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02/07/2005 CONF MTG - 4566r a CfTY OF FRIDLEY SPECIAL CITY COUNCIL CONFERENCE MEETING February 7, 2005 — 7:00 p.m. Fridley Municipal Center Conference Room A (Upper Level) 1. Cable Television Franchise Agreement. Adjourn. �� Memo to: William W. Burns, City Manager ;�;1�� From: Brian D. Strand, Media Specialist " Subject: TW Franchise Proposal Date: 2-4-05 The point of discussion is to determine if the proposal that Time Warner has submitted to the City meets the needs of the City and the RFP the City drafted. The City needs to determine whether to accept or deny Time Warner's proposal as submitted. The discussion is not intended as a time to redraft or negotiate the franchise. I would like to note that the Franchise is not only with Time Warner Cable; it also is with any subsequent owner of the system. We must keep in mind, though the sales of cable systems have tapered greatly in the last few years, this system has gone through many ownership changes over the years and it may again. This Franchise is with Time Warner Cable, but it also greatly affects the franchise of any other cable company that may wish to enter the city. 1. Gross Revenues, Bundling — The City feels that the present language that Time Warner operates under better defines the scope of services for which franchise fees are paid. TW's proposal may reduce the amount of franchise fees the City receives. The language may also affect the City's ability to collect fees from other services as may become allowed by federal law. I am particularly concerned with the exclusion of the definition of bad debt. The City's language caps bad debt at 2% of the annual Crross Revenues. TW's proposed language may make it possible to subtract 100% of their bad debt from their franchise payments. Bundling is the practice of packaging services together and offering discounts on those services. TW's proposal would eliminate the current language that specifically determines how franchise fees are paid from bundled packages. TW is not only a cable provider and a high-speed Internet provider; they recently began testing digital phone service. The elimination of the cunent language could allow TW to offer discount or free cable service to customers who purchase Internet and/or phone services, reducing or eliminating franchise fees paid to the city. 2. Performance Bonds and Security Funds, Right of Ways— Performance Bonds and Security Funds are common language in Fridley Contracts. The Community Development Department requires bonds and/or security deposits for new developments to ensure that landscaping and other improvements that are important to the City are constructed. Public Works requires bonds for companies that work in the right-of-way, or that do road construction and repairs. Performance Bonds and Security funds protect the City's interests in the repair and reconstruction of City owned properties. The City has the right to draw on these and the affected companies must replenish the bonds and funds. They also protect the City in the event that the cable company does not complete its wark on system upgrades as promised. Since the current franchise already provides for these security deposits, we are not asking TW to provide anything new. This language also protects the city in the event of the sale of the system to another provider who may or may not be as responsive to the City. The Security Funds are already in a savings account and TW receives the interest payments annually. TW's take is they have been doing business in the City for many years and the City has not had to use any of the bonds or security funds, so they are not necessary. Their language suggests in the event that the City determines and proves the need for bonds or security funds the City can ask for it and they will provide. To the extent that we cave-in on any of these items to TW, we will also be caving in to any future owners of cable systems in Fridley. 3.Work provided by others —The City's Right of Way ordinance allows for Franchise Supremacy, stating, "The terms of any franchise which are in direct conflict with any provision of this Chapter whether granted prior or subsequent to enactment of this Chapter, shall control and supercede the conflicting terms of this Chapter". Time Warner proposes to provide the City with names and address of those when requested by the City. The current language requires they provide these names automatically. The Right of Way ordinance requires all subcontractors who work in the City right-of-way to be registered and bonded with the City. It is very important that the Cable Franchise does not lessen the Right-of-Way Ordinance. 4. Maps - TW's proposal eliminates the requirement that they provide the City with maps of the system. They would allow the City to view maps at their site. TW maintains the maps are proprietary information, and does not believe the City has the ability to maintain the secrecy and security of the documents. Minnesota's Data Practice rules allow the City the ability to protect this information. It would be very cumbersome for the City to make appointments to see the maps. The Public Works department requires the maps so the City can maintain its infrastructure under the right of way. Maps would also protect TW's system from damage from City crews working underground. The City's concern is location of lines and equipment, not the equipment specifics. This is a safety issue. Bob Nordahl is in charge of Right-of Way permits for the Public Works department. According to Bob, Time Warner did provide the City with system maps at the time of their upgrade and maps of the area they are performing work on are required when a permit is granted. 5. I-Net. — TW does not want to build and/or maintain an I-Net system. They propose to continue maintaining the existing I-Net, at the City's expense, as long as parts are available. We suspect equipment is no longer made to support the current system. The current system is very old and antiquated, it needs to be replaced. The return line used to get the City's channel onto the cable system is in very poor shape. The line has electricity on it, which interferes with the signal quality. The electricity also affects the subscriber feed in the City Building. TW has put a series of filters on our lines that filter out the electric current; they then have placed amplifiers on the lines to boost the signal in the Municipal Center. According to MIS Coordinator Jim Erickson, from a purely IT perspective, the City does not currently use the INet, so the system that is in place right now has little value to us other than as a conduit for sending our cable signal to TW. This is primarily due to the fact that the current INet uses, for the most part, outdated technology. Hypothetically, should TW build a fiber optic-based I-Net with drops at all, or at least the most populated, City sites, we could use this system to interconnect these sites for data and even voice services. The greatest impact of such a system would be between City Hall and the Public Works Garage - which is currently served by two ISDN lines for data (�$130/month combined) and a T1 line for voice (�$300/month). Lower cost savings could be achieved for Springbrook Nature Center (�$130/month) and the Senior Center (�$130/month). Other remote sites that could take advantage of such a system would be the liquor stores, the water plants, and possibly even the remote fire stations - none of which are currently connected due, in part, to cost. The I-Net is a very useful tool for the school system, and, as is the case with the City, delivers the School channels to the cable system. Unlike the City, the School District does use their I-net as a means of data transmission among their buildings. In view of its current and potential use, the City would like to replace the hard-wire I-Net with a fiber optic cable I-Net that connects all City and School buildings. In response to our request TW proposes to build an I-Net at the City's expense; bill the City for any maintenance, maintain ownership of the I-Net and govern how it is used. They take the stance that there are no provisions for I-Nets in the Cable Act. We believe the Cable Act does allow the City to require an I-Net as part of a franchise. 6. PEG support. TW proposes a one time $390,000 grant. Their language gives them the right to audit the purchase of equipment and at their discretion and determine if the equipment purchased from the grant is access equipment. If they determine the equipment is not access equipment, they will automatically subtract the purchase of the equipment from the next Franchise fee check. TW's proposal also eliminates their responsibility for Public Access. Under the current franchise TW is to maintain and replace, as needed, all equipment used for this purpose. In order to compare the TW grant with Fridley's cable equipment needs, we hired CBG Communications to do a needs assessment. They identified $597,800 in equipment costs for the operation of the City's government access channel for a ten-year period. In view of the age of our equipment and the fact that most of it is analogue rather than digital, this estimate seems reasonable. It's also important to note that the needs assessment does not take into consideration the needs of Public or Educational Access equipment. 7. Franchise Term — TW proposes a ten-year franchise with a five-year extension tha.t would be triggered by the system being "up to date." This is most certainly an automatic e�ension. The technology field is changing more drastically and at a much quicker pace than ever before. The proposal does not allow the City to take system performance, financial ability or customer service issues into account before issuing an extension. A longer-term franchise also lessens the City's ability to leverage changes in cable service that reflect rapidly changing technologies. In just a few years, for example, all- local broadcasts will be in High Definition Television_ While TW currently provides High Definition Television in their digital service package, they do not provide it for standard cable subscribers. Other new technologies are on the horizon. To the extent that we are locked into a franchise based on current technologies, we lose the ability to insist use of these new technologies for the benefit of Fridley subscribers. S. Emergency Alert System — The current system allows the City to override audio on all cable channels in the event of a local emergency, such as flooding, a chemical release, or the presence of a violent criminal in the area. TW's proposal eliminates the override. Fridley's Public Safety Director feels the override is very important for localized emergencies. Over half of the Fridley households subscribe to cable TV. The Public Safety Director stated that though only half the residents may have cable TV, there is no other way to reach that many residents in a timely manor. Fire Chief, John Berg, concurs. 9. Customer Service Standards — Currently, Brian Strand's telephone number is printed on cable bills and many complaints are channeled through him. TW is also required to maintain detailed customer complaint records. Their franchise proposal would replace this current customer complaint system with the requirement that they follow FCC guidelines in these matters. We contend that the FCC guidelines do not prevent the City from imposing stricter guidelines. Moreover, we point out that the FCC does not take customer service complaints, and does not track the performance of the cable company. They rely on cities to perform this function. 10. Local Origination/Public Access — Cunently, the franchise requires Time Warner to provide, at minimum, 15 hours of original, locally produced programming per month. It also requires the equivalent of two and a half full-time employees to produce these programs. Additionally, it requires a studio for public access use with minimum dimensions of 28 feet by 38 feet. The TW proposal shifts the entire burden for both to the City, without any compensation. The City doses not have the staff or budget to perform either of these functions. 11.. Access Channels — The TW proposal eliminates one access channel. During informal negotiations the City was willing to give up one channel in return for something, TW claimed the channels have no value to them. In recent discussions with the Spring Lake Park School Districts, we learned that one third of district's student body comes from Fridley; the District has expressed interest in a channel on the Fridley System. Ideally, they should try to work with the Fridley School District to get their programming on the present Educationa.l Channel. It is possible that they would be willing to take over programming of public access in exchange for a channel that combines public access and SLP schools programming. Alternatively, the City could use the e�tra channel as a second Government channel. If we did, we would dedicate it to the replay of Anoka County Board meetings, Rice Creek Watershed District Board meetings, school board meetings for the four school districts and City CounciU Commission meetings. Use of an exclusive channel for these meetings would allow much more frec�uent airin� of Citv Council/�'c�mrr�i�ssi�n rr�eetin�Ts.