or audit, during normal business hours
and upon reasonable notice to the Company. all docUlllents which
pertain to the company or any Affiliated Pereon with respect to the
System., each Service distributed over the System, and each Service
Related Activity, excludinq the personal financial statements or
info:rmation of individual investors if such infor.nation is not
9~,erally available.. All such dcx".Uments shall be made available at
the office of the company, provided such office is within the
S4ro/'ice Area, or at the Palo Alto Civic Center, if sa.id office is
located outside of the Service Area, in order to facilitate said
inspection, examination, or audit, as provided in Section 11.6~Ol
hereof. All such documents which pertain to financial Inatters
which may ~ the subject of an audit hy the City shall be retained
by t.lle Company for a minimwc of t.hree p} ye.ars. following tenrdna
tion of this Franchise. Access by the city to any of the financial
documents covered by this Section 11. 6. 03 shall not pe clen:ied by
the Company on grounds that such documents are alleged by the
Company to contain proprietary information I provided that the
COl61pany or any Affi,liated Person shall be entitled to mark such
information as proprietaxy, and. provided further that this
requirement shall not be deemed. to constitute a wa iver of tl1e
Company's right to assert that the proprie!.:.ary information
contained in such documents should not be disclosed and to wit~Jlold
said information upon the agreement of the city. In order to
determine the validity of said assertion and withholdinq by the
Company, the city agrees to review the ~lleged proprietary
information at the Company's office in the service Area and, in
connection with said revieW', to limit access to the alleged
proprietary information to those individuals who require the
information in the exercise of the City's rights under this
ResT.ated Aqreement. If the city Manager., upor. advice of the City
Attorney, concurs with the Company's or the Affiliated Person's
assertion regardinq the proprietary nature of said information., the
City will not disclose such information to any Person and will not
remove from the Ccmpanyts Qr the Affiliated Person's office the
50
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proprietary portion of any document or other tangible thing that
contains said prop~ietary informatio~.
ll~6~04 The city Co~ncil, the City Manager, ~~e
City Auditor, or their designated representatives, may require
written certification by the company's appropriate directors,
officers, or other employees with respect to all documents referred
to in t-~i6 Se~tion 11.6.
11.6.05 Thl;"ouqhout the tenn of this Franchise, the
Company shall maintain, in e file available Cor public inspection
during normal business hours at its office in the Service Area, the
following documents:
{i} the initial version of all plans and
other docume.'lts to :be subm.itted by the
company or, a~ applicable, by any other
Person as provided in this Restated
Agreement, all updates to said plans and
other documents, and any modifications to
said plans or other documents that have
become effective;
(ii) all periodic reports to be submitted by
the Company, as provided in this Restated
Agreement:
Ciii) recoras indicating all uses, and users,
of all video Channels on the system, as
proyfded in this Section 11: am!
(Iv} reasonable summaries of Sobscriber com
plaints received by the Company during
the prier two '2J years, and of the types
of actions taken by the Company in re
sponse to the complaints~
SECTION 12 --FOBECLOSUBE AND CONDEKNATI91!
12.1 Upon the occurrence of any event whiCh is reasonably
likely to lead to the. foreclosure or other judicial sale of a11 or
a substantial part of the system, or th~ termination pi any lease
or mortgage covering all or a substantial part of the system, the
Company shall immediately notify the City Manager and the city
Attorney of such occurrence. Such notification shall be treated as
a notification of a proposed change in Control of the co~pany and
the provisions of section 14 of this Restated Agreement shall
apply.
12~2 !n the event that the System, or any ~terial part
of the System, is taken, appropriated., or condemned pursuant to law
and the effect of such taking is to materially frustrate the
ability of the Company to carry out its obligations pursuant t0 4
and the purposes of this Restated Agreement, then the company may
51
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EXCERPT -MINutl::S OF NO~ER 10. 1993 POLI'';Y .l.;\D 5rR';rC~01-~lTTEr:. ME.EH:iG
~S: 9: 10 to 9. 2c.--4~m~ -.,,-"
3. Regulation of Basic Ca~le SerVLce Eates
Director of Information Resources Dianah Neff s~ij in addition to
regular noticing, notice of the Policy and Services (P&S, Com:m:i.tt.ee
meeting had been posted on th~ cable system en the bulletin board
on Channel 16 for two weeks.
,John Kelly, 1868 Mark: Twair: Street, V6.S President "r the Board o~
Directors of cable Co-op. He encouraged that Council not proceed
with certification at the present time. Cable Co-op was attempting
to deal with a legislative 'chal".ge which congress had placed on
cable companies which resulted in the loss of a large majority of
extra outlet revenue. Cable Co-op had acted responsibly in the
past in managing its rate increases~ It had increased rates every
year as little as possible. It ~as anticipated an increase would
be required. Approximately $-600,000 in revenu~ from extra outlet.
charges would be lest in the future pecause of the Cable Act. It
was the Board's intention to increase the basic rate as soon as
possible from $26.95 to $29.95, which was considerably less than
the rate it believed it could charge based on the cost of service
standards as understood. eased on rellie· ... of cost data by Cable Co
op accountants. tbe actual cost of service was closer to $Jj per
month, with SO!!1e variation. The $29.95 figure represented a
savings to subscribers from the actual cost of a fairly significant
magnitude. The rate increase might appear to be a $3 to $4
incre~se~ but the total revenue per subscriber for projections for
1994 oompared with 1993 showed an average revenue increase of J~6
percent. The money form~rly paid by outlet subscriber~ was shifted
onto the ordinary basic subscriber. The service was changing.
Instead of paying $26~95 plus franchise fees for a single o~tiet,
people would pay a $29.95 rate plus converter charges of around
$0.84, plus the franchise fees, for essentially an unlimited number
of outlets in the home. It was a di~terent service which needed to
be cODllilunicated. The change was the result of the change in
national legislation. The notion of regulatory uncertainty was
discussed reasonably \rIell in an editorial in the: Palo Alto Weekly.
The author's position s~1O:med to be that it was a period of
regulatory change, and it was not clear what the rules would be.
The cost of service standar~s was unKno.~. !t was unknown whether
there would be a rate freeze lifted on November 15, 1993, or
whe.ther it 'Would be ertE.~'Kled into December, February, etc. The
rules of the game were evolving with the Federal communica.tions
Commission (FCCi and were likely t.o evolve furt1'ler witt. new
commissioners.. There 'Was qener~l unpertainty concerning the
national regulatory requirement. It was questionable whether the
expenditure of Council and staff time was appropriate to deal with
regulatory changes. Historically, Cable Co-op had invited member
subsc~iber involvement in decision-making concerning rat~s.
services, capital projects, etc~ Cable Co-op answered to 21,000
subscribers-and had 17,000 subscribers vote in the last election,
and each year subscribers elected at least one-third of the Boa~d
o.f Directors. There was considerable opportunity for member I
subscribers to become involved in deciSion-making, leading to the
final determination of .hat the rates should be. Notices of all
11/10/93 P&S: .19
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i :> bl h d 1 Q . d . meet ngs w~re publlclzed. Ca e co-op a a so lnvlte the Clty's
participation in the decision-making process. The franchise period
was nearly half over, and there would come a time ~hen a decision
·.ould be made about renewing the franchise. It 'Was good business
and good policy to cooperate vith the city on a wide variety of
fronts. There ~ere issues big~er than rate re9ulation Which would
have to be dealt with, hopefully in concert with the City, about
how to develop a system over the next seven to ten years. The City
should have received a letter regarding rate regulations from the
new General Manager and Chief Executive Officer, Brad Anderson.
One of the key points in the letter was, reqardless of whether the
City regula.ted, the Cable Co-op was willing to make available
whatever infon:lation the City might want to review in deciding
whether the Cable Co-op had made r~esonable or intelligent
decision.!i. in set.ting its rates., including accounting records,
budgets, financial, etc. There was a provision in the Franchi~e
Agreement Yhich allowed for submission of information under
confidentiality procedures. cable Co-op invited the City's
participation in its budgeting process. The Cable Co-op Bcard had
not taken a position on City Attorney Ariel Calonne's: suggestion to
amend the Franchise Agreement. Cable Co-op had taken a position of
informally letting the city know of its desire to work with it to
share information on costs and budgets. A rate increase was
r~ecessary for Cable co-op's business. The cost of service
information showed the truE. cost of basic service 'Was $33 per
month. with the loss of the extra outl.at revenue, with other
normal increases in costs, and with the increases expected in
principal payments to the senior lender, ~he~e was a need to raise
revenue. It was anticipated that expenses 'Would increase the
followinq year in the technical are.:! to provide a bcatter service
and help deal vith historic outage problems. There we~e ways to
anticipate, examine, and refine the responses to questions which
might be ~aised about Cable Co-op's rates. If the rates were
raised by $3, there would he a number of complaints in the
community. Cable co-op wanted its members to attend Cable Co-op
meetings and annual elections, run for positions on the Board on a
Bno rate increase~ plat£orm~ etc. He was not persuaded
certification was the best way for the City to work with Cable Co
op. If the City decided not to regulate at the current time, it
was net the end of the world. Ir. the future, if t~.e City believed
the Cable Co-op had net acted responsihlYJ did not make good on its
word to cooperate, thought infoI1Jlal procedures did not suffice, or
that Cable Co-op did not cIeal adequately with complaints from
subscribers, it always had the option to requlate.
Bob Koss, 4010 Qrme S~eet, read the FCC· regulations regarding rate
and rule malcing. If the aut.hority did not believe rate making
regulation was necessary, it could choose not to seck certification
from the FCC. certi.fication could be sought in the. future if
circWDstances warranted local rate regulation. By failing to
regulate, ~he city would not give up an}thinq. There were large
cable companies which did t~in9s as a matter of course which Cable
Co-op would not even consider, e.g., negative option accompanied
'With the launching of the Encore programming. congress legislated
'With a broad sword, coming up with is law Which was extremely
punitive with assumptions all cable companies were predatory and
ll/10/93 P.S: .0
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overpriced by Sic;ni:)cant amounts. Cable co-o;:'ad always placed
high quality of service and responsiveness to the community at the
forefront, 'Wtlich cost money, $0 it had net been the cheapest
provicler of service~ It was, hO'Jever, economical for .... hat was
received. He cautioned about reregulation and sending in the form
~hich cpened a one-way only gate. Once the ~ecision to regulate
was made, it could r.ot ever I except for act of congress, not
regt.llate~ It 'Was a }::Iwreaucrats dream. a position which ."..as written
into law-by an act of Congress, the City could not abolish, and had
first claim on the revenues from the Franchise Fee. The
requlations w.,.uld allo.., the catlle companies that chose cost of
service, which Cable Co-op had chosen: to return with findings four
times a year if there ~ere increases in costs. Cable co-op would
have increases in costs in the Summer of 1994 because, due to the
ca:ble Act and retransmission consent, it IJQuld have to add three
new cable channels, wtdch it had to pay for~ Absent the Cable Act,
Cabl~ Co-op would not consider the $3 increase. He referred to the
Cable Co-op Telephone Waiting Time and said cable Co-op spent six
JDcnths coming up 'With an improved telephone system which had
decreasea the ~aitinq time considerably. The average waiting time
in the last few years was 27.2.3 seco!'\ds, 'Which wa.s 10 percent
better than the requirement. The FCC goal for ou~aqes was to begin
service within 24 hours. The longest total outage time for Cable
Co-op in the last fe°"; years was 1.1. 5 hours. The average total
outaqe ti~e 'Was 1.8 hour~. It was t~o examples of the quality of
service Cable Co-op tried to provide. cable Co-op w-as very
responsive to the community and wanted to ~~ow from the community
which channels it .anted to keep and which it vanted to get rid of~
The number of complaints from Janyary 1993 tQtaled 46. In four
years i five incumbent ~embers of the Boa~d of Directors bad been
voted out of office~ cable Co-op was a community organization, a
coamuni ty resource, ana. if the. City wanted to keep community
control, it ba.d to be willing to let it operate. If t".he
constraints were too tiqht, the company Would not make it
financially.
Mr~ Kelly introduced Vice
Management Finance Coamittee
Carol Helman_
President Tom Hassel, Chairman of
St.an Smith. and Director of Mark.eting,.
Chairperson Simitian said council was being asked to make a policy
choice on whether tc regulate Cable co-op. He did not believe
staff had provided enough information for council to intelligently
make the decision eit-her way~ staff frequently encouraged Council
to stay out of administrative areas, to try to ::eely on staff
expertise when appropriate, and to limit iteelf to a policy-makinq
role.. He wanted to know the impact regulation 'Would have on rates"
pr09ramming, and service, if any~ It the city chose not to
regulate, he wanted to kno~ what impact it ~ould bave on rates,
programminq, and services" if any.. He. wanted to know the cost in
tenns of staff, Council, consultant, additional budget allocations,
etc. He queried whether there were policy issues which council
should consider which dealt with the difficult position the city
would be 1n as a goverJUlent body regulating a communications medium.
in its own com:munity. The Daterials from the city Attorney's
Office vere helpful and provided additional information, but
11/10/93 P.S: 21
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otherwise not OnlY~id he not hAve the inform~on h~ needed as a
council KQmbe~ to make the decision to regulate, but also he did
not have the information needed to ma~e a decision not to regulate.
It was an impo.rtant irrevocable decision, for which he needed
ans·wers. In fairness l he underEtood. the. process ·.as ne...... There
were questions for ...... hich trjere were no answers, but Itluch more
information was required before council could make a judgment.
council Kember Fazzino ,-"as ~lso concerned. that neither the Cit.y
Attorney, the city Kanager~ nor the Assistant city Manl1ger had
attended the meeting. He agreed he was not prepared to make a
decision that evening. He was confused by the whole issue of the
cost of serviC't!-standards. being a.dopt.ed by the. FCC and '1thether t.he
standards had been completed. '
Ms. Neff said the standards had not yet been adopted.
Council Member Fazzino sai~ Mr~ Kelly mads a good case about the
fact Cable Co-op ~as a public entity and provided ample opportunity
for s.ubscribers and members of the public to be heard. Mr~ Kelly
indicated in the. course of his discussion opportunities for
r-epresentatives of cities to participate Iilore actively in decisions
regarding rates and cost,s of service Jf Council decided not to step
into a requlatory role.
Mr. Kelly as)ced 'Whet.her the P&S Committee
Mr. And~rson's letter, dated November 3, 1993.
had received
Chairperson Simitian and Council Member-Huber had received copies
at their home addresses.
Mr. Kelly read key portions of the letter in terms ot participation
with the City: the ·cost of service methodoloqy had heen revieyed
by outside auditors and found to be conservative based on eXisting
utility requ1ation Dodels~ We are confident it will hold up whgn
the FCC finally releases its rules. We invite you and/or the City
designees to review the audit,or's report 'With our controller, Carol
Roland.· Cable Co-op welcomed the city~s participation in that
regard. The City representatives W'ere -invited to attend the Board
meetinqs, including our 4nnual budget approval meeting to monitor
our rate setting p~ocess. You are also invited to attend the Beard
Committee lIIeetinqs leading up t~ budget presentation approval.·
Although not sta.ted in the letter, 'What was implied was the
invitation to attend on behalf of the city and other members of ~~e
JPA" but they would welcome full participation. Cable Co-op 'Wanted
as much information es possible to mak~ an informed decision. The
City had excellent resources in terms of budgets which, if made
available to Cable Co-op, would be an area by 'Which both would
benefit.
council Member Fazzino asked about the possibility of a City
representative~s playing a more formal role in the process, if not
as the regulator, perhaps as an ex-officio beard member.
Mr* Kelly said the Board had not taken a position on it. If the
franchise documents were reviewed, fer seven or e1ght years Cable
11/10/93 P&S: 22
co-op had. indicated not only acceptance but al$O 'Welcome of a
closer relationship with the City~ There was a proqision in the
Francr.ise Agreel't'lent allowing the City to bond into the system.
possibly through designation of some of the franchjse fees.
council Member Fazzino said if Council decided not to regulate, he
wanted to ensure there were other ~ay5 to guarantee, if not formal
City participation, some fOnfl of die-ect representation. There
could also be other ways in ~hich Ci.1ble Co-op could reach out more
effe.cti,vely to t..i.e public to involve them in decisions regarding
rates and 6ervice~
Mr. ~elly believed there was a range of relationships which could
~ considered between the City and Cable Co-op. The neecs of the
City, the members/subscribers, and the public should be considered.
Ca}:!le Co-op would 'Work active.ly to cone up ",ith a relationsh.ip
which would work for all parties involved.
Council Hember Fazzino a.s)l:.ea whether Mr. lCelly could draft
suggestions regaraing options for a relationship, short, of full
re~Jlation, if another Meetinq on the subject was held.
Mr. Kelly believed options could be provided. Before drawinq up a
list, it made sense to discuss the ~arious options the City wanted
to see ..
Council Kember Fazzino asked for clarification on the City's
options with respect to requlation, e~g., if the City moved ~~ead,
whether it Would be unable to pu11 back from the role, or if the
City did not regulate, whether it would have the cption to do so in
the future.
Ms. Neff said Council could choose to regulate (or certify) or not,
and if it chose to r~gulate, it could do so passively or actively.
The City could be the ,advocate tor citizens ,and subscribers in
overseeinq What Cable co-op didf" or it could take action only when
~b.re wa$ a complaint. Even if Cable Co-op raised its rates and
there were no complaints, the City would not have to take an active
role.
Council MeDber Fa%zif'lo clarified the decision :not toO take an active
role would be defined as passive regulation.
Ms. Neff saltS yes. :Ii tbe city chose not to requlatl=!, it could
regulate .at any time in the future. What liould be lost if the City
chose to regulate at a future ti:ane vas 'Where it started the
process. It took a minimum of 30 days for certification~ and if
the company chose to increase rates during the 30-day period, the
City would not bave the right to regulate. The City had a
franchise and needed to consider the relationship before mcving
into a forJDal agreement with City staff 5i tting on the cable Co-op
Board since the city was in e franchise position. It was possible
there were regulations which would prohibit the City's takinq a
formal, active position in Cable Co-op.
U(lC(91 p,s: 23
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Council
co-op's
Member Fa~no asked for Ms. Neff's ~6essment
performance regarding rates and service levels.
of Cable
Ms. Neff believ~d there had been a marked improvement in Cable
Cu-OP'g service level, e.specially OV(I,r the past three years. The
nuubers Mr. Moss showed were at times ~isleading because they did
not address the number of complaints r-eceived by Cable Co-op. The
numbers also did not address complaints Which came in but did not
require resolution. The City worked well ~it~ Cabl~ Co-op. There
were areas of disagreement, but everyone disagreed about the Cable
Act at somc point. The customer serYice standards in the agreement
and as set by the FCC vere adequate. Cities were being u~ged to
re.qulate even passive.ly, because it wa.s: in::portant. The impacts the
regulations would have on rates I programming, and services ·.ere
negligible because people did not understand what cost of service
was all about.. Eight:y percent of all cahle operators had gone
wnchl!lark. very few caDle operators declared cost of service.
Progr~ing would have no impact because under the cable Act, the
City could not requlate what Cable Co-op chose to place on the
channels other than to see it adhered to carrying local
programm.ing~ The city had the capabilities t,o hold Cable Co-op to
customer service st~ndards.
Chairperson SilLitian clarjfied that '"hile thl!: City could not impact
programminq, it could impact rates which possibly could impact the
kind of programming Cable Co-op believed it could offer as p~rt of
its basic program~
Mr. Kelly did not know since there was a number of different ways
proqramminq could be affected. If rates were regulated in general,
it forced rates down if the City thouqht the cost of service
justification was not accurate. The only immediate impact would
place limitations on Cable co-op as to certain forms of
programming, e.g., if there was enouqh pressure on overall costs,
the local origination efforts would be seriously reconsidered, the
relationship with Mid-Peninsula Access Corporation (MPAC) ~~uld be
reconsidered, some of the contracts for existing service,s ....,ould ba
reconsidered; and there would be fever opportunities to aad new
services. It was difficult to imagine how regulation would have a
positive impact on programming.
Chairperson Simitian asked whether there was a difference in the
City's ability to regulate service levels directly as a result of
the Cable Act. The City had some ability to regulate service
currently, and he ~~eried whether the Cable Act allowed a different
ability to regulate service levels more or less.
Ks~ Neff said the Cable Act allowed renegotiation of service
regulations if the two parties agreed thereon. The .franchise
allowed for a reopening of the Franchise Agreement and
renegotiat,~ng even p,rior to the franchise period"s end in 2001.
Mr. Kelly said the Cable Act imposed new service requirements on
operato~s to which cable Co-op had to conform regardless of whether
the city decided to regulate.
11/10/93 p's: 24
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.. ..r. Moss advocated hi~h quality service levels:--.As soon as the
requlations tor service were pr·omulqated, he pushed Cable co-op
ltI.anag9l'11ent to exceed them, i.e., the lalJ required i1"'.stallation
within seven days while Cable Co-op's was between one ar.d one-half
and two and olle-half days. The only time it had been more than
seven days was when two installers were sick at the same time.
cable Co-op would have no problem meeting the standards. 'There was
A statement in the Cable Act which stated that, if the Franchise
Agreement had tighter regulations for service than th£ Cable Act,
th.e Franchise Agreement 'Would govern, even though it preempted
local governing in every other area.
Council Member Fazzino asked whether Cabla Co-op's current service
levels were acceptable.
Ks~ Neff said while there was room for improvement. Cable Co-op/s
willingness to cooperate va~ probably hi~h~r tha~ what cculd be
found in other cities. The trend of Cable co-op's service over the
past years had impr-oveo. The lIlajor complaint involved the
telephone system. She met with the ne'W Genera.l Manager to discuss
the issues on a regula~ basis.
Council Kember Fazzino queried 'Whether there would be a higher
level of service if the City regulated regardless of national and
state orga.niz:.ations views regarding the appropriate role of cities.
Ms~ Neff said no. The only area wbich would potentially benefit
the city was the ability to regulate should people with less
conscience sit on the Board. The service levels and cooperation
would remain the sa~e whethe~ the city regulated or not.
!lO"J'ZOB TO emr.rnr02J Council MeII!.bQr Sit:litian moved, seconded by
Kniss, to continue the item and have staff return with additional
information respon4ing to the questio~s which had been p~esented,
including whether the Joint po.ers vould be re~uired to participate
or could they acquiesce or have staff simply encourage to engage
the...~ The issue cf the regulation of basic c~ble service rates
should return to the P&S com=ittee.
Council Member il:niss agreed more information and time. was necessary
for a decision~
co~cil Member Huber personally believed regulation ~as a ~ora&s
and should not occur unless a:bsolutely necessary ~ In order to make
a decision, more information was needed~ He yanted to know the
nature of the problems. who vas complaining, what the co.plaints
were, and how the Cable Co-op compared with other cities~
Council Member .Fazzino believed the item needed to return as
quickly as possible, and the cable issue should appear .first on the
agenda~ The questions Council asked should be included ir • .a report
Vbicb vas based en the current ana projected relationa.."lip with
cable CQ-CP. There .ight not be a si9nificant reason to change the
situation.. The report given to the PiS Committee in September 1993
bad. been more abstract and conceptual. providinq a different
aessaqe. The City Attorney and City Kanager should be present at
11/10/93 J>&S: 25
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the next meetinq ~);?ch dealt with the item~ ~was interested in
the issue of alternative ~ays for the City or its partners to have
a formal role in Cable Co-op decision making I 'Which should be
explored as an alternativ~ to full regulaticns~
Chairperson s.ill'litian also wanted to hear both the City and Cable
Co-op's thoughts about a cost of s~rvice analysis without entering
int.o the. re~ulation process~ If Cable Co-op did ",ell, the
conclusion vas reached it W2S unnecessary to enter into t:he
requlatcry process on a continuing basis. If it ~as discovered it
'Was necessary, it could be done at a later tilrl.e.. If the bottom
lina was really rates and the programming and service issues ware
ancillary, then rates could be looked at in the same process.
Council Member Huber referred to a letter from Mr. Hooks regarding
the amount of money the City received~ and he wanted a sense of
'What the City received.
Ms, Neff had not seen Joi.r. Hooks' letter prior to the evening's
meeting, but the $400~OOO in f~anchise fees was fairly accurate.
Chairperson Simitian said there had been a significant tUrnover of
eigbt. Council Members in the past four years, %!leaning .only a fev of
the veterans were present during the ext~nded birth of Cahle co-op.
He personally did not have much of a backgr-ound on many ot the
issues. A startinq point might include what regulatory
responsibilities and opportunities the City had already. As he
evaluated a potentially new regulatory role, it would be belpful to
have some discussion on the City's role and what it could be~
Mr~ Ke~ly asked for a copy of the list of i~sues to enabl~ Cable
Co-op to speak more intelligently at the next P&S Committee meeting
and Assistant to the City Manaqer vicci Rudin agreed to provide it.
Kr ~ Moss naid bylaws would require an amendment by Cable Co-op
mealJers before it would allow a City staff or representative to
have formal Board representation, e.q., there was no guarantee the
Board would vote for passage of a formal representative~
Covncil Member Fazzino encouraged a creative re!!,ponse to the City's
request since the alternative was full regulation,
IIO'ZIOII PASIIED • -o.
4. Future Meeting Schedules and Agendas
Assistant to the City Manager Vicei ~uain said the next Policy and
Services (P&S) committee meeting would occur on TUesday, November
16, 1993$ and would include the issues of Johnson Park restroom
h.sues and Do'Wllto"'1l parking recommenclations includinq the Lot Q
parking ga;-age.
Chairperson Simitian wanted to ensure the Johnson Park neighbors
were t:e-noticed.
11/10/93 P&S: 26
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November 4, 1993
The Honorable City Council
Palo .~tQ, California
Attention: Policy and Services Committee
Referral of Cable ~egulation
Members of the Council:
Report in Brief
This report transmits the reasons why Counr:il referred the staff repo:l"t
OIl Cable Rate Regulation to the Pclicy and Services Committee and
includes the minutes of tt,e CouDcil Meeting on Se:pteIl'lDer 20 and the
original staff repo~t. It is accompanied by a separate report from the
City Attorney.
DisClUISiQn
on September .20, Council voted
regulaticn to the Policy and
following questions:
to refer the: matter of cable
Ser-..rices Committee to cOI"l..sider
Can rates he regulated in an active or passive manner?
Is the decision to regulate rates irrevocable?
rate
the
Can an authority other than the Council review and/or regulate
rates and service issues?
The referral will also ensure adequate opportunity for the public and
the other Jcint Powers member jurisdictions to give their input on
whether Palo Alto should regulate cable rates.
This report is accompanied by a staff report from the City Attorney's
Office responding to the first three issues. Staff has sent information
to the Joint Powers agencies. asking them to attend the Policy and
Sen."ices meeting or send written comments~ and has cablecast an
invitation to the public to attend the meeting.
Respectfully submitted~
9;~itIJ
Director, Information Resources
Attachments
0!R:572:93 1
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Manager
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".C·
lIN. j
Exr::erpt -!-:ir.utes of ~~~;!l,=,er :0, 19-9J Cit.\' Cc.'ul'.cil ~lOng.
lingering communications gap be~ween the Vtilitie~ Depart~ent, the
Council, and the cO:',::7,:..:nlty+
Council NembE:i."" i,;j~ee}!?::: 5~_d c:-:;: of the t:'.<:::st lmp:":"::lnt resp8:'":sit,ili
ties of ~he Council ~dS to ~a};e appro?riete decisions tha~ r~la:ej
to utility issues. S~rne excellpnt de=isions ir: the pas~ resultej
in the healthy conrJi'ti::m of t.'ie City's utili!..!cs. Tne Co..:ncil
Sh01.::1d r:are::~l!y gUc!"d t:ce co:-:ditlC:": of the \.:-;:ilitics. It ""a:;;
import~nt to h3ve th~ pclic~· questions l~;d t~fore the Co~~=il
either in ·..,'riting O~ by phon.; in a(h'a~C'e of the !:' .• ;et.ings. She
!:>uggested it ;""Quld be helpful to= the 1.:;.[ to sE'.nd the Council a
separate memoranduT'", that included policy COITl.t~~".:.o,.
Counci 1 Kember Ccbb t:han}:ec Ctili ties i..,j'.'isory Corr.~issioner Fred
Eyerly and Jack Sutorius for their e~fcr-r.s. He: added that UAC
would probably t03l-~~ on an inc:r-easir;gly i~;:,orto.;::, r-ole.
MOTION: Council 1-1e!"bt::t" Cobb moved, seconded hy Roser:bau!ll, to
~pprove the Utilities Advisory Com~ission reccrnrnendatio~ to
author ize the Mayor to execute the Nort.herr, Cal i Earn ia Pa .. r.e:r Agency
(NCPA I Facijities Agreet!lent and its associated Schedules and the
NCPA Pooling Agreement and its associa'ted schedules.
MOTIO}; PJ.S,sED 9-0.
RECESS: 9:40 P+M. -9: ~5 P.~+
RESOLUTIONS
13. Resolution Finding and Determining that the Cable Television
System Operating Mlithin the Joint PO\olzrs Service Area,
including the City of Pale Alto, is not subject to Effective
competition and Authorizing the Regulation of Basic Cable
Service Rates
Director of Information Resources Dianah Neff said the Cable Act of
1992 presented challenges for both c~ties and cable operators.
Many residents were interested in Palo Alto bec':lming ce!"tifiE',d to
re-regulate the basic tier which meant th~ City could regulate all
cable costs.
Council Member Andersen quer~ed the need for a consultant to advise
on the cost-of-service regulatory principles.
~s. Neff said several companies specialized in the Cable Act, but
there was no individual on staff with the time to investigate the
rules. The cost-ar-service document ",as expected to be very
lengthy; it ,-"ould require a great deal at time for someone to
become praficie~t in th~ regulations.
Council Member Andersen asked about the curren-r. staffing level.
Ms. Neft replied ther-e 3S a helf-time staff person and :iihe handled
all of the administr~tion.
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• ~;':';;"''-''--.:/": ,
""""" Counci 1 Mernbe::-Ar.de'5)n as].:ed at,;Jut
the otheL cities.
Palo) Alto"; . .....)C "'l~h regard to
Ms. Neff replied Pale A:t~ ~as t~e le~~ dgcnc;.
Council M,,"r.her Ar.de:-sen as.:".e.d r,.:hether tr-.'C" at~:c.: cities ',,:e::-e
appro·"ir.'=l the 5ame dDCU-':,'2~'1: or -""het-her Palo }\.1~o ":2.S 'lhe onl:.-' city
approvir:g it.
Ms. Neff re.plied the agree,,€fnt af 1981 left t:--.o? r::;:>p';;risibility of
approving such itetls an behalf of t":-te Jc.,in':. ?G,",,'e:-s t~ t,'"::e Palo .~.ltD
City CO~ilcil.
Council I'lember A..'1.cter"sen as)..-.ed ... '~ethet"' Palo Alto hod received anI'
feedback froi':l the other ,:ities.
Ms. Neff had sent :memora:1Ch.lIDS too the staff en the Joint Powers but
had not received any feedbac,'t.
Council l·fe1T1ber Fazzino requested more ir.for~,:n:ion regarding Palo
1.1 to' 5 role in regulatir.g rates.
Ms~ Ne!"f stat_ed Cable co-op ,".'ould file its basic rate .... hich
included the full cable price. Sh~ explained a cable operator
could apply to the Feder~l Communications Cnrnmission (FCC) ruling
for a "benchmark" rate which could be administered by the City on
behalf of the Joint Powers, or cable operators could ask fer a
"cost-of-service e,-;alysis lT if they felt the benchmark did not
reflect the cost they incurred in providing the service. The
consultant ~ould work with staff to provide the necessary analysis
an~ reccmmendations regarding cost-of-service a~d accuracy of
information by Cable Co-op. That information would be submitted to
the City Council.
Council .Member Fazzino asked how the ~ther cities ..... ould be involved
!It that point.
Ji'!s~ Neff replied that a joint committ.ee of the cities ..... ould meet.
e:fter the consultant i£!valuatl!d the info:t1nat.io>1. A.s a courtesy, the
otber Councils .... ·ould have ar. oppcrtunit':l to comment on the group's
recolr.tnendation. Tbe Palo Alto City Council ""ould ulti:mately
approve the recommendation_
council Membe~ Fazzino asked ~hether the Council's app=oval ..... ould
occur on an ~nnual basis based upon rete increases.
"Ms. Neff said F'CC ... ould allow cable operators to come back on a
quarterly basis if there "'ere changes in the costs. The Council
wculd be in a position to !'eview any and all proposed rate
increases.
council Member Fazzino assumed Council would review cable Co-op's
record to ensure consistency with the federal standards.
Ms Neff said the review ,",ould be handled adrninistrati vely by staff
Which would not require council action u~less ~hc Council wanted to
09/20/93 71-266
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amend the customer service standards. Th.:::. cot..l:-.::il I,.,'Q'.J.ld tE:'.ei· ... e an
annual report on the subjec~ and co~ld age~:lizc the n,a~ter for
formal review.
council Hc::\be.r Fazzino asked ~'!hether ar.y cC!:'".:;:"dc::3.":.ion had been
~iven tc having an authority ether than the CJunCll revie~ rat~s
and service is~ues. such as the Utilitias A~'Ji50ry Co~~ission.
1'1-9.. Netf had not.. considereC: using any other o'...i:1:"lor .i.-::.y.
council M€'!Dber Wheeler asked whether the Cl tyl::; nelO":c:l for consulting
il!Idvice .... auld be ongoing.
Ms. Neff replied once the major cost-of-::r:-':-','icc analysis !.Jas
prepared, she hoped staff ., .. ~uld be at·Ie t~ ha:lcle 5ubseq'Jent
requests for rate increases. HOIJev<3r, if tr,'9:-e ;.;en~ a co.r.Iplete
restn;:.ct.ur ing, therE: night be a need for a:Jiitional con3.U lting
services.
Bob Mass, 4010 Or me Street, said Cable Co-ap h~j ~dopted a forma!
position regarding rates and he had been a.s;:eC to preser.t that
position to the Council. He affirmed that C~ble Co'-op ..... o'.Jld be
going ~ith a c~st-of-service, not a benchm3rk. method for pricing
services w!i.ich .... ould increase the basic rat.es significa.ntly. The:
Cable Act. outla1,o/ed chaz."ging for additional ou'.::le'ts, and the Cable
co-op ...... ould ha .... e to make eCher adjustments to ".3ke up for t:he loss
of revenue_ A consultan1; did 'IoIork on a cost-of-service evaluation
for Cable Co-op. No one kneW' exactly "'hat the FCC regulations
wou.ld be, but the FCC regulations were clear that any city
regulating must use the franchising fee as the~source of income for
regulation. The volume of FCC regLllations t,.'as expected to be
st.agger ing'. The franchise fee .... 115 not subject to the Gann
limitations. To the extent that the money ',,;as used for other
purposes such as regulating cable, it was not available for general
public purposes. FCC service levels were adopted sever-al years
ago, and cable Co-op had almost always exceeded the requirements
for service levels. He cited several exan'p.les. FCC assumed the
Council would be the final arbitrator of rates and that there ~ould
be full public hear ings. The FCC expected reguiatot'"s to follo·.,' the
rules set by the FCC.
Tom Passel, 3825 Louis Road, vice Chair ot the Board of Directors
of Cable co-op, ex~ressed his desi~e that the system be second tv
none and that it be available for local community use_ He favored
Cable Co-op continoing as a subscriber-owned system. and the only
.. way to continue 'Was to go with the cost-of-ser'vice method of
pricing services. The financial books would be open 50 that anyone
cculd tell where the money \>las going. CablE! Co-op 'Would charge
",,'hat it would cost to deliver services_
council Member Fazzino asked what the current basic rate was.
P:!r _ Passel rep] ied the rate ",as $26.95 and covered access to
62 channels~
09/20/93 11-267
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~~ Council Mel:1ber Faz~: asked about an estir1atet: ~t~
rates.
!~.l. Passel replied :.:_== nc· ... r;'lte ' .... 'ouJd p::--obablj'
abo~t a 10 pe::--cent ~~:=e~se.
incredSC i~~
Counc:"'l "~e.mbe= Fazz:':.:) asked ho' .. ' the nel..' ra~.e ','IOU::! co::-pare
other basic rat.es ir. :.2arby CCr7' . ."','J.J"1 i t ~ E'S.
Mr. Pa.s:::el replied C-:-:::e co-ap c:o!i1paz-ed quite ravortL~ly on a c'ost
per-channel basis. :-: '~Ias important. net t.o cD~[lz>=e "3pples to
oranges!1 wherl lOOY.i:-J'; ~t cable rates.
Council Member FClzzi...-,: askEd for Hr. Passel's reaction t.o the staff
proposal r2garding C7:~cil review of cable rates.
Mr. Passel indicated :~b!e co-op .. 'as comfor-!:a:--Jle dealing with the
City.
Council ~'ember Roser,=-:::'.;;:'l asked ·."hether Mr'~ Pas3el arld ?-1r. Moss were
subtly saying that ca:::::e Co-op did not \lIant th(! Council to take the
action recommended c::: staff and engage i'l regulation.
Mr. Passel rei terat'?-: the Cabl~ Co-op was confortable with the
Councj.l reviewi!'lg r~::= increases. He painted out that the Cable
Act was a carr-plex d'O::-..:~er.t \o,'hich, alr,ong other things, ..... as adver
tised as a rnecl-.anisr. "::> red":.lce cable rates. Under the ne .... · rules,
Cable Co-op was forc~:! to carry some channels that it would not
ordinarily carry. Tn.::: Cable Act ",'as aimed at "th'! big ;:;layers" but
the cost-of-service ::::.:tnod would allow the smaller companies to
sllrvive.
Co~ncil Member RosenL~um clarified the cost-of-service stUdy might
result in a much hi;:1.er rate for service, which would help to
compensate for the loss in revenue !1ientioned by ~lr. MOss.
1'!r. Passel replied tt:.=. cost-of-service study might result in tluch
higher rates for basi,:: services. Cable Co-op .... as charging $8.95
tor an additional ou.tlst~ and cable co-op ..... ould lose about $54,000
per month. The people " .. ho hoed additional television sets ..... t:re
SUbsidizing the eve-rage cost of everyone else's bill for basic
service.
Council Member Rose:llbe:um asked about the number of subscribers.
Mr. Passel said Cable Co-op had about 21,000 subscribers.
Council Hember Rosenbaum asked ""hether Cable co-op had anticipated
higher rates regardless ~f the connection fee issue.
l"r. Passel did not have enough information to respond. The
biggest efiset "Was the inability to char,ge fo!" the second televi
sion set.
09/20/93 71-268
~ 0 council .Mernb{'!r Ar;~'~5en asked to ' .... hat E'.;.:tent ~'.l..d ~hE: a,::;diticna]
revenu~ fro~ the premium chan~e15 and pay-per-)i~~ C~J~nels ~educe
t:r-.e cos1:-oi-service. cGrnpcnen:.
Mr. Passel replied the channe:s die prQ';~da r~V8~~~ and, in 50~i
sense, did subsidi:~ the basic rate.
Mr. Mess added that when the co~t-c,f-service ~:~d~· ~a3 p~Epared,
they looked at the income fro1Tl both pay-pe:--·i~e'.: c:.,j t.:-.e p!"e:::iu:7.
channels arld detlS!:rrnined that Cable Co-op \,:as ;;C': c~.1.!'"":;iir,g e:lcugl" ..
[or either services t~ rec~ver all the cos~s_ }[e 7en:ioned that
Cable Co-op 'Was spending a~out $4.00 per r:lonth per s:..:.c.scliber fer
undergrounding.
council Member Andersen asked · ... h€:ther indebte~~css ;'25 a factcr and
if the Council could expect a recover}' over 3. t;~.GTt pe::-iod of time
resulting in a stabilization of rates.
Mr. rloss replied it was a ve-:y cO!:1plicat.ed quc:-stio:'"',. Ca;:·le Co-op
had a high debt load and a high capital cost ,.;hi.ch :-Iad to be built
into the cost-of-'service base. CablE Co-r,p \0:;::3 short a fe''''
thousand cust.ome:-s from oeing able to recover 1'-"1.1;. If Cable Co
op chose the benchmark method and decided not to cha~ge 100 percent
of what was allo~ed, the Cable Act ~ould prohibit Cable Co-op from
future rate increases. Subscriber rates could be raise~ cnly by
cost-of-living increases. If the Co-Op did no~ ,~s}~ tor 100 percent
of the cost-oi-service methDd allm .. ·ed by Octobe:-1, 199), Cabl~ Co
op ~ould never recover that amount. Cable Co-cp might be forced to
raise ratoes more than it 'Wanted to in ordt;;:r to build into the
system full recovery. If the cost-of-service ...... ere reduced beca'...i.se
of efficiencies and increased subscribers. the rates would also
fall. Dividends to the subscriber had been built into Cable Co-op.
Mayor McCown asked the alternatives the Council had. The issue of
cost-ot-service versus benchmark: was not a decision the Council had
any control over. The chcice of the city \o!as whether. to become the
rate regulator. .
Ms. Neff replied there .... ere t;,;o alternatiVes: either the city
chose to regulate or not to regulate. The FCC '.,culd step in if the
City did not have the franchise "fees to cover tile cost 0: regula
tion.
Mayor McCown asked staff to explain why the Cit.y should become the
rate regulator.
Ms. Neff sensed from residents that they wanted the City to rzvie ... •
the actions that Cable-Co-op took for the protection cof the
subscribers.
Mr. Calonne clarified that the market place ""as fj::lt. functioiling in
a normal manner since there was only one purve'1o!'". Palo .'lto ,""culd
probably be involved in a contentious rate-making process. The
City would probably neec consulting assistance"
09/20/93 71-269
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.~:
Mayor McCown said when the subscribe:--olo:r;ed sY~,':C1"1 '.· .. as sele:::-:>_d,
the City rnad~ a conscious decision not tc get ir'~0 the role of ~~e
provider"of cable c:mj/c,r regula':.,-'::". It ,,'as her :~,~'il?':S"'C2l"'.ding ':hat
f"he ne· .... fE:de::al ld,,' had caused the City to c;c;::;icie ','l;letne~ -:'c
regclatc or not.
Council Member Cobb stated that if the City beca~2 ~~~ rate setter,
there 'Would be a perception en the Fart of the pll::'lic that the
·~·.Juncil should be able to do sOr:iethir.g about trJ8 $crv:.ces provided.
", .meil Member Ros€:nbau7':"1 asked · ... ·hether a decis.:on. en the iss~€
r-,~eded to be made immediately. Based upon , ... hat !le he;d hean:3 r he
did not think that it was a good idea for the Clti to take on the
regulating role. He sugg<;!sted that a decision be! defe!'"rea Until
the Council could ~et mere input from the public.
Ms. Neff said if the Cit} h21d not chosen to rcgul,3~e by November
15, 1993, the rates could bs in::reased Iolithout the City's approval.
It took 30 days to be certified. The latest poszible dat@ that
Council could make a decision to regulate rates ~lould be October
12, 1993.
Council Member Rosenbaum asked ... 'hether the Council could start the
process at any time even if it rr:issed the Cc:'ober 12, 1993,
deadline.
Ms. Neff replied there .... ·35 no tj!T1~ limit by .... :-, l.ch franchising
authorities must file for certifica':.!.on requests. The real time
frame was November 15, 1993, because the freeze on cable rates
applied on April 5. 1993~ ~ould be lifted .
.KO'l'ION: Council Member Fazzino moved, seconded hy Krdss, to
approve the staff reco~~endation as follows:
,1. Adopt the resolution determining that the cable television
system operating 'With the Joint POl,;ers service area is not
subject to effective corr.petition and authDrize the regul3.tion
of basic cable service rates;
2. Authorize the City Manager or her designee to tile ~ith the
FCC form :328, "Certification of Franchising Authority to
Regulate BasiC Cable Service Rates and: Ir.itial Finding of Lack
of Effective Competition~; and
3. Approve notification to Cable cc-oP~Of the intent of the City
to enforce FCC C1.ostorner Service standards and/or continued
enforcement of the custom-er service: standards in the .Amende.d
and Modified Franchise Agreement Section 9 --Additional
Subscriber Ri9hts~ whichever !ncthod of enforcement is more
beneficial to the subscriber~
Council Member Fazzino said there was a role for governme~t to play
in the cable. television world. He did not support the idea of
municipal owne~ship when the issue came before the Council years
ago. At that time the Council did not have a significant problem
with the idea of regulating rates. He preferred to have another
09/20/93 71.-270
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jl'\ ,,,"", authorit~t regulat'fflg rate,s. He suggested t~j-a.t.[J g:;cup ] i:o:e the
Utilities Advisory Coremis;iorl assist the Count.:il ' .. :ith t!:ie i~5ue of
rate regulat ion and service stc:.ndard adhercr:-:-e;. B~' taki ~g rl1)
action on tht" issue, the Co~ncil \,,;ould t,ake i.:c::o;:. t!e felt tha~
Coble Co-op had dan£! ar. e,:co::llent j()~. He re':Cl~nli:e,j the r.2tes
were high, but based on the quality of t~e pro;r~~~lng, the rates
.... ere fair. Staff should explore ... 'ays to avoid 50~e c': the cor:;;::e:-ns
expressed by Co~ncil Member Cobb relating to co~pl~int letters and
the problems assClciated l,,'ith being put in th!? po.siti':-r~ of reg;,,:lat
ing rates. He felt the Cable Act placed the City In a positicn of
playing a role in the area of rate regulation.
Council Member Simitian said there ~as a lot of data cut not much
clarity about the policy decisions to be made c~d the i~plication5
of those decisions. He did not disag=ee Id th nuch of '\t,/hat. Council
Member Fazz ina said except for the ccnclllS ion he reached. One
possibil i ty was to refer the matter to the Pol icy and Services
(P&:S) Committee. GiVen t~e nu:nber of ... ·i::-it:~n ccr..municatio:"l5
received about ca.ble ,",';'1en the City was no':. responsible far
regulating~ he .... ·as inclined to believe that tna::-e "j8!"E'-rnQny peopl~
'Who 'Would l~ke to share their opinions on the subject. !t ..... ould be
a disservice to the cornnunity to make 3. decision without. 'thos.e
opinions. He understood t.hat there ;,.'as laO days or longer peri.od
of time in y.·hich to decide whether to regulate. To the ex:tent that
Cable Co-op ...,-as. concerned about"_ the City's act ior'.s. th€re ..... ere
political i~per~tives tor Cabl~ co-op to continue to responj in a
responsible way to the community' 5 concerns about rates ""hile the
City continued its deliberations. If that did not p~ovide the City
with enough protection, he asked whether the City co .... ld take a.n
action to become the regulator, refer the matter to P&S Committee
and then consider if the Council's decision should stand.
fils. Neff did not have an answer to the question.
contact th~ FCC to get an answer.
She offered to
Council Member Simitian asked for staff response 1:0 t.he suggestion
of referring the matter to t~e P&S Committee.
Ms. Neff said 'With regard to the issue of conplaints, the city ","'as
req-u.ired by the franchise to admir::ister complaints. If t.ne ~ily
got a con:plaint regarding service~ staff responded to the COT:!
plaints~ The new ac-t;lvity was the rate regulation, not the
complaints~
council l-1ember simitian said that his comment about complaints .. ·as
.to poInt to the fact that as the rate regulator the Council could
e:lCpect even !nore comm-entary. !ie believed th~ .... e were ntany people
..,ho 'Wo~lld like to communicate ;Jith the Council about the: issue.
There ",,"as a strong view ex:pressed in the letters. He PI'oposed a
substitute motion in the absence of staff being able to clar~fy the
iss~e of referring ~he matter to the P&S Committee.
SUBSTITUTE )lOTION TO REFER: Council foSember Simi tian lJIoved.
seconded by Rosenbaum, ,to refer the iss~e to the Policy and
Services Committee, -wit.h t.he proviso that ~f necessary. staff be
09/20/9) 71-271
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given the authoritv to bring the tTl3:ter hac,: be!::,:'e
Council if there wa-s a dead] ine t.hdt · ... arrantej it.
th€ entin'
Council l':Emb.<;:~ 5ipitia"n said the Cot.;~cil s~o~ld C<".:':: ~ cdl,;,"iQ::~~y
glance at Cable Co-op and he hoped. it unders:':)oj :1" :,:,:pli.:-atiarl::':
of ratE ;ncreases during that interi~ period. ~E 1:-:jer~:o8d t~e
council could join the regulating "ga~er' a~ a later :i~e.
Hr. Calonr:e suggested if council · .. ·a;:tea t-c refer tl"'.0 ~.'3tter in
order to qet so~,e auestions ans'''''~:red, ~he sub5titL:~£ ~:-~ion should
be specific about -aLlt.horizing staff to returTJ before! Qctc.t.er 12,
1993.
MARER ANt> SECONDER ~GR!:ED TO INCORPORATE INTO THE SUBSTITUTE MOT10N
the understanding U",i:lt staff caulo bring the matte::-back to tt-,e
f·ull Coum:::il prior to the Folic}' and Services co~:":'.ittee hearing if
staff believed it ... ·as app::-opriate.
Council Me.mber Anaer~en said rec;ardless of ho .... the Cou:"lcil acted,
there would be a rate increase. There was a larg~ nu~b€r of people
in the cOllUllurdty "'ho a:lticipated the council ..... '0uld be involved in
t.he process. The Councll should not send a !llessage to the
community that it did not want to be responsible for rate regulat
ing.
MaY0l:· McCown ha.d not been persuaded that having the City in the
regulatory role would make any ditterenc2 to ~hat cable co-op was
forced to do given the changes in the federal law. The one area of
concern that was not justified on the part of the public was the
issue of cost. cable co-op ha~ demonstrated the justification for
the level ot -::harges. Sh~ queried "What additional value the
Council would provide by looking over the shoulder of Cable Co-cp~
She noted that no one from the community was ir. attendance to speak
to the issue. 5he -did not t.:!)ink.. the Council should rush into a
decision on the matter unless staff told them differently~
Council Member FaZ2:1nO said that by supporting the substitute
motion "the city was giving cable Co-op free reign to establish
whatever rates it desired. The decision as to wh~ther the Council
was a rate regUlator had already been decided bjo' Congress"
SUBS77TUTB MOTION TO REFER PASSED 6-J, Andersen, Fazzino, Rniss
"nOa"
14. Ordinance 4172 entitled "ordinance of the council of the City
of Palo Alto Amending the Budget for ~he Fiscal Year 1993-94
to Allow for th~ Purchase of a 36.5 Acre Ease~ent Commonly
known as International Telephone an~ Telegraph Site"
Agreeme.nt between City of Palo Alto and KFS World Communica
tions# Inca, fo't Purchase and Sale of a 36.5 Acre Easement
Commonly known as International 'Z·elephone and Telegr6ph 5i te
09/20/93 71-272
Q
giverl the awthority to bring the mattE:1" ba('f.:. befo:re the t:;"lti!"E'
Ccuncil if there was ~ deadline that warranted it.
Coullc~l Membe:-S':nitian said the Ccu:--.c:..l sh':;'Jld Ct!! ~ ::-. caut.:c~)aT"
glance at CablE Co-op C'.;,",.:i he r;:J."-'ed it 'u[1dC':-st<)':)d : h.::: iT,pl 1';6 t i,~,,";~
of rate ~ncrea5es during that lnterir ~eriod. !{e U~~e~st0oj the
Council could 1011'1 the regulating "game" at a 12ter ti~c.
Mr. calonne suggested if cc~~cil ~a~tej to r~fe~ r~~ Ddtter i~
order-tc get some ques':.lcns answer-ed, the substit.:Jtc ;-,:;ticm sh::l'~lc:
be specific about authorizing staff to re~urn berore October 12,
1993 .
.KAP:.ER AND SECONDER AGREED TO INCORPoR7J.TE INTO THE 5UIlS7I'TOTE .MO'rrON
the understanding that staff CO'Jld br':'ng til<=: mattEr t,cck to the
full Council prior to the Policy a~d Se~vic€5 Co~mittee hearing if
staff believed it ""as appropriatE.
Council Member Andersen said regardless of ho ... : the ('ouncj 1 a:::ted.
there would be ~ rate i~crease. There was a la~g£ number-of people
in the commur:ity ..,ho anticipated the Council ;.:Quld be irNolved in
the process. The Council s..!"lould !'",ot ser.d a !:lessa'3e co the
community the:t it die not want to be responsible for ri'lte regulat
in9~
Mayor McCown had net. bee:l persuad.ed that. having the city in the
regulatory role wouJd make any differen~e to vhat Cable Co-op ~as
forced to do given the Changes in the federal 1 a .... •. The or,e area cf
concern that ""as not justified on the part of the public ,,",as the
issue of cost. Cable Co-op had demonstrated the justification for
the level of cha.ges. She queried what additional value the
Council would provide by lcoking over the shoulder of Cable Co-op.
She noted that no one from the community vas in attendance to speak
to the issue. She did not think the Council shoul d rush into a
decision on the matter unless starf told them differently.
Council Member Fazzino said that by supporting the substitute
motion the City was giving Cable Co-op free reign to establish
whatever rates it desired. The decision as to whether the Cou~cil
.... as a rate regulator had already beer: decided by Ccngress.
SUBSTrTVTE MOTION TO RESER ~ASSED 6-)~ Andersen, F3zzino l Kniss
"no .•
09/20/93 71-272
•
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" , .
'·:~;:f)~r. :~)i,;~!l
13
September 16. 1993
The Honorable City Council
Palo Alto, California
Members of the Council:
l&P9;t ip Bri.ef:
The purpose of this report is to re~ye8t that Council approve a
reBolution on behalf of Palo Alto and the other Joint Powers member
jurisdictiODS to regulate the basic cable service raee as allowed
under the Cable Television Consumer Protection and Competition Act
of 1992 (~992 cable Act); authorize the City Manager or her
designee to file Federal Comnunications Commission (PCC) Form 32:8.
·Certification of FranchiSing Authority to Re~late Basic cable
Service Rates and Initial i'i.ndi.ng of Lack of Effective Competition"
with the FCC; anc1 approve r.he notification letter to Cable Co-op of
the City' B inte..'"lt to enforce FCC CUStomer Service Standards and/or
continue to enforce the Amended and ¥~ified Franchise Agreement
section 9 - -Additional Subscriber Rights, whichever method of
enforcement is more beneficial to the cable subscriber_
pi.c;uIslop
The 2992 ~le Act's basic premise is to curb rapidly increasing
cable tel'evision consumer rates and irlt:prove C1Jstomer service. The
1992 cable Act' s requirements extend to numerous areas of cable
television operations_ Some of the law~e provisions apply only to
certain types of multichannel video programning distributors, while
others affect all players involved in providing video programmdng.
See attache;i -suamary of S. 12 -The cable Television Consumer
protection and C~etition Act of 1992-for details.
Per~~ps most significantly~ the act ~re-regulates-the industry,
changing the way broadcasters. cable systems, local governments and
programmers conduct business. While the 1984 cable Act took a
CHh4BB :93 1
'.
· ..
o
general hands-off approa.:::h t.o cable, there [10::)\00' !;xi!;t fede:.-al rules
for altr.ost a.ll aspects of cablecasti:19, rauging from ",-hat broadcast
stations must be carriej and how they are ar~anged, to rhe
par8.r.'le':e:::s t!'lat may be est.ablished fo::-ra~e setting and rr.i::.irnum
standaros for custcmer service.
Local govern.llants may begin enforcing new-:ederal regula~ions
governing cable rates and customer service sta~dards this fall. In
order to re~~late basic service rates and the rates for equipment
at!d installation used to receive basic cable service, local
franchising authorities must be certified by the FCC and may begin
filing certification requests (Fonn 328] SepteIJl...ber 1, ::'.993.
Complaints regarding Ca.ble programming service tier rates (Form
329) may be filed with the FCC OC that same date. At this t~e,
Cable Co-op has indicated that they will not be tiering rates (all
cable programming will be included in the basic tier). Therefore~
it is not necessary tor the City to file F~=m 329.
Frapshi •• AUthority CertifiCAtiop
A franchising &uthority seeking to regu~ate the basic tier cable
rates, which includes all local television broadcast channels
(commercia.l and noo-comrr..ercial) and public. ed.ucational and
gove.rmnental 'PEG) access channels, and any other video programming
a cable operator chooses to place on the basic tier~ ~st fir~t
file a written certification with the FCC that it:
~. will adopt and administer rate regulations consistent
with FCC regulations;
2. has the legal authority to adopt, and the personnel to
administer, such regulatioASj and
3 ~ will adopt laws and reg--.1lations providing a reasonable
opportunity for consideration of views of interested
parties.
Franchising certifications will be deemed effective 30 days after
filing, unless the FCC deter.mines that the franchising authority
has not met tbe three criteria. The franchising authority will
then have an opportunity to revise or modify its certificatio::.
Cable operators or other in,terestEd parties may petition the FCC at
any time to revoke a franchising authority's certification.
The FCC itself must step in and exercise jurisdiction over rate
regulation if it (a) disapproves or (b) revokes a tranchisiDg
authority's certification. If the franchising authority chooses
not to file a certification, the FCC will not step in; and local
franchising authorities would have no authority to order rollbacks
of basiC rates or to protect consumers from continuing increases in
the basic service or equipmeot charges.
2
1 Bat. Be9111ation
Under thE: new regulat.ions. franchising authorities may regulate the
rates for basic service (i.e., the tier containing local television
broadcast stations. PEG channels and any other progrd..fn!l"'.ing pla;:ed
by t.he cable operator en t.hat tier.l. and the rates for equipment
and installat.ion '..lsed to receive basic aer-.rice. The FCC ~il1
regulate the rates for cable programmiog se::~.tice tiers (i. e .• all
tiers of service ether than pr~~um and pay-pEr-view pro~r~ng),
but the FCC 'Will do so only in response to comp:l.aint.s from
franchising authori ties. subscribers or other relevant goverr..mental
entities. The rates [or premium channels ie.g .• Home Eox Office,
Cinemax, Encore: and pay-per-view progr~~ns are not subject to
regulation.
Cable rates are subject to regulatiou only in franchise areas Dot
sul:lject to -effective competition, -which is defined as a f~anchise
area:
1. where the cable system serves fewer than 30 percent of
the households in the franchise area; or
2. which is served by at least two unaffiliated multichannel
video programmdng distributors that cove= SO percent of
the fr.anchiee area and serve lS percent or more of the
boueehol dB; or
3. where a municipally-.:.wued eyetem covers SO pp.rcent ot the
households in the frAnchise ana.
'Onder the new rules~ the FCC will presume that rates can he
regul.ated in e.l.l markets; and cable operators must show they are
subject to effective competition. Onder these rul.es. the cab~e Co~
op system is not subject to effective competition, because they
serve 4' -50 'Oerceut of the households in the franchise area and
there are =0 ot-ber multichannel video programming dist.ributors that
meet the criteria above. Therefore, cable Co~op would be ~~j~ct
to rate regulation upon certification of the City by FCC.
Loca.l franchiSing auttl.crities may begit'. filing requests for
certification to regulate basic service rates on September l~ 1993,
although there is no time ~imit by which franchising authorities
must file a certificat.ion request. September ~ also is the
effective date of the FCC's rate regulations. Franchising
authorities. cable subscribers and other relevant govermneIltal
entities may ~gin to file complaints about the reasonableness of
cable programming service tier rates OIl that date.
Both a request for certification and a complaint regarding Donbasic
rates are to be filed on official FCC for.ms '~ee at~achment)~
CMR.:4SS:93 3
o
The FCC's rate reg":J.lations establish a fo:nn.:.13 b}o' which cable
operato:,s det.ermine their rates fo::-basi c a:1d ca!::;:·le programr.ing
service, and then co:npare them against a be:;:ch.ma.rk rate derived
from bas~c and cable prog!"a.rtlI!!ing service rates in competitive cable
enVirClI".ments. Generally. rates in effect or:. September 3 O. 1992
that ar~ above the benchmark rate mus~ oe reduced by lD percent or
to the bench:nark rate, whichever is less, or show that the higher
ra!;es are just.ified based on a cost-of-service showing. Cab·Ie Co
op has notified thor::! City it plans to request a case-ot-service
showing.
Coat-pf-Beryl" Shewings
Cable systems that de not have competitive benclw..ark rates are
per.mitted to demonstrate by a cost-of-service showiDQ that rates
higher than the benchmark rate are justified. The FCC plans to
develop and: propose national cost-Of-service standards by November
1993 to be used by cable SYBt~s in making rate justifications. In
the meantime, cable systems and local franchisi~g authorities are
expected to ~e general cost-at-service regulatory principles.
Because of staff'S lack C!f expertise in adrr,inistering cost-of
service regulatory principles, it will be necessary to hire a
consultant or finr. to review cable Co-oP's cost-of-service
j~stification. This process will follow certificatioo~ aDQ staff
vill return to COl.mcil in November or December with a contract for
consultant services and a budget amendment ordinance (BAD) _ Sta.ff
antiCipates the contract will be under $25.000~
The FCC's new customer service regulations set minimum national
s~ds for:
1. office hours and telephone availability;
2_ installations, outages and service calls; and
3. camumicat.ions between the cable system and subscriber.
billing and refunds.
A copy of the FCC CUstomer Service Standards are attached for your
review. Although the federal standards became effective on July 1,
a franchising authority cancot enforce the Bta.ndards~ unless it has
provided the cable operator 90 days' written notice via certified
mail of it-a intention to enforce the federal &ta.ndards~ A
franchising aut.hority retains the right, however, to e....::tablish
and/<:lr e:1force existing customer service standardS t.hat exceed. the
FCC's st.andards. or which are not covered by the FCC's standards.
Such local standards may be enforced pursuant t.o a franchise
agreement. or by state or local law or regulation.
-CMR: 488 :93 4
Staff has prepared a letter to notify Cable Co-op. upon Council's
approval, of its int.ent to enforce the FCC Customer Sen/ice
standards and/or continue to enforce the customer standards in the
Amended and ~':odified Franchise Ag1.'eement Section:; - -Additional
Subscriber Righ:.s. 'll.'r.ichever mett'lOO of enforcement is more
beneficial to the subscribe~_
$'PP"'ry of Basic Service Itegulatorv Procea.
Actign
City Adopts Regulations
File Certification
Certification Effective
Notic~ to Cable Co-op by certified
mail that certification bas occurred
and necessary rules have been adopted
Cable Co-op Files Rates
City decides case~ or issues order
saying more t-ime needed
City decides case or allows rates
to eake effect subject to retund
Written decisioD and order to roll
order back rates, if appropriate
R.ecqmm'p4etJ.9P
Staff recommends that council:
Effective Date
9/20/93
9/22/93
Automatic, 30 days
after filing; 10/22/93
~O/25/93
Earliest Date Due:
11/25/93
Must issue 30 days
after Co-op filing
of rates
120 days after first
order f or cos t -of ~ servi ce;
90 days f or benchmark
120-~50 days after first
for rat.e review
1_ Adopt the attached resolution determining that the cable
television system operating within the Joint Powers service
area is not subject to effective competition and aut.~orize the
regulation of basic cable service rates;
2. Authorize t.he City Manager or ber designee to tile with tbe
FCC Form 328, "Cercification of P!."anchising Aut.hority to
Regulate Basic Cable Service Rates and :Initial Finding of Lack
of Effective competition R ; and
3. Approve notification to cable Co~op of the intent of the City
to enforce FCC CUstomer Service Standards and/or continued
CHR:488:93
e:<.torcem.ent of the C'..lsto~er seI.""'.rice standards in the A"'nended
and Modif.l.ed Franchise Agreement Section 9 Additional
S\.l.bsc;:-iber Ri9hts~ whichever method at ~.nforcement i6 more
heneficial to the suh5criber~
Respectfully submitt~d.
ResouI'"C'-es ;Fity
Attachments: 1) Resolution Regulating BAsic Cable Service Rates
CMR:48B:93
:2) FCC Porm 321; ·Certification of Franchising
Authority to Regular Basic::: Ca!)le Service Rates and
~nitiate Finding of Lack of Bffective Competition·
3) Certified Letter to cable Co-op
4) summary of S .1.2 "Th.e Cable Television ConS~'t'
Protection and Competition Act of ~992·
5} FCC Cl.lstomer Service St.aodards
6
J
I
! RESOLUTION NO.
iiESO:: ... 1JTION OF THE COt.'NCIL OF THE CITY QF PAl,;O AL 1'0
FINDING AND ~ETERMrN:NG T.~T THE C.~LE TELEVISION
SYSTEM OPERATIlIG WITHIN THE JOINT POlo.'ERS SERVICE
AREA, INCLUDING TlfE CITY OF PALO AI. TO, IS NOT
SUBJECT TO EFFECTIVE COMPETITION AND AUTHORIZING
THE REGULATION OF BASIC CABLE SERVICE RATES
WHEREAS, the City of Pale Alto (~City~) is a pa~ty to an
agreement entitled BJoint Exercise of Powers Agreement by and among
the Cities of Palo Alto, Menlo Park, and East Pale Alto. the Town
of Atherton, and the Counties of Santa Clara and San Mateo~ [-Joint
Powers Agreemen~·J. and represents the inter~sts of the parties
(·Joint Power-s·) in connection with the cable televisj,on system
(·System") operatea in the joint powers service area ("Service
Area"}; and
WHEREAS, the Council of the City of Palo Alto i"Council")
tinds and determines that the System operating within the Service
Area is D.Qt subject t.o effective competition under the Cable
C~cations policy Act ot 1984, as amended by Section 6~3(a) 12l
of the Cable Television Consumer protection and Competition Act of
1992 (,Act'). 47 C.S.C. i 543 (a) (2), aDd
WHEREAS, the Council will~ within 1.20 aays of certifi
cation of the City by the Federal Communications Commission ,rpcc~)
as a franchiSing authority authorized to regulate basic cable
service rat.es~ adopt and administer reg'..llation9 with respect to
basic cable servi.::::e that are consistent with the r~gulation6
adopted by the PCC pursuant to Section 623(b) of the Act. 47 D.S.C.
§ 543 (l:»; am:!
WHEREAS, under Article !I of the Charter of the City of
Palo Alto~ Art.icle XI, Section 5 Ca) of the Constitution of the
State of califo~ia, and the Joint Powers Agreement, the Council
has the legal authority to adopt and aCtrinister the regulations
with respect to basic cable service rates; and
WHEREAS~ tne procedural laws and regulations appliCable to
basic cable service rate regulation proceedings by the City provide
for a reasonable opportunity for consideration of the views of
interested parties;
NOW, THEREFORE, the cou~cil of the City of Palo ~to does
RESOLVE as follows:
SRCTlQN 1. The Council hereby approves and authoriz~s the
City Manager, or her designated representative I to file on behalf
of the Joint Powers, an application for certification of the City
as a franchising authority to regulate basic cable service rates
1
'W. ! .W
• "=."
o
and an ir.itial finding of lack of effF:C't.ive cornpetitio!'J w:::':h the
FCC.
~li...l. The Council further approves and a"w,thori'Zes ~he
City Manager, or her designated representaciv'5', aft.er the effective
date of the FCC's approv~l of the City's application for ce~tifi
ca~ion to adopt and admi~ister regulations with respect to basic
cable service that are consistent with the regulations adopted by
the FCC pursuant to Sect-iOt:: £23 CCi of the Cable Televi5io~ Consumer
protection and Compe~jtion Act of 1992.
SRCTION ,3. The -Council
approved does .cot constitute a
Environmental Quality Act.
INTRODUCED AND PASSED,
AYES :
NOES:
ABSENT
A3Sn:NTrONS,
ATl'EST:
City Clerk
APPR.OVE!) AS TO FORM,
Senio~ Asst. City Attorney
finde that the
project under
APPROv:EI):
Mayer
City Manager
actior.. hereby
the California
Director of InformatioD Resources
fCC 328
CERTifiCATiON OF FRANCHISING AUTHORIT1 TO REGULATE BASIC CABU SERVICE RATES
AND INITIAL FINDING OF LACK OF EfFECTIVE COMPETITION
,_"'''~_ ~ C::'tv (If Pa 0 ..... ...:.to _ ......
~T.~1 eon Avenue
COt I..... lZ"Cod< Palo Alto CA 9001
' ........ JrrijG,. 6adWI1I'U aNII:l.:.
4l5il2~23D
'-tJI. coMar;t WIlt! f'!IIlIICf; to h ~
Dianah Ne.ff
2. .. ""'-{l)8'I'IIIJ.........,.,aYi.,.mmw"~KC~
wMI~ ~1MftJ1f~J wIthm".... ...... ~~
c:aw.,s,.e..'1 ~-f ~ble A.~c'mmu~;catioZl5 Co-
v.. ;'''0 ~o n. ---3200 P:';rk B"ulevard
CIt> 1-r"'''''' 'Palo Alto CA 9430~
CIIba..s,.r-'. fCC~u.iI~
CIIMt ...... .,-..-
"0 --0Ir 1-IZIP.,...
CIiIIII-~ FCC c-.ih tIM ~ .
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cWa .. .-;..ct to NpiIIIiotI: ..." ..ch ....-=t to ..tWdI. ,...woe .....
ca" "~~~f-=-fJ 1_01 _ I c-.r ....
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NlfTatjYf of raJq Altg. Inc
1. L ....... ,... __ .. ~ ., thiI ___ • p.wtia [!jy. OND
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bl.Uc cable ~ It..a1 we ~..m
w1lh h r.t\ll.ll'l~ adept.-d ~ thl fCC
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INSTRUCTIONS FOR FCC 328
FRANCHISING AUTHORITY CERTlFICA TlON
Tr.e c..at.It rf'lt"o'i~iOl1 COf1wmt"' f>ToI~jO" iII~t! Com~'I'Ot1 "ct,
~ in OctoOe' lUl, CI'\In~ ~ ",-,"rter It'I ..;,",d'1 &:.lIcit
~ SII':l'!'1fU tfta1 It!' "01' wbJKI too ~1Y2 CDt11P!",IiQ<; ;f:'l:!
~1I1.1fed, t~ ~!, ndfl/orw buOt ""O.!cr fir, t\hr \~r ,.-q~,~ *' .. CIII'Iod,tion '" .lCCtiS tel ,n OI"'~' VlCto XlVICI'l II\d COOIU 'I'HflS.
~ OI~ wrvicti" Ioc:.il ~ IIoIIIOtIo 5i~I.anc:; plIb,,(
illJl.c&lOtlIl. .,1$ p:AJEic: &a.'Hlo d\arlMItI .rod .u<oc~ f'quiplJ"W','!
w;ll bt-1l.Ibft"C:! !C ~~ 6~' 1001 ~ ~ ~~
1"frarId'.I~itIt: author;'ov").. R.aes for wit-P!~""i>'lB le"V1~ .and
~ eqlJipnem ",1I1It':\'ic:es ace;t wi('.,d PolY ciw1~I., ... ill
be ~ ICI ~iaI'I by ~ FCC R.Ns fOI' p.r.f tt.,r.eli
~Ilo b ."'bictl ~ if I ~IC p«I'-cNnMol 0' pei-pt'Oll"am
chaIp)_I'CII:~.
1. Onlo( caM 1yIlen'l$ IN:.lJ'II! 1'01 1UtI.iect 1:I1I!fr.a~ alft\pel:rliGn ~
lit-~1iIJtoC!. ~ ~ IMoIIU 1NI (.a) teWl!r INri ]0
~dane ~~ in ftIt, hnct\J~.I'U wbiCtl'be to the Cllbllf
.~", .. cablto~; ~j~~~ Q; rn......ul~~ lor.
IWO ~11.oIIeod ~ ",i(ieo p:rop~ dimibv.3I'lI ucfI d
wNct!cftrts ~.-.cIeo ~~minJtc-.fI1a:st SO peI"Q!I'tI of
_ ~ ~ the-~ ate.t ar;C: (m ~ numtoPr 01
~ ~~ II!! prDII"aI"ftmirl, WtYi~ ~ by
~1 ~ pmsrarrominl ~1I:ribut::wl OII-.e-Itkin thI! :arrest
~ 1ridto~1 ~aaeclllS ~ of
1M ~ WI 1M ~ area:: !Of Ie; • ~, wideoo
~ina: alSU'iibYaDr opreraeed by ~ b-..dliloinJ oIUIhority for-tN!
~ ..... oIIefs Wito pitljJi* •• , ... to c INs! 50 ptlt:lJl'l! dtht
~ ... tNf:~-.&.-
J. ~ ordtI' 10 ~ .. basic-serrioe tiel' rat:1. I ~ ~
-. .... be-~ av b FCC. In ~ ID be cenIDed, .. frr.d1i'sitl1
~ mc.at ~ 1M bm ............ ad ..... topf of ....
~ ..... aIlII dI Mlid iCJ -. lot ,...."." tID ... fCC
.,,........ ........... ,.. .............. fCC ...
~ .... ....
4. It cap)' of !hi! bm IllUltlie ~ OIl 'IhI able ~by~
.." III! or ~6e'" IN! iIDtm " caw.: Dr 1Ief....--d to the FCC.
'" .,OIOrflObe~~oI:l.CttonIiemw_'"'Yes·to
QuaI:ircns 3 • .c. ~ l • .,.+I::octl M' apiIiMd. folIc.1...
~ 3; Tile ~ IUIhority INoIII: ~ ... ,....,1.aiooo4i
~MtI. ~.'~.;g.:INI.>cCOllli;lie~
To bil£U Iha ~ fur czrtIfic:.aiOll, ... b'.d! ...... 1I.dhorit)I
...,. ~ ~ oil ~ i1w6catin ..... if will bI~ the
~~byWFO:.
Tnt' hn~ ~ has. TlO..,... "' .... ItIee ~
... IIhe IimI' iii: ill-CIef'..iCIed. Thr inr....~ ~ !NY hOC,
~,t.tm tD fI!I\I-~ QIOIi!5 yr'j(j~ ~ ill kD tdopIed V
~ tnd Ul"l;Jl • t-n natioC"Qbie ~ du!: II Mi ....
~"_~N .. ~feSt.liII_.lo.
•. Qudior. 4W" l''w hndIisint MIChorify'i -lepi ~ III Jq\I
t....ic .me, ""'" cume fnIrn ..... III tAD' Si"'" !xlh,-rt.e
... PM'!:""'!!! m.w ,""latr cfttlr.." 1ft 1Mw ~ ... -.e
~ WIuki lile !Iftis CJrftifQliM. ~4 in frar;cfUw
oI!fIiII'ItmIII N ~ ... "'I'IIMion .... mid. .cna' aG rICJI...-a:
;I ~ ~ ......... irII ft baJ.ic: ieNkr lie' I!Ad --
..... ,
QCf@1;I.or. "'eJ 1~ hoi,,(hlw,g a....,r..c.r'~' tr;..,n hr;e " 1~1;.~,~:
"I,;m~r 01 PEllo~ru·IIO V"o(!~'u~t ,.It~ "'S..JJ~lo;w1.
... frar;C''''ioe ."lh!IrllY "n.1IbJr to ~"'swer ~-re~' to C;..:n1101'1..1 <till O! .. ~)
1T'WI" .. ,so, IOrr._ ~ FCC·I~.i!:I.C._~
FCC 9}.117 ftefe.lM'd M.l}' J, 1993: fo, ~~~, ."I(J~IO" C'fI ~
est.l!bl·,r.~1 04 :thtrnv<V!! ~t .. : tqulollory Ol.oatdo;teS.
QutsiIGtl 1 r'VlC~':li"l! iIUIhCJllleJ 1'I\1j" hoi..,. prOC'e(ju-r.i'I'tI"1..i:1OIU
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c:omp.etiliOfl, as. Cietined by ~ Clble ~ (The defrn~ Is ~dlOOK
oIboote" on ~ fI>noI.: Tnr ~"l..Ijf1I • ...rt.J;I'I"it't' o"na'!' ~ N
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1101. ..em lID be b.rd w'" '~W!' "dec! Ph.l; .......
fl, n.c.. ~ foma ..... be s;aned by .. ~ ~ .......
~ 10 act 11'1 beNIf d ~ ~ oIIlIhority.
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VIA CERTIFIED MAlL
John Kelly, P=idem
Cable Co-op
3200 ParI: Boulevard
Palo Alto, CA 94306
Dear Mr. Kelly,
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CjtydrPalo_blto
rXI'Qr!",,," o/7'ifwmalim, Resources
September 16, 1993
00 April', 1993. !be Fede!al Comm"".icatic· -Commission ... _ • Roport
and Otder adoptiDg a DeW rule (47 C.F.R. i '!o.3(9) implementing Section 8 of
!be cable Televisioa Coosumer Procection and Competition Act cf 1992; !hit
_ governs !be .... blisb"' ... u, impiemenla!iOll and enforoemeot of custom ...
&en'K% SWldards fo< cable opentOrs nationwide. A copy of !be new rule is ..,c_.
Patagtapb (e) of the ..... rule establisbeo fe<Znl CDSUIOIer sorvi<:e _
("r __ oJ. ParagJopb (aJ of:be new mle pmvide& !hal • fnmthisiDg
IIdbority may enforce !be feden! _. but In mderlo do 1<>, the francbN.g
awbority 1DUJt provide air"".., cable "l"'J'3IO" 90 days' _ DO<ice of iIS
_ 10 emon:e !be SIlmdards. This le<ter ~ !be cny of Palo Alto',
DOti::e on bebalf of !be 1<rim Powers of its intern !O .mon:..!be fodm1 SI2DdaIds.
Tho City _10 bqiD ~!be federal SIlmdards 011 Pcccmber 2i. 1993.
PatagrlIpIJ (b) of Ibo new rule ~ 10 francbising antI>otiti<s, among 0Ibef
tbing3. rights 10 esublisb lIiIdIor enforce stme Ill<! local cuSlOm.,. service
requimnClltS that ~ or .... DOl covered by !be fe<Znl SIaDdanIs. The City
of Palo Alto ~ Ill<! imeDds 10 exen:ise aD rigbu idemifiod in !be Amended
and Modlficd F13tlChise Agreemem by and _ the City of Palo Alto on
bebaIf of the 'oint Powers and Cable COJnmunicatioas Cooperative of Palo Alto,
IDe. (Cable Co-op).
Sirlc:ezdy,
Enelo."",
P.o..bllt!5O
_AIb,CA...."
ill.l29.23ll
.Il5m_Fe:
SUMMARY OF S. 12
THE "CABLE TELEVISION CONSUMER
PROTECTION AND COMPETmON
ACI'OF 1992."
Introduction
On OclOber S. the HOllse .. ,d Senate overrode a pre.<ldendaJ
veto and enacted S. 12, the "Cable Television Consumer
Protection and Compedtion Act of 1992" (hereafter referm! to as
"5.12" or ·the.ew law"). TheSenal.overtod. President Bush's
veto of the legislation by • vote of 74 to 25; the House followed IA
suil with • 308 to 114 vole. Thi, congressional vOlo muked the 'Ill./'
fitstlime COIICress has overridden. velo by President Bush.
S. 12 should promote compelilion in Ihe cable lelevision
induslry and help curb unfair ... Ie increases and olher cu,lomer
service Ibu,., by cable television operalors. S. 12 gronls I~
government, additional authorily 10 help promole competilion and
curb cable operators' abuses, and pro\'ides local govf:tnmcnu with
immunhy (rom monet4ry damagei hi suits challengtng lbcir
r.gul.lion of cable 'yslems.
S. 12 requires the federal ComnlUnkations Commission
("foCC" 0, ·Commlssion") and local governmcnlS 10 take many
actions within the next reM (0 implement the pro\l'isiQns of S. 12. ()
It is critical that local governments panicipale in implr:menlation
p,oceedings before the FCC In order '0 ensui.· th3l c.tblt
subscribers ,tce;v. the m.~i",um protoction under S: 12 >nd Ihal
local covemmentl have the abllily to protect cable sub,eriters 10
Ihe full extent allowable under Ihe neW law.
The (oUowlng is a summary of the major provisions in S.
12 and of some or Ihe crili<al deadlines [0' aClion, by 'he FCC
and local governments,
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SUMMARV OF 'nlE MAJon I'ROVISIONS
IN S. 12
I. Rn(. nelolaUon
II. R.,ulat.r
S. 12 permits rale reguillian where. cable sYSlem Is nol
!Ubj«t 10 "eflecllve .o"'peUlion" (which is der.nw below). II is
anUlned that, uncler the new law,. very substanlial majority of all
cable systems will now be subject 10 rale relulalion.
(1) Franddtl.g "uthDN!
The Commission shall enSure thlt tbe ralO lor basic c.bl
service Is "rasonlble." In .. tabll,hln, a reasonable rate, -Ibe FCC
is directed to .. tabHsh rea.IIUons "desiened 10 Ichleve lhe &oal 01
prolettln, subscribers .., lrom ralOS rt>f lb. basic service lier
Ih,t e.coW the rales Ihat would b. chlrged (or the basic service
lIer II sucb <obi. system w.", subject 10 ellocll.e compedlion."
S. 12 IIIls some ollhe laclors tbe FCC 'hili lake Into accounl fn
wablishing a ,easonable rate and il establlshe, a procWure by
which (fanchl,lng ,ulhoritle. can be certinw to "enlorte" Ih.
adml.btratlon or the FCC', basic 1110 regul.tlons. In order 10
.egulate basic .ervlce I8le., I rrancbisinz .utborlly mUSI me a
certificate wilb Ihe FCC. The .. rtintoUO" become. e(lecUv. 30
days after Ih. dale il is mw unless the FCC acls 10 di"pproye it.
The FCC a1.0 I. empowered to reyo~e • Irlnchlsing •• thorily·s
rale regulatory I.spon.ihiliti •• If Slale and local "Ie law' and
regUlations are not in conformance with Ihe FCC', ba,lc lite
,egulalions. A rrancbising authorily has the nehl to apply (or
recenilicalion ,her revoca~ion and the FCC most let on such a
"'.certification relluesl wilhln 90 days aller It Is filed.
2
(2/ FCC
The FCC b liven Ihe authority to ensur. thai Ihe rale, fot
other ""ble programming "",lea (exCepl pro,rall1minc ",,,,ices
offered on a per·ch ... nel or per-program basb) Uc nol
"IInrea",noble.· The bill allow •• franchising authorily. olher
rel ..... t local or .late &o.>'emmenlal enllty, or a cable lubscriber
to file • c:GIIIplainl wilh the FCC clIaI\en~inz I rat. as
"""reasonable. "
D. Bruit Ozbl. S,,.,;,,
The new 1&'11 rtquirt. eYe", cable opcralDt 10 provide •
blslc service lIer conlainlng II leasl the 10Uowing; (i) leleyision
broadcast si&naJ! c&tried puttuanl to the new law's I"I'Ilist carry
prOYisions; (II) PEO channels; and (iii) lily si,naI of Iny broadc .. ,
.talion thaI 10 proyided by tile cable operalor 10 ""Y subscriber.
eKcepl a .Ilnal which i. seoondarily <.ansmillcd by a sateUite
carrier beyond Ihe loeol s • ."ice Ilea or such stalion. S. 12 permi"
• cable operltor 10 add addltion.t video programming services 1.0
the bui. service tier. A subscriber must purchase the Luic
service Iler _. bul only tho billc tier •• in order to purchase otber
service! offetw on Ihe cable .y.letll. The new I.w contains an
"anH-buY~lhrouJh· provision thai prohibHs a cab;e operator (rom
requiring I tier or se.rvke. ather 'han tt\e basic tier. as ;, condition
of receiving premium cable channels (such as HDO and Cinemat)
and pay-~r-view channch. Cable <>JlCI>I<>!l must comply witllthe
'anli·buy-through" provision .s soon as lJIey lie le.;hnica1ly
capable or complying: all cable .yslem$ must be in compliance
within ten yea... A coble operalor can obtain. Iimilw waiver or
Ihis requirement if the FCC determines thaI compliance would
require the cable opeAlor to increase lIS .ate.; the fCC may lilllt
Ihe cable operator a waiYer In such a ease ror 'such specified
period as the Commission determines "",sonable and appropri .. e.·
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S. 12 defines Ihe drcumsWlet' under which "erlecll""
compemlon" •• 1.1, as: (I). cable syslem Ihal strves le'\'Or Ihan
30 perctnl of Ihe households in Ihe franchlst .rea; (Ii) Ihe presence
of al leasl Iwo mulliehann.1 video programming dlslribulors In a
franchise area II each off ... comp ... ble video programming
s.",ice 10 II leasl SO percenl of lite cable <ommu.i1y and If Ihe .
number of households subscribing 10 video programmin, service.
oltered by multichannel video proXf3mmlng dillribulors. olher
Ihan Ihe I"'gesl such dlslribulor. ex<<<ds IS p.,ce.1 of Ih.
',ousehold. In the f ... nchlse Ifea; or (Iii) • mullichannef video
programming dislribulor opera led by Ihe rra.chising a.lhorlly for
thaI 'ranchi .. Ifea o(feu video prog .. mRllng 10 alleast SO percenl
of Ih. household. In Ihat f..ncbi .. alU.
D. Ollrtf Ralt-Rtl4l.d I'ro,llians
Slgnlfica.lly. Ihe aUlhorily 10 recu!ale .. It~ for Ihe ba.ic
lier and all other cable procramming .. rvices iDUltlk.Ilhe righl 10
regu1ale irtSlallalion and f-quipmen( co:sl~ associated with (hose
services.
S. 12 allows cable operalors 10 ilemize On ci\ble bills tosU
• ((ributable 10 franchi .. fees. PEa reql1lrements. 1o 'c. and other
casu impor.ed by local governments,
The new law prohibils • cable operator from charglne •
cable subscriber ror a programming service Ihll' (he subscriber has
nol affirm. lively requested.
S. 12 aliowl a cable op,ntor to offer reasonable discounls
10 lenior cilizen, and other economlcally.disadvantaged groups.
The new law reqUlkS • cable operator 10 rerund 10 cable
subscribers lhe punion or ihe cable ralt paid by sub~cribers ror
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_'"1':.k\":'"_~_' "~""0'?1:/~,."_.",.,~"!,,,--~~""'-_1;~~ ... ",--"-"""~~ "I}"'-_ t:""-"--"--r-'~
non-basic ders of .ervice Ihll Ihe FCC deem, unrea'onable fro'm
Ihe period 01 Ume a complainl Is filed with Ihe FCC.
II. Cuslom •• Ser,lte Slandar""
S. 12 di,ecls Ihe FCC 10 "establish ltandards by which
clble ope11110rs may (.lfililheir cu.lomer .... ice requirements.·
The new Ilw IlI10ws: (A) franchising lulllorilie. ;0 ", .. bli.h and
enforce CUtlomer service standards thai exceed, or differ (tom, the
stand",dl estabillhed by Ih. FCC; and (8) (ranchi,ing autllorilies
and cable operalo:s 10 negoliale sWldmrds Ihal e.cccd loole sel by
Ihe FCC. The new law abo permits a rt2)lch;slng .u'hori·y 10
require I cable operalor 10 provide tltlny days wli"en nolice of
any programming changes.
III. Rene ... 1s
S. 12 contempla~eJ severaJ .:hanges to the renewal process.
Among olher Ihlng,. (or the first lime. a eable operator would be
required (0 provide specific ~ nOlice to invoke formal
renewal proceedings. If a cable opefillor provides a wrinen
request for formal tenewaJ, Ihe new Ia.w would require •
franchising aUlhoril), 10 eommenec l formal r~newal proceeding no
later IhAn six months after such rcque!( is: submitted .
S. 12 also amends section 626(d) of the Ca~1e ACI by
Slriking "effectively acquiesced" l\nd inser1ing "or Il1e c,ble
operator gi\l'cs written nolice of a failure or inability 10 c.ure and
the rranchising authorit)' (ails 10 object within a reasonabll! time
arrer receipt of such nOlice,· This: arnendmenl remO~'es uncertainty
ov., whelher a franchi.ing authorily had notice of franchi.e
vjolalions or poor service and over the subjective inlenl or a
franchising aulhorily in nOI objudng 10 franchise violation. or
Irt:ildequate service. Moreover I the new law clarifies that :I court
shill not overturn :a (ra."chising au'horily's d«:ision 10 deny a
renew.1 requeSI If il Is ba.ed on l\n infraction of 111. procedural
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requlremtnU of seellon 626 that. eoU" dttcrntlneJ is "harRllen
e"or." Fin,lIy, S. 12 clarifies Ihat InvOCItlon of (ormll ",newal
proceedings does not negale Ihe rlgh! or. ("nchlslng IUlhorily to
revoke I Iranchl,e (or ea" .. d"rlng Ihe rtnew.1 process.
IV. Olmacos bnmunlly
In one or Its key provisions. S. 12 granl. franchiling
."Ihorities immunity from monetary dlntlges In mosl federal, Sille
or loeallawsuils chanenglng Ihe righl or. f",nchlsing aUlhority 10
re&ulalc a cable sy,lem. This immunily appliel 10 bOlh ClScS
pending on Oclober Sind 10 III s"illlnlli.led aner Oclober S. II
applie, 10 the r,,11 range of cable rog"IOIory IcUviUes, including the
awud, renewal, transfer or amendment of a rr.J.;'1chise or the
ongoing reg"laUon or Ihe cable ,ysl .. m.
V. Signol Quollty S'"lId.rds
S, 12 "'luires Ihe FCC 10 establish minimum lechnic.1
.tandltd, (or slenal qualily. and 10 periodically updale such
standards. It allows a (ranchisinc aulhority 10 include provisions
for Ih. enforcement of Ihe FCC's standlUds In a (ranchis.
agreemenl, and permits a franchi,lng aUlhority 10 seck a woiver
Irom Ih. PCC 10 Impa •• more slrincent standard.. The new law
also 'equl, .. the PCC to .. tablish reg"lallon' 10 ensu .. thai
viewers of (:able programming have access to Ihe emergency
In(ormalion proYided by Ihe emergency broadcasling system.
Vf. Multiple Fflnchts.s
The new law prohibits a franchising aUlhorily Irom ,ran\lng
exe1usive franchises and unrea!Onably rduslng 10 award In
additional compelilive franchl.e. S, 12 Slale, lhal, in awarding a
(ranchbe, the fran<hlslng aUlhorlly: (A) shallillow .he applicant's
cable syslem a reasonlble period of time 10 become capable of
providin, clble service. 10 all household. in If,e ('""<hlse uea;
''"'''', .rJ~~ '_M .. -,-~,!,e ilJ7~ ...
(0) may require adequate .nuranee thai Ih. ""ble ove ... tor will
provide adequate PEG acce" channel c.paci.y, facili.ies or
financlll suppa"; and (e) may require Idequ •• e anuranee lI;\I the
cable ope",tor has Ihe fin.nci.I, technical or 'egal qualificalions 10
provide cable service.
VII. Lo<.1 Authorlly 10 R'IUI~I. Ownership
S. 12 clarifi", the righl of a franchi,ing .u~~orily 10
prohlbitlhe ownership Of control of a uble system by ""y persor.
bt<:Au.e of such person" ownership or control of any other uble
syslem in Ute franchising authorilY'S jurisdiclion or In
circuntslances in which a state or franchising aulhority delermi~ 1
Ihal II,. acquisition of ,uch a cable system may eliminate or reduc.e ' ... ,.I
competition in th~ delivery or cable service in such jUlisdiction.
This provision was designed, among other purposes, as a way 10
lo"er h""d-to·head competl.lon by <.able operators by makin, il
casler ror I franchisinc authority to deny an operator the right 10
buy oui ill com~dtor in I particulat markel.
VIII, Mu.1 Carry
S. 12 ,e-established reqUirements lor lhe (.atriage of local
television !Illations by cable sy!lems. It allows bl"oiJdcasters, every
three years, to choose between mandatory carriage: under
traditional must carry pdnciples or payment for retransmission
rights, The choice or eilher one would waive a br03dca!h:~r's right <)
to Ihe other. The new law excludes: noncommercial educational
television signlls (rom (he retransmission conse"t provisioM, and
requires Ihe pce to: (A) eonsid« .he impaci of Ihe gnnl o(
relransmission conlt:l'lt on the _rates (or basic cable service, IJ1d
(D) enSUre Ihal .uch rates are reason.ble. The bill .. 'ablish .. a
musl carry regime (or local commercial Ielevision ,tation" low
power leltvislon stations, atld noncommercial cduCl:tionill
lelevision slllions. A cable operator could 5a~isfy requirc:men~ (or
the carriage of noncommerdaJ or low power stalioll$ by carrying
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~ ..... , ry a noneommr:ni.t 01 low powt'f station i:t.
""",oye;, tl/bjtJ!\ \0 apptOVll by Ih. ('lIllchisiOt .ulll1)(lly.
IX, "'""!rIIlAI o,.n.nblp or CAbk> SJ'JI~IIl!
S. 12 clariliot !he rich! of. nlUnlcip3lily (Q OIJ"rale. cable
I.levis;"" sy!(cm, .nd Sl.ll.' Iha •• municlpJlllly need "1)/ hi •••
(rancbis< \0 provide such servlt.. II also f<tes I
municiplUy,owntd <able system from laIe ~gulatio. If It II !he
only !)'lIetn opett\mg \. Ih. mIIlkel.
X. COIItulI«!r EI.d ...... lts &111111 ... 0111
'l'l>e no'" law ''''1.11,.. thoc, FCC 10 issue rq~I~I;""$ \!lot
luur. compalibililr belwu. Itlevisions and vidw eas .. !!.
.etorden ("VCRs") and cable syslems, so that cable lublcribell
enjoy Ih. full benefits of bolh the plogrammlng •• ailalili: llIl tllhle
.yslem •• 1Id the funtlmn! available ~ lhelr ItWi!sionsllld VCRs.
The FCC's ",«'ati"". shilll: (Aj spedry technkal ''''Iu\.enlenls
thll permit • leltvision reeeive, or VCR \0 b. sold as "cable
''''dy': (B) 'equir. uble opera,a" 10 offer lul1stribefS the aplion,
if 'I«~*,,\\y I!I<l ..,M<lmkrJly· f ... sible, of hlv"" <ho"""ls
delivelM d,.«:Uy 10 Ihe .ubocribers' lelevision ,uei."1 or video
",.,tUt , •• ",1$." wilhmil paulne IhrDlJC~ • convoNer bo.; (C)
promot< the commen:jal availsbilily of eonven." oM of ",mote
(a"uo! devktl compatible willi Wll'lt/t!:rs; (0) '<qUllt cable
operators, which offer mbtcriben the aplion or rtnll., a fM>Ole
conlrol lillI!, It) ""Iiry subscribers 1lIal, Inslead of'Mliog & ItltJO!e
conlrol vnl!, !hey may p"ll!blSe commercially avail.ble femole
conllol unilS compatible with tbe cable .y'lem', convener 00';
and (El prohibit. cable operalor (rom lakin, any aelian Ihal
prevenl, • convert., bo. suppliM by Ihe cable ope,ator from
ope'.ling comp .. ibly wilh commercially available ,""ole conlJOl
uniu.
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AI. {unher Sl¢1' leWiro 1M. $<m of '''''' ....... , compelit"'"
10 ulslin, cable system., S. U plohibi~, & video peognm"""
amllaled wilh a cable openlo( (rom dill:rin.inMing againsf I
mulUchannel video programm;", disuiblllOl and, .xcept In llmilod
dftUmSl.Intes, l'I'ohibi\s til ~.d,,<ive I"otnmmin, CO.lnCI
beI...."n a <able operator and • programme, affiliated wilh the
cable OIJ"ro\or. The prohibition does not apply 10 extlusive
programming contract. entered into on or before J~ .. I, 1990.
The new law 1!SO Wl'liU:llhe FCC lo""W,!i!h reguI.tions banin&
cable operalQ" (rom: (AJ 'tqul!int • finanti:tl intere.st in a
prQgramming service, iJr -coercin,· elclusjve. programming ri&hU,
as a (ondillon or ClITiag.; and (II) distlll'linalin, ogain£\
un.mll.led plotnmlllCf1. S. 12 dl'~ls \he FCC to .. tablhh "'lao"
that limit; (Al the numbe, of cable subs.:ribef$ 0 multiple syllem
operator ('MSO") can reach; and (8) the OIl/Dbet or chJMtI. on
• system that may be oo:upiw by an .(filiated video programmer.
The new la ... plohibilS ",ble OIJ""lt>rs {mm !lfJlOint lit .. , .. (OJ
mullichannel mollipoinl di'lOootion service ("MMDS") 0'
p,avloins $atellite ma$ll:t antenna ~"'vi.i<m ("SMA TV') >crvice
in "' ... s served by Iht. C1Ibl. syslem, ab,ent an fCC waiver.
fi.olly, Ih ••• 111 I ... di,ecl$ the FCC 1<>; {A} i.illait. rultmuins
to imptist: publie interest requirements OR d,r~t broadcall ufc:UiIC
('06S") .ervices; Il1d (B) !<quile such ,eIVice"1) reserve channel
capacity for nQnCOmfMlcf&1 educational or inforlM:lional uses.
XII. Sales Qt C.bl. SysttmS o
S. 12 prohibiu cable operators from selling or lTalurer,;ng
own.nhlp of • c.ble lj'3U:m within 36 m~"'h< following {he
otcqt)i:iition or Inllial construction of that tyW'..m~ Ttt.t C(\mmissi.on
may waive the prohtbition for pubUe insfresl rt'.asonl t lubjoct lo
the approval of. franchi,ing aUlhority lh'l h.s lhe right to .cl on
• nl.,r .. 'equest pun.anI _ f'>nthi... For any ll'iIJIS(C( or sale
.(ter Ih. 36·momh ""nod, Ihe new low ,lale' thaI if a (,anchi,ing
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aulhorliy fails 10 lei within 120 days, the transfer is deemed
lranled '(unless Ihe cable oper.lor Ind frunchlsln, lulhorlt1 .,ree
to an extension of lIme). The 12O-day period doe.! not bell. to
run until the cable ope",tor hu !ubmilled Information r"'lul,ed by
the franchi,lng aUlhority and Ihe FCC.
xm. Leased/PI!O Accl!55
S. 12 r"'lulr .. Ibe PCC 10 esllbll,h • formula to determine
the mulmum reasonable ",lo • cabl. ope"'tor may chlrge for
leased access, and 10 csbblish .... SOIIIIbI. lerms and conditions for
such IcceSS. A cable ope",lor would \Ie permlUed 10 use up 10 one
third of lIS leased access channel ",paclly to proylde q .... med
rducaUonal or minority cabl. prog"'J)lming services, regltdleso
of whelher such programming services are arnliited with the cabl.
operator.
The new Ilw: (A) allows coblo operaton, pursulllt to •
written and published policy, to decline to carry material o.lused
ellannel. which they .... son.bly believe to describe or depict sexual
or ucretory activities or organs In I patently offensive manner IS
m ... ured by conlemporary community slandards; and (8) directs
the PCC to Idopt rOlulaUon. Ihat would require: (I) cable
operaws 10 carry Indecent prOlrammlng on only one leased Iccess
chlllnel, (2) cable ope",to" to block such channel unlell a
subscriber requeslS access ta It, and (3) cobin plogramme .. 10
inform cable aperators of whether their programming Is Indecent.
The new la., requites the PCC to promulgate regulation. that
would enable I cable operator tn pmhibllth. use of PEO channels
to carry "obscene material, se.ually .'pllcit conduct, or material
• oliciting or promoting unlawful cond.ct." S. 12 subjects cable
ope"'tars 10 criminal or clyllUabillly for the caniage of obscene
programmlna on PEO and leased IcceS! channel •.
XIV. EquAl [mpl.yn.elll OppDrtunily
Tho new law r"'lulres able ope",lo" 10 file with the FCC
an onnual sbtlsllcal ,eport Idtlltifylng by ",ce. sex and job tlUe.
Ihe number of employees In ~e",1 full·timo and pan·time
calegories. 1t"'10 codifies the FCC" existing ERO roquirement>
for television broadcast statlons.
XV. Hom. WlrlnR
S. 12 r"'lultos the pce to esbbJlsh rules concerning Ihe
disposition, a'ter • subscriber terminat .. cabl. service, of any
cable equipment Installed In Ihe subscriber', home by • cab!.;,,?,,)
operator. ~''>'
XVI. 11.on of Cable Se .. k.
S. Illncrease, lhe penaille. for <he', of cable s<",i('.e.
XVU. Subscr~b.r Privacy
The neW law clarifies 51!veral aspects of the exh.ting cable
prlva.y rule. Inc/llding, among Olhet things, that the definition of
"personally Identifiable informa:lo." under Section 631 of Ihe
Cable Act does nol Include My record of aggregale d .... which
docs DlllldenllfJ panicolar persons. S. 12 also prohibits a cabt., , )
opera lor from ,ranting unauthoriwl access 10 • subscrib<r's .
Information 10 ""yone other t~an the subscriber or the cable
operator .
xvm. Anlllnls{ lrnlIIunlty
S. 12 clarifies that II doe. not .lter or restriel Ihe
applicabilily of 'ederal and slIle .ntilnutlaws. Since 1984, local
goycrnment! have been immune from damages in antilnHt cases.
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DATELINE FOR IMPLEMENTATION 011 KEY
I'ROVISIONS IN S. 12 IN THE COMING YEAR
The following I ••• umm • ." of letlonsth. FCC mUlt either
commence or comple!e In the coming )'ell.
I. Wllhln 4S DIYS of En.dmont of S. 11 ..
8y No .. mber 19, 1991
A. The PeC mUlt commence I rulemlldng p~lng
to establl.h "'gulatlons to sovem th •••• rel •• by
television broadcasillalion. of their retran.mlnlon
or mu,t calry righl!. The FCC I, required to
conllder as part of,!his p~lng the Impact of
retransmi •• ion consent on ba.lc cable IlItes and
mu.1 enSure Ihal the regulations II promulgales do
not conRId with II! obllgalion to ensure Ihat sueh
,otes are ,easonable. The FCC must complete its
nllemaking proceedlnl wilhln 180 day. ane, Ihe
date of enaclmcnt of S. 120.,., by April S. 1993).
NOTE: TUrner Broadcasting System. Ine. filed a
Ilw.ull on Oclober S, the dote Ihe new law waS
enacled, .hllllen,ln, the rellan.mlsslon consent and
must cony provision.. ~ IIIm~roadcasline
~ItL..lnb v. fCC, No. 92·2247 (D. D.C. filed
Oct. S, 1992).
Ii. Within 120 nlYs of Rnldmenl of S. Il ••
Dr Februlry 2, 19'3
A. The FCC mu.t promulgale regulallon. requiring:
(I) cable operalors to place 011 a singlo leased
Rcte" channel 1111 Indecenl progrlmmlng: (2) clble
operAlotl to block such chl.nel unl... Ih.
subscrlbor reque.ls Icce" 10 such channel; and (3)
o programme, 10 'n(o,m Ihe coble operator If lIS
programming would be Indecent.
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D.
.-_~ ____ ~~;n ___ _
The FCC musl ptescribe rules concerning remo,,1
of any cablelnllalled by I cable operalor wilhln the
premises of a subscriber who has lerminl!ed
subscripllon.
III. Within 180 naYI of Enadmenl or S. Jl •.
8r AprilS, 1993
A.
B.
C.
D.
B.
The FCC mu'llmpose regulations to en,u", !hat the
rates for the bul. cabl. service lIer aro r .. sonable.
The PCC mu.! impose: (I) "'gulation, Identifying
whether rales fot non·b.slc programming services
are unreasonable; (2) procedures for r .. olullon ot."
complaints (rom (ranchblng 8t1thorilies , conslimerU
and other rtlevanl stJIte or focal government entities
about unreasonable rales: and (3) procedures for
reducing .nreasonable tate, IIJ1d for providing
reCunds '0 subscribers.
NOTE: Local government, will have only 180
days aRer Ihe FCC'. rules become effective to seele
• reduction In exisling ra'es. After the 180 day
period, locU governments can .uk relief only with
respect 10 changes in cable rates Ih31 are initialed
lfter the FCC's rules become e((ective.
The FCC must Impose rul., to prevent evasion. oS',
the FCC', rale regulations. V
The PCC mu,1 impose regulalions implementing Ihe
local commercial television station mus(<arTy
provisions.
The FCC musl complele ils nile nUking procc,din&
implementing brol!ldcaslcl's' fig~l 10 choose (,jlhcr
retrlnsminio~ consent or musl carry.
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, __ ,1llI SIIIIdald. by wItIcl! <:atJlt
."",010I'I l1li1 MIIIl IMk t~_ ~
oblle.ljon,.
'TIlt. I'CI:: \1I1l1\ eslalillsh ~ ror IfmrmllliJ!( 1M
maximum "",onab!e met, tnd the Iemtt t!>l.l
cOIll!lllollJ. 01 !uJl!d I«f)'"
The FCC 11M! pnIIIIII\ple ~ltIklrtt Ilt wille ill!
~n.\oT of , <Cable !ySItm 10 7J'It)\OO\l the me, on
such S1ltem, 0/ no cllanneillOt my Pllllltmmmg
tonWniAI ~ ""I~rial, ,ulRllly e~pIkll
eondllel, or malerfal fOllcl.Mg or rtcmoll",
lIlIIawM tllIIduel.
Th" fCC RIll« pre«:flbt !l:J;ult;tlMs making It
UfIIawlttl (<It • e.lIIct ope!lIlor, or « "",1111<:
""" .. mmlllJ 'ltMot In which a .. Me ~ flu
1ft .«ributabh! Im.mlt, 10 "",ale In unrlllr .... !I\Ilds
of tompe!&lO!I, {It UlIfair Of 6ecqnfve .Cls cr
prac!ltt!, the purpole Of .!feeI of wllidl II to
hiru!er OJ prevenl 11>1 IIIt>l!Icllslmel .. hk&
programmlftl distrIbutor from pro.1dinl
progltmmin& ~ lublCriben.
t
The FCC m\I!t ~ I rnr.."",I:m, 10 Impose,
on PfO'Ildeu of oIlS setY~T publie IRIm!! 1M
oIhet tet)\ll,emt'llli rOt 1I"",ldln, vide!>
prog .. ",m1ne, l",,'udlnl, .1IIMr. 01,." IhI"I' ••
JequlJemtII\ 11m DBS pmvf6m re~m: tllaMrl
eapIcl/y fOf ~ PfOCft«ImhIc of C<1
td..,.liomtI Of 1n~kn>zlllI1»te,
"" •• __ ~e •• _, ... ,,_.~'''''~ ~
IV. WlIl>lI! l'lI Da)'t of EmtttmMt iii S. 1~ ••
111 JuJr 1, J993
Y.
A. The Pee RIll« <l<Iml'1eIe tlle ~~. 10
dt!e:tmint wIIe1Iler "-dCatI ttIl:rilioo SIallo", that
4I1'l p~ UIili%td for the 1IlIrmnlnl()!l of
lila pnsmtIIl"," ty progttm ltJlg!b rommmbl.
m teN... Ute jl'IIIlIe ialete!(, oon\'((\(e<l<le Ill<!
~I)'.
8. The l'ee iIIlIrt prueribe re.iJ~ to Its EEl) roles.
WII.IIIII One Year of Enacf.meu( of S. U ..
81 (~mr S. 199;1 fj
A. TIle FCC 1mI!1l e!!lblim relet !hal ''''lulr!: WIle
oprnl()f$ 10, lilt, wllbln OM 1m an~r VIe hu: ()(
_t of s. 12 l1l<I _uti!,. Ihtmfltt,
Il_lallllr",,,,.ilim lhotl ""'1 lie d.,.1It«d ~<IU:)'
r<:Or (lIfoo:mg Iht !'CC'~ me '~uIaIi_.
S, The FCC mm( too4~( t p=<Il~g "' I'ff..~
rule.1l111d II!gulaao •• e$!lb!~hin~ fimilS an: (I) 1M
!l\I!IIl>o< <If abk sulmril>ef$ a ~,= b ~
\0 ,tIIcl! It.rough cable sySltmS owntd by such
pet.\lJl!; and (2} !lie 1!Nl~ of -::lllllllcls <lit • ""llk
.yslem mal can be llCCulIled by ~idoQ pro'ru<I~I',
'" w~!¢ll I cabl~ ~"'(1)1 M:s an altribuiat )
tntere!!, The PCC mU<l -.;W ~ I>WlOvry !)(
lmp<lSin, llmilailiml 00 !be 6egme 10 whlcll
mulllclwuJtJ "lllto ~mlltc dimlOOloo ",ar
~t&e m tll!\ emlfun 1)1' prodm:ilim of vidoQ
ptoCr.tnImflle.
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ptllIfiM ea""re ,c""",.ents III(! rel,1t<I practices
beIW .... Clbfe ope!llor. and video PIOC,.mmers.
D. The FCC mU'1 ptelClibe togulallon, wblell estIlIl .. "
mktlmum 1odm\ca1 sWltl\rds telatlng 10 table
• y"e"u· tCl!hnicai open!doft lite! slgnll qualify,
e. The FCC must report 10 COORre!, On rntMS ot
ISluring eompallblllty between lelevblont, vldro
cassell. ,=nIetsllld aille ,yslem •. Wllhl. IS!'!
days .fter Ihe date Of submission or lflii IqIOrI 10
Cona"''', the Comml.sion mll.t !ssue tegul.llons.,
are IIt'lOO<suy to Inure suclt compatibility.
F. The PCC mull IUbml! by July I, 1993, an 1"ltrim
.eport on !he migflrion of spons ptllIrammln£ r'Qt1I
broadetll stations (0 etblo programming •• ,work!
and P'Y·I"'·,·vlew syS!tm.. The lino! "'porli! due
Oft My I, 1994.
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Abou! the Authors •..
thIs su",mary VItI prepared rOt lolA TOA by· Norman M. Sinel,
Patrick ,. Granl, 5teph:ml. M. PhllHpps..,d Willi.m e. Cook, Jr •
Me.m. Sine! Md Grant and Ms. Phlllipp. IN! pattnelS, and Mr.
Cook b an Buoel'te, 01 the Washl"rIM, D.C. law linn or Arnold
&. 1'011er. The lulIIo" would be happy 10 aII!wcr any Inqulri<~
Itgaill! .. S. 12. )'bt! authors can be mched 312021872·6700 or
by wlltlna to them al Arnold &. Porter, ,'00 New H'mp!hire
Avenue, "OW, Washlnglun, DC 10036.
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~CUSTOME.j1, SERVICE STANDARDS
Effective July I, 1993, • cable opera.or shall be subjec. to the foilo"ing customer seTvice
standan!s:
(I) Cable SYSlem office hours and telephone availability •
(A) The cable operuoT .till maintain • local, IIlIH,. .. or ""ilect call tclephone =. line
which will be available to its subscnben 24 boors a days, seveo days. week.
(I) Trained company TepIeSnltati yes will be available to respond to cusromeT
tclepbone iDquiries during oormal buoine .. hours.
(2) After _ bIuiooos boors, the access line may be lllSWemd by • seNce OT
an automated mponse .ySlJ:m ine1udint an OIlSWoriug machine. lnquiri.es
n:>eeived after oormal busioeos boor.; tIWSI be r=ponded !o by a tniDing
oompany represemalive on !be next business day.
(B) UDder oonntl opeming COIlditions, tdep/xIDe onswer time by • customer
~, iDeludiDg wail time, sboII DOl exceed dWty (30) ,..,.,.,.,m ",her> !be
.....-jon is mode. U!be call .... '" be traDsfmed, llIDder time !halJ DOl exceed
dWty (30) SOCODda. These IiIandanIs sboII be met DO leu !.ban n:-y (90) pert:em of
!be time I!Dder _ ~ cooditions, matsured "" • qtlartOrly basis.
(e) The operuor will DO( be ""'l"imlto aaj!liJe equipment or ~onn SUTVeyS 10 measure
t<IDIpIiaDce wid! !be ldepbooo aasweriDg SIaftdaJds above IdIIess ... historical recoro
of compIaims jndjcares & clear faiIme 10 c:omply.
(D) UJtder _ operating CODIIitions, !be " • ..,.".,. will m:cive • busy signal less thaD
thrce (3) perecnlof !be time.
(E) Customer service center IIIId bill payment Iooa!ions will be open alleast during normal
busiDcss boor.; IIIId will be COI1VC2licaIly 1oc:aIed.
(D) I .... Uatioos, outages IIIId service calls • UDder _ opera!iI!g coaditiocs, each of !be
followiog four staDdan!s will be met DOl leu tb.an ninety fi .. (9S) pm:em of !be time
""'"-'UTed OIl • quarterly basis:
(A) S1aDdtIr.IlnstaIlatiom "ill be pedormed within sevm (T) business day. 0/'..,. an order
.... beeII placed. "StaDdald" i ..... Uatjoqs .... _ that are Ioc:aIed up 10 125 (I00I
from !be existiDg diSIribuIion oysu:m.
(B) Excl lUfm• c:onditioo.s beyood !be control of the opetator, the c:abIe opctll1Or will begin
wortiltg 011 "service iIllC".pOOIIs" promplly IIIId ill DO event later dwJ 24 boor.; after
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the in«:Il1!pt.!Oil becomes }:.nOWD.. The cable operator nlust begin actions [0 correcl
other service problems tbe next business day after notificaticm of [he service pmblem.
(C) 1he -appointment windou."" alternatives for il15ta.Uation.s., serviced a..lls, and oHler
instalJation activjlie:s will be either a .specific rUnt or. at maximum. a four-bouT lime
bJock during normal business hours. (The operator may M:hedule service ca1Is and
other installation activities outside of nonna! business hours for the C;(pre-.s.s
convenience of the customer.)
(D) An operator may not cancel an appointment with a customer after the close of
business on !be business day prior 10 !be scheduled appoimmenL
(E) If a cable opetat.ot representative is running late for an appointment with a Customer
an<! will DCI be able to keep the appointmenl .. ""beduled. the <"S10mer ",ill be
oootacted. The appointment .. ill be resche<Iuled. as =nary. at • lime ",biob i;
CODven.ie:Dt fer the CUSIODler.
(III) Communicatiow between cable ope:a!OIS an<! cable subscn'bers -
(A) NotifJCa1ions 10 subsen'bers -
(1) The cable opem1JJr shall provide written information on eacI! of the following
aras at the time of inSlan.1io!l of _. at IeaSIlDD\IOIly 10 aD subscribers.
lad at any tim:: upon ~
(a) products aJId services offered;
(b) prices ODd options fa< programmiJJg service50Dd COIlditiODi of sub:scription
10 progmmni1Jg ODd other servla:s:
(c) iastaJ1.atioo and service maimcnaItC"! policies;
(d) iruUuctions on how to D.Se the cable setVice;
(e) charu!el positions ofprogtammiDg carried 011 !be sysIem; ODd
(I) billi!Ig ODd complaint ~. iDcILlding !be address and telephoDe
DUmber of !be local fr.mchise ~" able office.
(2) eu-ners will be uotified of any <baoges ill rates. pnl&t3I!lming oeMces or
c:lIannel posir.ioo.< as soon as po5.<!bIe tbrou,gl-. arIDOWlCCIDotllS 011 the cable
sy5tem and in writing. Notiee must be giveu 10 ",1ncribers a minimum of
thirty (30) days in adVllJlCe of such changes if the change is witbill!be COtIII'OI
of !be cable cpemtor. In addition. the able cperaIor sbaIl n<Xify sabscriben-
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I thlny (30) days in advance\ of any signllK:anl changes in the other Ullonnation
requiI<d by the preceding paragraph.
(B) BUling·
(I) Bills will be clear, concise and undernJ!lldable. Bill, must be fuUy itemized,
with itemizations including. but not limited to, basic and premium service
charges and equipment charges. Bill, will also clearly delineate alJ activily
during the bUting period, includiDg optional charges, reb.ale, and credits.
(2) In case of billing dilJpwes, the cable operator must respond to • written
complaint from • subscriber wiL'lin thirty (30) days.
(C) I!tfunds. Refund cbecks will be i<sued promptly, but DO later than either •
(I) tbe customer's ..... billing cycle foDowing rosolutioe of the request O! thirty
(30) days, wbichever is <arlier, or
(2) the rettim of the equipment supplied by the cable operator If service is
termiDa'e,t
(D) Credits -Credits for service will be issued no Ia!er than the cusromer's next billing
cycle folJDwing the -.niDaIioc that • CJOdit is wamlIIed.
(A) Normal Business aoon -'Ibc Imn '_ business boors' meaas _ bolus during
... hid> most JimiIar "'aw ... in die oomlDlmity are open 10 serve customers. In an
oasos, 'aorma! busioes& boors" m1IJI iDcIude lOUIe evenitl!: boors alleasl ODe uigIu per
week ODdIor some ~ boors.
(B) Normal Operating Cocditioos -the ccrm 'JJOImal <lJIOIIIiDg conditions" III<8lIS ,bose
service c<lIIditioas whid> are wilhlD the CO!lIroI of tile cable operator. Those
CODditions ",bich are IIQI ...ntrlu the CCIItrOI of the cable operator iDcIOOe, 1M are DOl
1imired 10, oanuaI disasIen, civil <ilsIwtJaDce<, power outage8, t<:IqJIxme aotWork owages, aDd __ or UIIUSIIII ,.._ alOdiIions. Tho .. CODditioas wbicb ill:
ordinarily wiIbin tile =1 of the cable op:raror iDchJde, bat ore DOl IimiIed 10,
special J>!DIIlOIions po.y-per-view ovans, tale increases, n::plar peak or ~
demaDd periods, aDd rnaiDt:Dance or upgnde of die cabk syltlOD.
(C) SeJVi<:e lDtcnupQon • 11= tenn "oeMce imer.uption' means the loss of pi= or
soond en ODe or more cable c:haImeIs.
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FR OM CI TV 4 rrORN EV
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THE HONORABLE CITY COUNCIL
Palo Alto~ california
A'ITENTION: Policy and Services Committee
Novew~er 3, 1993
RE: R@gylotigD of BAsiC cable Service Rates
Dear Members of the Council:
This report. addresses t.he legal implicatior:.s of any
po2icy deci8io~ by the City of Palo Alto acting OD behalf cf the
Joint Powers Authority to regula.te cable television ('CATV') rat.es
and service standards, among ot.her aspects, of a cable franehise
operating in the CATV franchise area by the cable Communications
Cooperative of Palo Alto, Inc. ('Cable Co-op·). It addresses
several of the questions and concerns ~resBed by the Council on
September 20,1993.'
Palo Alto can regulate rates and service standard.s
actively or passively. Active regulation would probably mean
routine rate and se~~ice reviews, passive regulation would depend
upon complaints or same oth~r -trigger-to initiate a review. Tbe
decision to regulate is irrevocal:Jle. Regulatory functions rray be
delegated to an advisory body. We ~ccmmend that any decision to
regulate be eoord~ted with and supported by the otber entities
constituting the Joint Powers.
~ne City of Palo A1to {-City~l acti~g OD behalf of the
Joint Powers Authority has the pover and the right to regulate CAT';
rates and service standards UDder federal and state laws. It a~so
.Is. copy of tbe minutes of t.he regular meeting of the
Council on September 20, 19S3. pages 71·265 to 71·272, is attached.
The many issues concerning rate regulation, tbe role of the Joint
Powers AUthtJri t.y I aDd t.he role ct a consul [ant are covered .
•
THE HONOPAEi.£ CITY COUNCIL
November 3, 1993
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has the regulatory authority by virtu~ of the fran=hise ag~eereent
entered into on behalf of the cities of Palo Alto, Me~:o Park, and
East Palo Alto, the town of Atherton, and the counties of San Mateo
and Santa Clara [wJOiDt Powers~). Recent changes in federal a~d
state 1 a",' would permit the City acting on behalf of the Joint
Powers to expend its regulatory authorit~/ over Cable Co·op in the
area of rate regulation and service standards.
1. Fegera.l and S~ate lraw
Since the enactment of the Cable Communications Policy
Act of 1984 (-1994. Act-). t.he prin'lary consumer complaints about
CATV have targeted rates. servicing ~ and programming. On the
national level~ rates in over 96 percent of cable franchises have
been deregulated. the rate of increase in the averag~ monthly rates
has al.most trebled t.he rate of increase in the Consumer Price Index
since 1984, and rates for basic cable services have increased 40
percent for almost a third of subscribers. Regulatory limits
imposed upon loca~ franchise authorities by the 1984 Act and the
vertical 1ntegration of cable operators and cable prcgrammers have
enabled the CATV indust.ry t.o capt.ure a substant.ial market share of
households with televisions.2 With t.he shift trom broadcast tele
vision t.o CATV. effective competitiOIi. has BO declined that the lack
of effective competition is n~ presumed.~
Tbe cable Television Consumer Protectio~ and Competition
Act of J.5192 (-J.992 Act. -)" was enacted in response t.c the numerous
complaints about. CATV pric~ng and services. While t.he 1992 Act
effected several cbanges t.o the 1984 Act. the provisions which 'W:l.ll
have the tnOst noticeable impact upon CAT" subscribers fall within
the areas of carriage of local comme:rcial television signals {"rr.ust
carry-pr~~ision8j. rate regulation, and customer p~o~ection and
customer service.'
Section 2 of the Cable Television Consuzner ProtectioD anC3
Competition Act of 1992.
47 eFR § 76.9~6.
106 Stat. H60:
Under the cable Television and Video Provider Customer
Service and Information Act, Government Code sect.ions 53054
53056. a CATV provider is enc~Jraged to establish customer service
gtandards and t.o not.ify its customers of them. An aU-'"1ual notice of
such standards must be distributed to the employees and customers
of the pr~der. If the provider fails to do 80, the local agency
in which the prO"Jider operates may. by ordinance) impose a penalty
..
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THE HONORABLE CITY COUNCIL
November 3, 1993
Page 3
RE: RggHlatiQ'"1 Qf' Bas"·c Cable SeaiGEt kates
2. Joint ExeTcise of Powers & Jcin; Operating
Agreements
On July 26. 1983, the Joint Powers entered into a joint
powers agreement tc permit the City to administ~r a CATV franchise
process after the award of a C~TV franchise to serve the franchise
area is made. On October 13, 19S5, the Joint Powers entered. into
a joint operating agreement. which affirmed the administrative
responsibilities of t~e CitY4 Onder both agreements, a Franchise
Revie~ Board '-Board-) consisting of a ~r of each of the ~oint
Poven was established to review and. r~solve any issue formally
raised by any of the Joint Powers regarding the administration of
the CATV franchise. In being responsible fer the oversight and
regulation of the CATV franchis~. the City is required to follow
the determination of the Board. The j oint powers agreemet:t
requires the City to provide Board members with infc.rmation on
substantial ~~anges in the franchise agreement; including cnangss
affecting rates; services. and renegotiatio~.
:Itla.ImlUch as the agreements were negotiated by the parties
when there was deregulation, the exercise of regulatory auehority
over rates and services may be regarded as a discretionary matter
to .be decided by the Joint Powers. The-refore, it is recCJ£ZDended
that the decisioD to regulate Cable Co+op's operations be
coordinated with t..~e Joint: Powers. and that their affirtililtive
response to the decision to regulate be obtained.·
3. Amended ond Restated FrAnchise Agreement
Under Section 5 of the fraLch!se agreement. the City has
no express paver to regulate the fees, ct~rge&. deposits, and other
services. for the several tiers of CATV s-ervice offered by cable Co
op. Tbe only two limitations are tbat the fees and charges to be
collected by ca.lJle Co-op shall be nondiBcriminat:ory~ and that such
fees and chargee a.re not permitted to be levied for certain service
calls for repairs not at.tr.ibutable to the fault of the cal:Ile
subscriber. Seccion 5.4~ however. reserves the power to the City
not to exceed $500 for each failure to act within 60 days after the
provider has received notice furnished by the local agency. State
law does not preempt local agencies from enforcing standards that
are ~sed by a fr-~cbise agreement.
• A draft resolution a"oJthorizing the City on behalf of the
Joint PoWers to regulate the CATV franchise pursuant t.o federal law
has been prepared by our office, and it sMuld he adopted by the
governing councilor board of each Joint. Povers member.
"11m.,.. GO'JIOW1
o
TEE HONORABLE CITY COt~CIL
November 3, 199)
page 4
RE: Re~Jla;iQn of Basic rab 1 p Service Ra:e~
and the Joint Powers to regulat.e rates to the ft;.llest extent
permitted by law~ and the implementation of the 1992 Cable Act's
pro..,-isions would effectively confer upon the City act ing upon
behalf of the Joint Powers the right to regula~e ra~es. It reads:
"5.4 The City and the Joint Powe::-s intend to
re~late ra~es for cable Selvice to the
fullest exte:ct permitted bi" la'\ili". Notwith
standing aIlything in this Restate::::! Agreem~nt
to the contrary. in the event that the Cable
Act is amended or restrictions on {:he
au~ority of the City and/or the Joint Powers
to regulat.e rat.es are otherwise removed or
~essened, the City and the Joint Powers each
intend to and may. at their di~cretion.
regu1ate rates to the fullest extent of tbeir
regulatory authority under federal, State and
local laws.-
Section 623 of the 1992 Act" ~nds the correlatiYe
provisions of the 1984 Act to permit the City acting on behalf of
the Joint Poveors to regul.at.e rates, provid.ed that it seeks and
obta.in.s the appropriate cettification from t.he Federal Commu~
niCAtians Commission '-FCC-). The provisiOns of Section 5.4 would
permit the City to exercise regula.tory authorit.y of the rat.e
setting mechanism of the CA111 operator ~
1. ~ndatQry reguirem~
The City as t.he framchising authority may file for
certification by following certain procedural steps, including the
filing of a Form 328 certificat.ion form i committing t.o enforce and
be consiatene with the PC'C regulations for the basic service t.ier,
and affording a reasona.ble opportunity for consideration of the
views of al.l interested parties. The certification will become
effective within 30 days after its receipt by Che FCC.'
T 47 USC § 543.
• The attached Staff Report 'CMR: 4!8 : 93} add.resses the
provisions pertaining eo certification and rate regulation, thus~
this subject ~tter will not be considered in thi6 repoxt.
93llDl .,..G07CH97
THE HONO~~LE C~TY COUNCI~
Novemb~r 3, 1993
Page: 5
:2. Optlqnal ctIJidelines
):
The regulations may be furthp.r designed to address other
COnCeXllG peculiar to Cable Co-op's operations, including, without
limit.ation. fra!l'le t!le administrative tools for evaluating cable
operator submissions on services and p::iciD9, provide financial and
other noo·financial incentives to locate ·last~ customers who are
entitled to fees and charges refunds. develop effectiVE: er::.force!T'.ent
procedures to address any violations of local o~ders (such as by
tines and fo~feitures). and previae for -repeat Offender·
en''lancements. If the Joint Powers det!:!rmines t.hat the CATV service
Bta..ndards are maintained at. a high or very high level~ as Cabl"! Co·
cp hae statecl j the regulat.ory authority need not be actively
exercised in this area of concern.
D!:PLICATI:05'S 01' '1'3E' POL:ICY DECISION
1. Bpsmlation
Rates may be regulated in an ac~ive or a passive manner.
The City acting through the council cn ~t of the Joint Powers
may actively DlOllit:or cable Co-op' 5 rat.e changes on an on-going
basis. or it. may regulate only when the occasion to ae:eert its
power to regulate arises. for example, whenever c~laints about
rates are registered. ~f the decision to regulate is an
a..f.firma"".ive one. the City will be required to incur costS and
allocate staff time to adopting procedural rules and regulations
governing the exercise of the rate regulatory authoritY4 Staff and
the service of consultants will need to be activated and deployed.
Because Cable Co-op proposes to use the cost-of-service
methodology to set rate3. ana the City's staff presently does not
possess the expertise to interpret ana implement the FCC's
regulations, which have not yet been issued, added costs must be
antiCipated. A consultant ",'ho is knowledgeable about the CATV
iDdustry and its general practices, highly trained in financial
analysis and t~liar with general accepted accounting principles
and general accepted auditing standards, and able to e~fectively
crnmm'uicate complex financial principles and data to lay persons
must be retained. There will be finanCial and other assumptions
that are built into the cost-of-servlce rates which need to be
closely analyzed. Whether the retainer will be an on-going one
depends on how active the Joint Powers acting through the City or
another body will be in the area of rate regulation.
The decision to r~sulate rates is irrevocable while the
Cit.y remains qua.lified under the FCC rules. therefore. the City
caL1tlOt unilaterally deC:i.de not to regulate the rat-es after the
certification is granted. It could, however, elect not. to regulate
9JIIPl.,.. DITJDWI'
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! T:~ HONORABLE CITY COUNCIL
Nove~r 3. 1993
Page 6
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RE: Rggula.:'ion of B3,sic Cable Se::.v.i::,Q. Bat.?.:-
actively~ The only manner In which the City coulc lose its
certification is if Cable Co-op W!';!re tc petition the FCC to revoke
the City' s certification, because of certain em.l.","t'LI;rat.ed fai~ures by
the City to comply with the certification requirements, ana the FCC
approved cf such revocation. However, this revQCatioD would ~ot
preclude the City as the franchising au~hority to apply tor
recertification at a subsequent date.
Neither the 1.992 Act, the joint powers agreemer:t, the
joint operating agreement~ nor Ule franchise agreement would
pro:bibit the City actin9" through the Council from d~legating to any
board or commission the right to review the rates charged by Cable
Co-op. The 1992 Act expressly permits any franchisi~9 authority
which is certified to regulat~ rates. Thus. any regula~ory action
may be taken by a subsidia!'y body of the franchising authorit~r.
however, the appointive body. here. the Council. has the power to
accept and reject the recommendations of the appointed body4 ThE
Council may wish to determine whether t.he Joint Powers wish the
Board to review the parameters of the regulatory authorit:y of the
City or whether such delegation could he made by the City and to a
body appointed by the CitY4
2 . NQ Regulation
The Joint Powers could de'cide tr~t the City should not
seek the certification to regulate .rates. unless ana until CATV
subscribers complaints are received. If the City as the
franchising authority fail.a to obtain the certification, to the
extent there is some lead t.ime built into 'the certification
process; the City cmd the Joint Powers wO".!ld lack the flexibility
to respond promptly to rate complaine.s4 Presently. beca.use the
City iand the Joint Powers) have not ~~vsen to regulate the rates,
rates may be increased by cable Co·op after November 14, 1993 with
impunity and without any interference from the City (or the Joint
Powers). If the City is subsequently certified; the City could not
legally require Cable Co-op to roll back the rat.e increases promu.l
gated before the City obtaineo its cen.iticatioD. Only the market
conditioos will dictate the extent to 'Which cable Co-op will be
able to raise rates.
As an alternative to rate regulation pursuant to the
powers conferred by the 1992 Act, the City may seek to amend the
franchise agreement with cable Co·op's consent in a manner which
effectively delimits cable Co-op's right to increase rates withou~
some oversight and approval by the City on .behalf of the J"oint
Powers. No external administrative costs would be incurred by the
City oCher than t.he costs inherent in the processing of an
amendment. to the franchise agreement 4 The drawback ot this option
is that it woul~ require the consent of cable Co·op.
9l111D.,.. 00'10497
•
THE HONORABo£ CITY COUNCIL
NO\.'ember .3. 1993
Page 7
RE: Regulation pf Easic Cab1e Ser~;c§ Rates
CONCLOSION
It is wi t~i ... the Council's purview :'0 dete:rn'<i.n.e ""heche::
the Joint Powers and the CATV eubscrib€rs support the decision to
regulatE CATV rates, service standards; and other aspects of CATV
services offered by Cable Co-op. The complaints or the lack of
complaints about the rates charged and the quality of services
provided by cable Co-op could be the sole or t.be subst.antial factor
which determines whether Cable Co-op will be reg~lated. Tbe cost
of re~ation on a one-time a~d on an on-going basis is a factor
which deserves consideration. Regulating rates and service
standards and other CATV activities would, once certification is
obtained; give the City acting on behalf of the Joint Powers ~he
power to elec~ to undertake rate and other forms of regulation only
t.o the limited extent required :by t.he needs of the Joint Powers and
the CATV subscribers. A decision not to regulate would prevent
the City and the Joint Povers from regulating in a timely and an
effective manner.
APC:GK:SY"
At.tachments
cc: cable Co-op
June Fleming, City Manager
/s/
GRANT r.:OLLING
Senior Asst. City Attorney
Bernie Strojny, Assistant City Manager
Dianah Neff~ Director of Information
Resources Department
d f
o
lingaring communications gap betwe~n the utilities Department, the
Council, an~ the community~
C~uncil Member Wheeler said one of the most important: responsibili
ties of the Council was to make appropriate decisions that ~elated
to utili~y issues. Some excellent decisions in the past resulteo
in the healthj' condition of the City's utilities. The council
sho\,llcl carefully guard the condition of the utilities. It "'as
iDportant to have the policy questions laid before the Council
either in writing or by phone in advance of the meetings. She
suggested it would be helpful tor the UAC to send the Council a
separate memorandum that included policy comments.
Council Member Cobb tha~ed Utilities Advisory Commissioner Fre~
.Eyerly and Jack sutor ius for their ettorts~ He added th.at UAC
would probably take on ~~ increasingly important role~
HenlOII: Coun:::il MeUlber Cobb moved, seconded by Rosenbaum, to
approve the Utilities Advisory Commission recommend8tion to
authorize the M8yor to execute the Northern California Power Aqency
lNCPA) Facilities Aqre~ent and its associated Schedules and the
NCPA poolini Aqre~ent and its associated schedules.
JiO'nOW PAsSED 9 -0.
BECfSS; 'i'o P.M, -9; 45 P,M.
~3. Reso~ution Finding and Deter.ining that the cable Television
System Operatinq within the Joint Powers Service Area,
including the City of P~lo Alto, is not SUbject to Effective
Coapetition and Authorizing the Regulation of Basic Cable
Service Rates
Director ot Information Resources Dianah Neff said: the ~ble Act of
~992 presented: Challenges for both cities ana cable operators.
Many residents were interested in Palo Alto becoming certified to
re-regulate tbe basic tier ~hich meant the City coula regulate all
cable oosts.
Council Meaber And.ersen que.ried the need for a consultant to lidvise
on the cost-of-service regulatory principles.
Ms. Neff said several companies specialized in the cable Act, but
'there was no individual on staff" 'With the time to j,nvestigate the
rules. The coct-of-service d.ocument was expected to be very
lengthy; it would. require a qreat d.e&1 of tille .for someone to
becoae proficient in the regul".tions.
council Member Andersen asked about the current staffing level.
Ms. Neff replied there was a balf-ti~ staff person end she handl.~
all of the a~nistration.
09/20/93 71-26S
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council Member And~r'sen asked about Palo Alto's role loI'it.'"l regard to
the other cities.
Ms. !leff replied Pa!o Alto was the lead ~gency~
council Mem..ber Andersen ask.ed io'hether the ot::'"er cities 'Were
approving th~ 58tI'le document O~ ""nether Palo Alto was the only city
approving it.
Ms~ Neft replied the aqreement of 196:3-left the responsibilit)· of
approving such items on behalf of the Join~ Powers to the Palo Alto
City council.
Council Member Anaer5e~ asked whether Palo ~lto had received any
feedback from the other cities.
Ms. Ne~t had sent memorandums to the staff on the Joint Powers but
had not =eceived any feedback.
Council Member Fe~zino requested more information regarding Palo
Alto's role in regulatinq rate~.
Ms. Neff stated Cable co-op 'Would file its basic rate \IIlie!l
included the full cable price. She explained a cable operator
could apply ~o the Yederal communieatigns Commission (FCCj ~linq
for a -benchmark-rate which could be administered by the City on
beh3.1f of the. .:Toint Pow.-:r.s, or cable operators could ask tor a
-cost-at-service analysis-if they felt the benclmark did not
reflect. th~ cost they incurred in providing the 8ervice-.. 'l'he
consultant would work with .. taff to provide the necessary ana.lysis
and rec~endlltions regardinq cost-of-service and. a(;:curacy of
inf"oraation by cable co-op. That intonu.tion would be submitted to
the City Council a
council Kamber Fazzino •• ked how the other cities would. be involved
at that point.
MS. Neft replied that a jOint committee of the cities vould meet
after the consultant evaluated the information. As II; courtesy, the
other counoils would have an opportunity tel comment on the qroup's
recommendation. The Palo 'alto Cit}" council woule! ultimately
approv. the 'recommendation.
Council Meabe%' FazziTIO aaked whether the council'. approval would
oceur on an annual ~is basoed: upon rate increa.Bes~
Ms. Neft eaid FCC would allow cable operators to co .. back on a
que.rterly :basis if there were chanqes in the costs. The council
would be in a pos i ti on to review any and .all proposed rat.
increases a
Council Member Fazzino assUDed council voul~ review cable co-op's
record. to ensure consi.tency with the .r.;:teral stan~ards.
Ma. Neff said the review would be handled administratively by staff
which would not require council acticn unless the council wantea to
09/20/93 71-266
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amend the customer service standards, ThE c~uMcil would receive an
annual re.port on the subjeC"'t and could ~gend.ize the mat.ter for
forn.al revie ......
Council Member Fazzino asked wheth~r any consideration had been
given to having an authority other than the Council revie. rates
and service issues, such as the Utili'ties Advisor}' Corr.missiol"' ..
Ms~ Neff had not ccnsidered usin9 any other authority.
Council Member Whe.eler asked 'Whether the City's need for consulting
advice would be ongoing.
Ms. Neff replied once the major cost-of-service analysis was
prepared, she hoped staff 'Would be able to handle subsequent
requests for rBt.e increases. HO\iever ~ if 't.'here vere a complete
restr-.Jcturinq, there miqht be a neee! for e.dditicnal consulting
services.
Bob Moss, 4010 Orme Straet, &aid Cable Co-op had adopted a formal
position :-egc\rdinq ra.tes and he had been asked tc present that
position to the Council. He affirlbed: that Cable co-op Would be
going with a cost-Qf-service l not a benchmark, method for pricing
services which would increase the basic rates siqnificantly. The
cable Aet outlawed charqing for additional outlets, and the Cable
Co-op vou~d have to .ake other adjustments to ma~e up for the 1055
of revenue4 A consultant diO work on a cost-of-service evaluation
.for cable co-op. No one knew exactly what the FCC regulations
would be, but the FCC requlations were clear that any city
regulatinq must. use the franehising .fee as the source of income for
regulation. The volume of FCC re:qulations was expected to be
staqqering. The franchise tee wes not subject to the Gann
limitations.. To the extent that the money lias used for other
purposes $Ucb as. rI!;CJUlattng cable, it vas not available for general
public purposes. FCC service levels 'Were adopted several year-s
aqo, and Cable co-op bad almost al~ys excee~ed the requirements
for service 1evels~ He cited sever_l examples~ FCC assumed the
council would be the final arbitrator ot rates and that there would
be full public: bearings. The FCC expected regulators to tollow t:he
rules set by the FCC.
Tom Passel. 3&25 LouiS Road, Vice Chair of tbe Board of Directors.
of cable Co-op, expressed his desire tbat the system be second to
none and that it be available for local cOllUllunity use. He favored
C.able co-op continuing as & subs.eribe.r"'ovned systes, and the only
way to continue was to qc with the cost-of-service .etbod of
pricinq services ~ The financial bOoks woulc:1 be open so that anyone
could tell where the IIOney ... as qoing ~ Cable Co-op vould charqe
what it WQuld cost to deliver services.
Council ~ Fazzino a5ke~ what the current basic rate was.
Hr. Passel replied the rate we.
62 channe 1£.
09/20/9J
$26.95 and covered access to
71-267
Council Mem):)er
rate$4
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Fazi-ino
·,'.
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asked abo~t an estimated rate ~f increase in
Kr~ Passel replied the new rate .... ould. probabl}" he .ebout $:30.00, or
about a 10 percent increase.
Council Melnber Fazzino aSKed how the nev ra~e ,",ou.ld compare to
other basic rates in nearby cocmunitie~.
Mr~ Passel replied Cable co-op compared quite favorably on 3 cost
per-channel basis. It 'WaS important not to cOlllpare "'-apples to
oranqes· ~hen looking Bt cable rates.
Cauncil Member Fazzino asked for Mr. Passel's reaction to ~~~ staff
proposal regarding Council review of cable r~tes.
Mr~ Passel indicated Cable Co-op was co~fortable ~ealin9 with the
City.
Council Member RosenbaUllt askeel whlfl!!ther Mr. Passel amI Mr. Moss verI!.
subtly seying that CAble Co-op did not W3nt ~e Council to take the
action recommended by staff and engage in requlation.
Mr. Passel reiterat~ the cable Co-op vas cUDfortable with the
Council reviewing rate increases. He pointed out that the CaDle
Act was a complex d~~t which, among oth~~ thinqs, va. adver
tised as .. ....chan ism to reduce eable rata.. Onder the new rules,
Cable Co-op vas forced to carry some channels that it would not
ordinarily carry. Tbe cable Act. vas aiDed a.t -the 1>i9 pley-ers· but
the cost-of-service lIethod would. allow the smaller eomoaniea to
fNr"Yive. -
council M~~ Rosenbaum c~&rified th~ eost-of-service study m19ht
result in a .uch higher rate tor aervic., 'Which would. help to
cawpe.nsate f"or the lOBS in revenue mentioned by Mr ~ Hoss ~
Mr. Passel r~plie4 the cost-of-service 8tudy miqht result in much
hi9her rates for basic services. cable Co-op was charqing $8.95
for an &ddition&l outlet, and Cable Co-op woul~ loee about $54~OOO
per month. The people wbo hac! ad.c1.i.tional television sets were
subsidizing the everaqe cost ot everyone elae'5 :bill for basic
service.
council ~ Rosenl)~nm asked about. the nlZJlber of su})Scrl.bers.
Kr. Passel said Cable Co-op had abOut 2l.,OCO subscribers.
Council Member RosenbaUlll asked whether Cable Co-op had anticipated
biqher rates regardl ••• of the connection f.e i.su •.
Mr. Passel did not have enough ir..t"onaation to respond. The
biggest effect wes the inability to charge tor the aecond televi
sion set.
09/20/93 71-268
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Council ~eaber Andersen asked to what extent did the additional
r~yenue from the premium chan~els and pay-per-vie~ c~annp.ls reduce
the cost-of-service component~
~~. Passel r~plied the channels did provide revenue and, in Some
sense, d~d subsidize the basic rate~
Mr. Moss added that when the cost-of-~ervice study was: prl:!pared,
they looked at the income fro~ both pay-per-view and the pre~ium
cha~~els and determined that Cable Co-op was not charging enou7h
for either services to recover all the costs. Fe mentianed that
Cable Co-op was spendinq about $ •. 00 per month per sUbscriber for
u • .,dergroundi n 9·
COWlcil Member Andersen as;ked whether inuebted!less was ~ factor and
if the council could expect a recovery over a short period of time
re&ultinq in ~ stabilization of rates.
Mr. Moss replied it was 8 very complicated question. Cable Co-op
had a hiqh debt load and a hiqh capital cost which had to be b~ilt
into the cost-oi-service base. Ca~le Co-op -.ras short a feW'
tbousand CU5to~ers trom beinq able to recover fully. If Cable Co
op chose the benchmark method. and decided not to cbarqe 100 percent
o£ what was allowed, the C~ble Aet w~~ld prohibit cable Co-op from
tuture rate increases. Subscriber rates could be raised only by
cost-of'-llvinq increases. If the Co-Op did not ask for 100 percent
of the co8t.-Df-se!"Vice aethod allowed :::::y October 1, 1993, cable Co
op coul~ never recover that amount. Cable Co-op aiqht be forced to
raiae rates .ore than it wanted to in order to build. into the
~ full recovery. If the CO&t-ot-service were reduce~ beeause
of efficiencies and increased subseribers, the rates would also
tall. Dividends to the subscriber ha~ been built into Cable Co-op •
.Mayor McCown 6Slc.ed the alternatives 'ehe council hi!ld~ The issue of
cost-af-service versus benchaark was not a decision the council had
any control over. The choice o.f the Cit.y wall whetb!!r to "'bec.oDe the
rate regulator.
Xc. Neff repl.iec1 there were two alternAtives: either t.he City
chose to regulate or not to regulate. The FCC would step in if tbe
City did not have the franchise fees to cover the cost of regula
tion.
Kayor MCCown asked staff to explain why the City shoulcl beCOme the
rate requlator.
Ms. Neff sensed trom resident$ that they wanted the City to review
the aetions that CaDle Co-op took for the protection of the
subscriber".
Kr .. calonn.e clarified that the market place vas not functioning in
a nor.al :aanner since there was only one purveyor. Palo Alto WOuld.
probably be involved in • IContentious r.ate-making process. Tbe
City would prQbably need consulting assistance.
D9/20/93 71-269
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Mayor McCown said when the subscriber-c'Wned systelti was selected l
the City made a conscious decision not to get into the role ~f the
pr-ovider of cable and/or regulator. rt wa.s her understanding that
the new federal la'W hac! c~used 't.he City to decid.e .rrlether tc
regulate or not.
council Member Cobb steltec. 't.hat if the Cit~· became the rate setter,
there vo'Uld be a percepti:m on the part of the public that the
Council sho~ld be able to do something about the services provided.
Council MeZilber Rosenbaum askec whether a decision on the issue
needed to be made immediately. Based upon -what he had heard, he
did not think ~~at it was a qood idea for the City to taKe on the
regulating role~ He suggested that a decision be defe~red until
the Council could get more input from the public~
Ms. Neff said if the City had not chosen to regule~e DY November
15, 1993, the rates could be ir.creasetj without the City's app:-oval.
It took 30 days to be certified. The latest possible date that
council could make a decision to regulate rates would be October
12, 1993.
council Nelilber RosenbaUlill. asked whether the Council could start the
process at any tiae even if it missed the October 12, 1993 ..
deadline.
Ms. Hef.f rlli;;lied there va. no ti~ limit by VhiCll franchising
authorities must file Lor certification requests. The real time
fr_ vas November l.!:i, 1993, becau8e the fr_ze on cable rates
applied on April 5, 1993, would be lifted •
.JIO'1'%Dlh Council ltember Faz.zino Boved, seconded by Kniss, to
approve the statf reogamendation as follows:
.L Adopt the resolution deteraining that the cable television
system operating with the Joint Powers aervice area ia net.
subject: to e!'fective eoapetition and authorize the regulation
of basic cable service ratasi
2. Authorize the City Kanager or her d.e5ign~e to tile with the
FCC form 328, ··certif'icaticn of Franchising Authority to
Requle.te hsie eal::Ile Service Rates and: Ini'tial Finding cf Lack
of Effective Competition-; and
3. Approve notification to cable Co-op of t.J,e intent of the City
to enforce FCC cu.stomer service stendard.&; and/or continued
e.nforceaent of the eustoaer .erv ice standards in the Alrtende4
and Modified Franchi.. Agreement Section 9 --Add! tional
SUl;)sc:riber Rights, whichevu-aethod. of enforcement is .ore
~neticial to the subscriber.
council Member Fe.z:zin-:"l said there was a role for qovernaent to play
in the cable televi.ion world. He did not support the idea of
.uni~ipal ownersbip When the i.sue came before the Council years
89". At that time the council did not have .. significant problem
vitb tb,e idea of requ.latinq rates. He preferred to hlllve anQtber
09/20/93 7l-270
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o o
authority regulating rates. He suggested that a group like the
O~ilities Aavisory Commission assist the Coun~il with the issue of
rate-regulation and service standarc3 at:L'1erence. :By taking no
acti.cn on. the issue, the Council -would take action. he felt. that
Cable Co-op had done an excellent job. ne recognized the rates
were hi9t, ~ut based on ~he quality of the programming, the rates
were :air. Staff should explore ~ays to avoid some of th~ concerns
expressed by Council Member cobc rela~in9 to complaint letters and
t.~e proble~s associated vith being put in the position of reg~la~
inq rates. He felt the Cable Act placed the City in a position of
playing a role in the area of rate regulation.
coun~il Member Simitian said there ~as a lot of data but not much
clarity about the policy d~cisions to be made and the implications
ot those decisions_ He did not disagree with much of what Council
Member Fazzino said except tor the conclusion he reached. One
possibili ty was to refer the matter to the Palicy and Services
CP.S) Committee. GiVen the nU!Dber of written cOl%I:munications
rec~ivea about cable when the City was net responsible for
req'o.\lating $ he was inclined tel believe t.hat thare lJere many people
who would like to share their opinions on the subject. It would be
a diasen·icra to the colllllunity to :uake a decision -without those
opinions. He understood that there was 180 oays or longer period
of tile ir.! which to d&ciae Whether to regulate~ To ti".e extent that.
cable' Co-op was concerned abOut the City's actions~ there were
political ~r6tives for cable Co-op to oontinue to respond in a
responsU,le way to the-community's concerns about rates -while the
City continued. its deliberatial\5._ It that d.id.. not provide the City
with ""DUg'h protection, he .... ked wIIether the City could take an
action to bec:o:ae the requlator, refer the matte:-to p,s Co_ittee
and then consider if the Council's decision 5hould stand.
KS. Neff did not have an answer to the question. She offered to
contact the FCC to qet an answer a
CQuncil Member Siait.ian asked tor staff response to the suqqestion
of referring the matter to the P'S Co.mittee.
lts .. Neff said lIith regard to the issue of cC1:lplaj.J:its~ tl1e City was
required by the franchise to administer coaplaints. If the City
got III cOIIPlaint req&rding s.ervice., staff re.spon4ed. to the COlQ
plaints. Tbe ntn-· activity was the rate regulation, not the
complaints •
council Kember siDitian said that his commen~ about complaints was
to point to the fact that as the: rate requlator the council. could
expect evan JDore comme..'1tary. He believed there 'Were many people
who would like to cOJDunicate with the Council about the-issue.
There was a stron9 view expressed in the le~ters. He proposed a
substitute motion in the absence of staff beinq able to clarify the
issue or referring the matter to the P.S Committee.
8Ull8TI~ XO"l'X05 '1"0 It.D'D: Counc::il Member Simi tian moved,
seconded by Rosenbaua:, to refer the issue to the Policy and.
services cammitt~, with the proviso that if necessary, statf be
09/20/93
'---""
qive.n the authority to brinq the mattEr l:!ack .before the ent.ire
council if there ~as a deadli~e that warranted it.
Council Me~r Simitian said the Council Sho~lQ cast a cautionary
glance at cable Co-op and he hoped it understood the implications
of rate :ncreases durinq that inte=im period. He understood the
CQuncil could join the requlatinq "qame" at ~ later time .
.. ...r. Calonne suggesteel. if Council wanted to refer the matter in
order to get some questions answered, the substitute motion should
be specific about authorizing staff tc return before Octo.ber 12.
1993.
~ :um 8ECOIIDEII AGllEEIl TO INCOIU'OltArE ZInO 'rEI: SOBSTITUTE KOTION
the und.r~tanding that staff could brinq the ma~ter back to the
full Council prior to the Policy and services Ccmmittee hearing if
staff believed it was appropriate.
Council Member Andersen sajd regardless of how the Council acted.
there would be a rate increase. There was a larqe number of people
in the comcunity who anticipated the Council ~ould be involved in
th-e process. The Council &hould not send a messZl9'''' to the
ccaaunity that it did not want to be responsible for rate regulat
i"'1.
Kayor MCCown had not been persuaded that having the City in the
regulatory role voul~ Bake any difference to what cable Co-op was
forced to clo qiven the chall9e.B in the f'ederal l.w~ The one area of
concern that waa not justified on the part of the public vas the
1ssue of cost. cable co-op bael. el.~.ted. the justiticaUon for
the level of charges. Sbe queried what: ac!d.itiona1 va~u. the
COUncil would provide by" lookinq over the 8houlder of Cable co-op.
She noted that no one from t.he community was in e:ttendaru:.e to speak
to tbe issue ~ She did not thi nJc the Council should rush into a
decision on the aatter unless 5taff taleS them d.ifferently.
Council .Member Faz.z.ino sai::! that by 8upportinq the substitute
-aotion the City was gi vinq cable Co-op 'tree r.iqn to establish
Vbatever rates it desired. The decision as to whether the Cou!'Icil
vas a rate regulator bad already been decided by Congress.
BtJIIft%TU'%E xarIOH !'O RZ7D. liMBED 6-3, Anderap.n~ Fazzino, J:.niss.
"no.-
ORPDiANCFS
1'.. Ordin!lDSC 1.'72 entitled "ord~..anoe of the Council of the City
of Palo Alto Amending the. Budget for tbe Fiscal Year 1993-94
to Allow tor the Purchase of II. 36~.5 Acre Easement comaonly
known as International Telephone and Teleqraph sit~·
Agreeaent betv.en city o~ Palo Alto and ns World Communica
tions, Inc. ~ for Purcha •• and Sale of II. 36~5 Acre EaSe1De.nt
COJamonly known as Inte.rnatiolUll 'l'elept.ione and Teleqrapb Site
09/20/93 71-272
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