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HomeMy WebLinkAboutItem 6: Ordinance on Comcast Renewal ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Action: An Ordinance Granting Comcast of Oregon II, Inc., an Additional Term and Franchise Renewal for the Operation of a Cable Communications System; Amending Ordinance 19775; Adopting a Severability Clause; and Providing an Effective Date Meeting Date: October 22, 2007 Agenda Item Number: 6 Department: Central Services Staff Contact: Pam Berrian www.eugene-or.gov Contact Telephone Number: 682-5590 ISSUE STATEMENT The proposed ordinance reflects a staff proposal to renew and amend the current cable television franchise for a 10-year term, shorter than the current franchise. As in the past, the cities of Eugene and Springfield, and Lane County, coordinated their positions on franchise renewal and negotiated jointly with Comcast. The current franchise sunsets in July 2008. However, if the franchise is not renewed through the informal process that resulted in the tentative agreement described below, the franchising authorities will need to begin a costly formal renewal process immediately in order to complete it before the current franchise expires so that data is available upon which the council can make a decision on renewal. BACKGROUND Franchises are long-term agreements for private commercial use of the public rights-of-way. They are not exclusive. Eugene’s current cable TV franchise is 26- pages long and addressed operating definitions, compensation, reporting, revenue territory, customer service, construction permitting, provision of community access channels for public, education and government (PEG) uses and more. Programming, channel line-ups, and rates, except those involving the Basic Tier, are not within local government purview. The 1991 franchise (Ordinance 19775) was between TCI Cablevision of Oregon and the City of Eugene. Identical but separate franchises were adopted by the City of Springfield and Lane County. With the City Council approvals, the franchise was transferred to AT&T, and later from AT&T to Comcast. Under Ordinance 20083 (codified mostly at EC 3.400 to 3.430), rights-of-way use fees and taxes apply to Comcast, subject to a federal statutory five percent limit on franchise fees. Comcast pays the five percent fee for use of the public rights-of-way plus a two percent business privilege tax (as do other telecommunications companies doing business in the City). Comcast and staff for the three local franchising authorities began renewal discussions nearly two years ago when Comcast asserted that it was entitled to a renewal or extension of the current franchise on the same terms. Staff for the three jurisdictions disagreed and were prepared to initiate formal franchise renewal procedures which would include a Community Needs (or Ascertainment) Survey. After months F:\CMO\2007 Council Agendas\M071022\S0710226.doc of discussion, both sides agreed to focus on negotiating terms of a renewed franchise that would be mutually acceptable, instead of resorting to litigation to resolve the procedural disagreement. The attached final draft franchise and accompanying Letter of Agreement is a negotiated compromise of Comcast’s desire for an expedited ‘as is’ 10-year extension and City’s option to implement a formal franchise renewal process. Staff believe the draft provisions provide Eugene with programs and funding that meet the needs of the community and are appropriate in light of rights afforded both Comcast and the franchising authorities by federal and local laws. The Franchise and Letter of Agreement have been reviewed by the City Attorney, Finance staff, Public Works Permit staff, and Metro TV programming staff. A City Council public hearing on this matter was held October 15, 2007; no speakers signed up to provide testimony. A vast majority of the provisions in the current franchise are retained in the draft renewed franchise. The Letter Agreement adds some benefits for the City. New components and amended provisions being recommended for City Council approval for the new 10-year term (previous franchise was for 15 years) are listed below. New 10-year Franchise and Agreement Components • $200,000 payment to three jurisdictions, divided proportionate to subscriber base. Eugene’s proportion would be allocated to the General Fund. • $20,000 towards Eugene downtown build-out if business or municipality matches with $20,000. • Basic Service television connections to additional publicly owned buildings which is a disaster- preparedness related benefit. • A fourth channel would be provided by Comcast for jurisdictional use - scrambled and dedicated for jurisdictional public safety training and communications. Comcast will provide 75 converters to unscramble the channel at no cost to the jurisdictions. • Comcast will provide an additional payment of $50,000 a year for public, education, and government (PEG) access channels for equipment. Federal law allows Comcast to pass on a prorated portion of this cost to their retail customers. • The definition of Gross Revenue would change to exclude - for this term - advertising commission income and program launch fees as revenue for purposes of assessing the five- percent rights-of-way use fee and two-percent telecom/cable tax. This definition remains in dispute nationally. • Jurisdictions will receive one paid full franchise review/audit in the 10-year term instead of one every three years. However, Comcast would provide an additional operational report after the fifth year. • Jurisdictions agree to a limited release of claims clause. The City Attorney believes the release does not adversely impact any claim the City may have against Comcast. Comcast has signed the Letter of Agreement. If the ordinance is adopted, Comcast will also be asked to sign the Acceptance attached to the ordinance. When that has occurred, the City Manager will sign the Letter of Agreement, and franchise renewal will be complete. If the Acceptance is not signed, staff will review its options, including returning to more formal procedure. Staff prefers the suggested ten-year term for the renewal. However, the legal, legislative, and regulatory telecommunications and cable communications environment remains unstable, so it is possible that F:\CMO\2007 Council Agendas\M071022\S0710226.doc some portions of the agreement and ordinance will be rendered less effective or ineffective. Local governments around the nation continue their joint efforts to prevent or mitigate such changes. RELATED CITY POLICIES FAIR, STABLE AND ADEQUATE FINANCIAL RESOURCES: A government whose ongoing financial resources are based on a fair and equitable system of revenues and are adequate to maintain and deliver municipal services. CITY TELECOMMUNICATION VISION AND POLICY: The City of Eugene's telecommunications vision is completion and operation of a coordinated regional information infrastructure that provides accessible and affordable high-speed connectivity for citizens, public institutions, and businesses, and is constructed in a manner that best serves the public interest. COUNCIL OPTIONS 1. Adopt the ordinance, which upon Acceptance and City execution of the Letter of Agreement, will initiate the 10-year renewed term. 2. Postpone the Ordinance in the event additional information is requested. 3. Take no action. For options two and three, if the franchise is not renewed through the informal process that resulted in the tentative agreement described herein, the local franchising authorities will need to begin a costly formal renewal process immediately, in accordance with federal rules in order to complete it before the current franchise expires and provide a base of information on which the council must act regarding renewal. Staff does not believe that additional negotiations or a formal process will yield significantly improved renewal provisions. CITY MANAGER’S RECOMMENDATION The City Manager recommends that the City Council adopt the ordinance. SUGGESTED MOTION Move to approve an ordinance granting Comcast of Oregon II, Inc., an additional term and franchise renewal for the operation of a cable communications system; amending ordinance 19775; adopting a severability clause; and providing an effectivedate. ATTACHMENTS A. Comcast-signed Letter of Agreement B. Final draft, renewal ordinance FOR MORE INFORMATION Staff Contact: Pam Berrian, Franchise Manager Telephone: 682-5590 Staff E-Mail: pam.c.berrian@ci.eugene.or.us F:\CMO\2007 Council Agendas\M071022\S0710226.doc ATTACHMENT B ORDINANCE NO. _____ AN ORDINANCE GRANTING COMCAST OF OREGON II, INC., AN ADDITIONAL TERM AND FRANCHISE RENEWAL FOR THE OPERATION OF A CABLE COMMUNICATIONS SYSTEM; AMENDING ORDINANCE 19775; ADOPTING A SEVERABILITY CLAUSE; AND PROVIDING AN EFFECTIVE DATE. The City Council of the City of Eugene finds that: A. Lane County and the cities of Eugene and Springfield, the local franchising authorities, entered into a franchise with TCI, Inc. which franchise was transferred to ATT Broadband, and subsequently transferred to Comcast of Oregon II, Inc., (hereinafter “Comcast”), the successor in interest to ATT Broadband, the successor in interest to TCI, Inc., for the operation of a cable communication system and have designated the Metropolitan Policy Commission (MPC) as the representative of the local franchising authorities in administration of the franchise. B. The City of Eugene enacted Ordinance No. 19775 on May 13, 1991, granting such franchise. C. The current franchise agreement with all three local franchising authorities provides that the current franchise term expires in July, 2008, subject to certain renewal rights and rights to an additional term possessed by the Grantee. D. In prior cable franchise renewals, Lane County and the cities of Eugene and Springfield, and Grantee’s predecessor used the renewal successfully to clarify, update and renew previous franchises with Lane County, Eugene and Springfield. E. Lane County and the cities of Eugene and Springfield, have had extensive discussions with Comcast that have resulted in the local franchising authorities concluding that an additional term and renewal of the franchise for an additional ten-year term to 2018 is warranted upon certain terms and conditions as more particularly set forth herein and in a certain letter of agreement between the parties dated as of ________________, 2007. F. The parties have agreed to certain amendments to the franchise as set forth herein below. NOW, THEREFORE, THE CITY OF EUGENE DOES ORDAIN AS FOLLOWS: Ordinance - 1 Section 1 . Section 3 of Ordinance No. 19775 is hereby amended by deleting the current definitions of “Grantee” and “Gross Annual Revenue” in their entirety, and replacing them with the following: "Grantee" shall mean Comcast of Oregon II, Inc., its successors and assigns. "Gross Annual Revenues” means any and all compensation in whatever form, grant, subsidy, exchange, or otherwise, directly or indirectly received by Grantee for services provided to subscribers within the franchise territory but excludes the following: taxes Grantee is required to separately state and collect from subscribers; commissions paid on advertising sales revenues; amounts received from programmers as reimbursement of marketing expenses and launch fees, and, PEG access capital support collected by the Grantee from subscribers if permitted by federal or state law. Except as expressly set forth in this definition, Gross Revenues shall be calculated in accordance with generally accepted accounting principles. Section 2 . Section 5(4) of Ordinance No. 19775 is hereby deleted in its entirety, and replaced with the following: Service to Institutions. Upon request of the Commission, the Grantee shall provide single installations of basic service to each fire and police station, public school, City Hall, County Courthouse, and all public libraries on the terms provided in Section 7(2) of this Ordinance. In addition to the institutions listed above and after August 1, 2008, Grantee shall provide, upon request of the Commission and at no cost, a single installation of basic service to no more than 30 additional public buildings owned and occupied by Eugene, Springfield, or Lane County and located within the Franchise Area and within 150 feet of the then existing system operated by Grantee, except for portions of buildings used primarily to house jail populations. No standard installation fee and no monthly service charge shall be made for the distribution of the services described in this section to these locations. Section 3 . Section 5(6) of Ordinance No. 19775 is hereby amended by deleting paragraphs (a) and (b) in their entirety, and replacing them with the following paragraphs (a) and (b) below, and adding a new paragraph (c) as follows: Access Channels. (a) Grantee shall provide four channels dedicated for public, educational, and local government access programming, three within basic service and one additional channel as provided in subsection (b). Ordinance - 2 (b) Public Safety Channel. Grantee shall make available continued use of a fourth scrambled channel to the Commission providing public safety programming created by the Commission or its designee. The channel shall reside on Grantee’s digital service tier and Grantee shall make available, without charge, use of not more than 75 digital converters to each designated location that shall be configured to receive only the public safety channel. The location of the 75 converters shall be designated in writing by the Commission. Grantee shall provide, at no charge, replacement converters should technology change such that the originally distributed converters are no longer capable of providing access to the channel. The public safety channel as provided herein is the fourth PEG channel required under the franchise prior to this amendment and Grantee shall not be required to provide any other service over this fourth PEG channel. (c) Grantee shall not be responsible for programming, operations or oversight of any public, educational, governmental, or access channels provided for in this Section. Section 4 . Section 10(5) of Ordinance No. 19775 is hereby deleted in its entirety, and replaced with the following: In addition to the franchise fees required by this section, Grantee shall pay to the Commission on or about March 1 of 2007 and 2008 $50,000 per year. Beginning on or about March 1, 2009, and on or about said date each year thereafter for the remaining term of this franchise, Grantee shall pay to the Commission $100,000 per year. Money received by the Commission under this subsection shall be used only for capital costs related to public, educational and governmental access facilities including but not limited to access center equipment acquisition or replacement. Payments under this subsection may, at Grantee’s sole discretion, be made quarterly at the same time franchise fee payments are made pursuant Section 10(1). Grantee's right, if any, to pass through and itemize amounts collected from residential subscribers for payments required pursuant to this section is governed by provisions of federal or state law. Section 5 . Sections 16(1) and (2) of Ordinance No. 19775 are hereby deleted in their entirety, and replaced with the following: (1) Duration and Renewal. This franchise and the rights and privileges granted herein shall remain in effect until August 1, 2018, unless terminated sooner under provisions of Subsection (4) of this section. Renewal of the Grantee's franchise at the end of such term shall be governed by and comply with the provisions of applicable law then in effect. Ordinance - 3 (2) Franchise Review. (a) A review of the franchise performance may be undertaken upon agreement of the Grantee and Commission. (b) Upon request of either the Commission or Grantee, a review of franchise performance may be undertaken once after August 1, 2013. As a result of such franchise performance review, the Commission and Grantee may negotiate modifications or revisions to the franchise upon mutually acceptable terms and conditions. (c) After January 1, 2013 but before August 1, 2013, Grantee shall submit a report to the Commission on the performance of the system under the franchise. The report shall include: (i) The channel capacity and plans for additional channels; (ii) Service extension policies set forth in Section 7; (iii) Technical adequacy of the system, including, but not limited to, picture quality, two-way transmission capacity, and compliance with standards sets forth in Section 8; (iv) Changes in the Federal Act or FCC authority, rules, or regulations which, in Grantee’s opinion, might affect the franchise; and (v) The franchise fee payments set forth in Section 10 and financial support for public, education, and governmental access. (d) The Grantee shall be represented during review negotiations by a representative of the company authorized to speak on questions or corporate practice, policy, and plans. Section 6Severability . . If any section, sentence, paragraph, term, or provision hereof is determined to be illegal, invalid, or unconstitutional, by any court of competent jurisdiction or by any state or federal regulatory authority having jurisdiction thereof, such determination shall have no effect on the validity of any other section, sentence, paragraph, term or provision hereof, all of which will remain in full force and effect for the term of the Franchise. Section 7.Savings Clause. Except as amended herein, all other provisions of Ordinance No. 19775 remain in full force and effect. Ordinance - 4 Section 8 Effective Date. . This Ordinance shall take effect thirty (30) days after its enactment by the City Council and approval by the Mayor. Subject to applicable federal, state and local law, Grantee must accept the provisions of this Ordinance and agree to be bound thereby. Such acceptance shall be in writing signed by an officer of the corporation which is delivered to Grantor within 30 days of enactment of this Ordinance. In the event Grantee fails to deliver its acceptance as provided herein, and notwithstanding any other provision of this Ordinance, Grantor may repeal this Ordinance without further notice to Grantee and without giving Grantee an opportunity to be heard. Passed by the City Council this Approved by the Mayor this ____ day of ____________2007 ____ day of _____________, 2007 ____________________________ ____________________________ City Recorder Mayor Ordinance - 5