HomeMy WebLinkAboutCC Min 1997-01-30
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1-27-97 I 1~30-97
Leisure World, the service number was unreachable, and the game
did not come on until the score was ten to seven.
ADJOURNMENT
It was the order of the Chair, with consent of the Council, to
adjourn the meeting until Thursday, January 30th at 8:30 a.m.
for a cable franchise workshop. It was the consensus of the
Council to adjourn the meeting at 8:51 p.m.
of the
Approved: _ ~~ ~~. ~+-/",
Ma r
Attest:
~",i?r.t ~~
C~ Y Clerk
Seal Beach, california
January 30, 1997
The City Council of the City of Seal Beach met in regular
adjourned session at 8:32 a.m. with Mayor Forsythe calling the
meeting to order with the Salute to the Flag.
ROLL CALL
Present:
Mayor Forsythe
Councilmembers Brown, Fulton, Hastings
Absent:
Councilmember Campbell
Brown moved, second by Fulton, to excuse the absence of
Councilmember Campbell.
AYES:
NOES:
ABSENT:
Brown, Forsythe, Fulton, Hastings
None
Campbell Motion carried
Councilmember Campbell arrived at 8:38 a.m.
Also present: Mr. Till, City Manager
Mr. Dorsey, Assistant to the city Manager
Mrs. Yeo, City Clerk
APPROVAL OF AGENDA
Brown moved, second by FUlton, to approve the order of the
agenda as presented.
AYES:
NOES:
ABSENT:
Brown, Forsythe, Fulton, Hastings
None
Campbell Motion carried
ORAL COMMUNICATIONS
There were no Oral Communications.
1-30-97
CABLE TELEVISION FRANCHISE WORKSHOP
The city Manager asked that Mr. Pilnick, the cable franchise
consultant, brief the Council with regard to what has taken
place thus far and what will be forthcoming as to the renewal
process of the cable television franchise.
Mr. Pilnick offered to review the basics of the cable renewal 1-
process which he said takes place about every fifteen years in
most cities.
* In general, the franchise renewal process is restricted by
Federal law;
* In 1984 the cable industry and the National League of
Cities negotiated and developed the framework for a new
Federal law which, for the first time, provided some
regulations with respect to cable systems nationally, one
area being the renewal process;
* The cable industry was desirous of establishing a renewal
process that would make it almost impossible for a city not
to renew, and they achieved that in the Federal law, their
argument was the investment of considerable money in the
systems in communities therefore they anticipate renewal;
The way the law reads it is more than anticipation, the
practical result is that of the approximate fifteen
thousand cable franchises in the United States there have
only been about two or three where a city actually tried to
not renew, each of those cases resulted in very expensive
litigation and the cities gave up;
*
The renewal process basically says that a city is supposed
to determine its cable related needs, the language of the
law then states while 'taking into account the cost of
meeting those needs', therefore once needs are identified
the cable operator may say that the cost is too much, which
is usually where the argument starts;
* After determining the needs the informal negotiation
process begins by meeting with the cable company, the city
presents its needs, the cable company then presents its
proposal, the intent is to negotiate a mutually acceptable
agreement, however if there are differences that can not be
resolved, the Cable Act then provides for a formal
negotiation process, which is relatively the same except
that there are time deadlines for each step, the city
determining its needs, submittal of a proposal by the cable
company, the city may then evaluate, accept or reject the
proposal;
*
If the decision is to reject the proposal there are only
four reasons to do so, it can not be rejected on the basis
that another company may make a better offeri.the four
reasons intentionally difficult: 1) if the cable company
retains financial and technical capability to operate the
system, and if they have been operating for nearly fifteen
years it would be difficult to say they could not continue
to do so; 2) whether they are in material compliance with
the existing franchise, however if there are some
significant non-compliance issues and the company does not
resolve them, that could be grounds for non-renewal;
* Question was posed as to whether non-compliance during the
majority of the franchise years then some resolution of
problems towards the end of the franchise period would
constitute grounds, to which Mr. pilnick stated the cable
*
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*
company argument would be that the city condoned their
service, no issue was made of the problem, the company will
take that as proof that that item was not really needed or
important enough to make an issue of, that would be their
argument in a court of law, therefore the more proof there
is of an ongoing problem, the better the city's chances, in
other words a paper trail;
The issue is not merely how a Council feels about the cable
company because if the eventual decision is to not renew
the city would be in court the next day, the Federal Cable
Act calls for a de novo review, a judge will review the
written record, if there is no written record to show that
the company had been urged to comply yet they have not, the
judge will assume the issue was not important enough
therefore not a material issue;
* Reason 3) is whether the quality of service has been
considered adequate during the franchise term, in most
cases it will be said that the service has not been good,
which is somewhat of a chronic problem, however if one
looks at that criterium from the standpoint of a judge, a
judge wants to see evidence of each time there was felt to
be a service quality problem, that a letter was sent, the
problem was identified, they were given' a reasonable
opportunity to institute a cure, and if there is no such
record it would be difficult legally to establish that the
quality of service was that bad;
With regard to the ability of the cable company to
establish billing rates, whether they are considered to be
fair or not fair, Mr. Pilnick noted there are two areas
that are important to subscribers however there is little
that can be done about them, one is what programs are
provided, as the Cable Act gives the cable company the full
right to those decisions, except for public information and
government access, as an extreme example, the company could
have fifty channels and offer only one channel of
programming, the Act requires a thirty day notice when a
program is going to be changed, however aside from that
notice requirement they have the ability to change
programming;
* The second issue of importance to subscribers is the cost
of the service, the 1984 Act deregulated all rates,
deregulation until 1992 when Congress passed another Cable
Act as a result of consumer complaints, which established a
small measure of rate regulation, allowing cities to
regulate the lowest cost tier, the basic service, anything
above that was regulated by the FCC, pay service had no
regulation, the FCC developed extensive regulations however
have been virtually no help in reducing rates;
*
*
To a question as to access by the public to cable company
earnings within the franchise area, Mr. Pilnick explained
that before 1984 deregulation many cities required periodic
reports showing not only the revenues on which the cable
company pays franchise fees but profits as well, the
necessity for those reports was because the cities were
regulating rates and to do so the reports were necessary to
determine the earnings, after deregulation the cable
industry took the position that that information was no
longer needed by the cities, and in most cases the cable
companies decline to provide that information because the
FCC formula was not based on profit, rather, the number of
channels, the number of subscribers, and the kinds of
1-30-97
programming provided, therefore benchmark rates were
developed which had nothing to do with whether or not the
company was making money, these reports are most difficult
for cities to obtain, however such information is usually
part of an annual report of the larger companies;
*
For Seal Beach to obtain a financial report would be
literally impossible as the cable company will claim the
information is not needed also that they do not keep
individual city financial records, however the company
could provide that information if they wanted, generally
one can determine how well they are doing by the
penetration, the percentage of the homes that subscribe to
the service, Southern California percentages are generally
lower than other parts of the country due to the number of
free channels available, somewhere between thirty-five to
fifty percent;
* Question was raised as to a feeling of penetration in Seal
Beach as that relates to gross revenues and percentage,
with Mr. Pilnick stating that Comcast Cable is doing well,
the franchise payment is generally five percent of total
revenue, and noted the city has the right to audit the
franchise fee payments; ,
-
Comment was made that it appears that all legal means to
date favor the cable company with no protection of the
consumer or the cities as to the performance of the
company, higher rates, lower standards, and antiquated
equipment, consumer complaints are ongoing yet it appears
nothing can be done;
Suggestion was made that someone should initiate an anti-
trust lawsuit;
* The consultant said he generally commences a presentation
with what a city can not do, complaints are generally
universal, cable has had the best of both worlds, the
privileges of a public utility, use of rights-of-ways,
etc., without being regulated like a public utility, the
argument always that they are an entertainment service and
people do not need them as an essential utility service,
however it has been found that even in the poorest of areas
people will disconnect their telephone service before they
will cable;
*
*
* Negotiations - whether or not the proposal of the cable
company for a new franchise term is considered adequate by
the city, again the phrase 'taking into account the cost of
meeting the needs', the city provides the cable company
with what is thought to be needed, they say it will likely
cost too much, negotiations start, the question is then how
much room is there to negotiate, is it one sided, and what
can be gained as an expected result;
*
Companies as large as Comcast go through hundreds of
renewals every year, they have established practices as to
what they will or will not offer; there are a number of
negotiating tools at the city's disposal, one being the
length of the franchise, which does make a difference in
the asset value of the system; upon the expiration of a
franchise some cities have gone to a month to month basis,
however if a franchise expires it exposes the city and the
company legally, the Act states that no cable company can
operate without a franchise, therefore they would be in
violation, and yet without a franchise they may not owe the
city the franchise fee;
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* The month to month basis does make it clear that the city
is not happy with the company and/or what they may be
proposing for the future, that sometimes puts the company
in difficulty with their lenders which is generally based
on the length of a franchise term, and makes it difficult
to trade or sell the system;
It was noted that in the Southern California area over the
next few years there will be an era of swapping systems,
the large cable companies trying to cluster a number of
systems together for a large group of potential subscribers
in order to offer things such as internet and telephone
services, which could not be done with an area such as Seal
Beach only in that about a half million subscribers would
be needed, at this point Southern California does not have
one dominant cable operator however there are three or four
companies in such negotiations, thus there is no guarantee
that Comcast will be the Seal Beach provider forever;
*
* Noting that Los Alamitos is served by Time Warner, question
was posed as to whether the Seal Beach provider could be
sold to that company; the response was that in reverse
Comcast could buy Time Warner or another company could buy
both of them, an example cited was Continental, the third
largest cable company, bought by u.S. West, a Bell company,
and is now a subsidiary of a telephone company;
* Question was raised as to violation of antitrust laws as
that relates to monopolies;
*
Response referenced the 1996 Telecommunications Act that
was to encourage competition, authorizing companies to
compete in areas they were not authorized to compete
before, the local' telephone companies can begin to compete
in long distance service and cable, the cable companies can
begin to compete in telephone service and data
communications, it is not known who will actually compete
and unfortunately there is probably anticipation that there
will be more competition than there actually will be, what
is being seen is more and more mergers and acquisitions and
less competition. It was noted this is not a violation of
antitrust laws, as an example, PacBel1 obtained a franchise
from the city of San Jose and is building a duplicate cable
system, that deemed to be a test of the market;
* Scenario was posed of a franchise renewal for ten years,
henceforth there are new technologies where a telephone
company could provide the same or better cable services,
the question then, would the city be bound by the franchise
until the end of its term;
*
Response was that there is a franchise, which is a contract
for a specific period of time, however that does not
prevent the subscribers from utilizing a competitive
service, that not unlike someone purchasing a satellite
dish, that industry having grown to over four million
subscribers in a period of three years due to the fact that
people are not happy with cable, even though the equipment
is costly and serves only one television unit, yet it
provides better programs and greater clarity, however at
this time does not provide the local prime stations, ABC,
NBC, etc., because technically the satellite can only pick
them up and deliver them in areas they are authorized to
broadcast, which is a FCC regulation;
* There is a start of competition, next month PacBel1 will
come to Southern California and offer wireless cable which
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*
is a microwave method of delivering pictures, involves a
home antenna beamed from a high place, however the
reception is not anticipated to be that good;
To a question as to whether the city is to provide a
certain number of subscribers to the franchise, the
response was no, the franchise only provides the use of the
pUblic right-of-way;
* It was noted again that once cable service is subscribed to
people do not stop it, competition is a good way to correct
some of the abuses, the 1996 Telecommunications Act
consists of six parts, cable just one, the others cover
telephone and other communications services, the Act meant
to encourage competition while making it more difficult for
a community to prevent competition;
* It was explained that cable franchises have never been
exclusive, there have been laws preventing the granting of
exclusive franchises, however once entrenched, particularly
a large company, a cable company makes it very difficult
for someone to come in and economically compete, the second
company needs to build a system, usually costing more than
the first system, if underground, those utilities must be
dug up a second time, if placed on the poles, the last
company to do so assumes the cost of rearranging the cables
of all others on the poles, the second service then
proceeds to entice customers from the existing cable
company, and in that case it is easier for the incumbent to
get into a price war where both sides will be losing money;
It was asked if the word franchise doesn't connote
exclusivity; the response was that it is a defacto
exclusive franchise, a hundred franchises can be granted if
desired, but the question is whether someone will build a
system, the cable industry up to this time has been
unwilling to compete against other cable companies, San
Diego an example of receiving no interest to their
invitation to consider a franchise;
*
*
Reference was made to the GTE request for support of their
fibre optics system some years ago at which time it was
understood t~at a franchise could not be granted as Comcast
had an exclusive franchise in Seal Beach and the city could
then lose its franchise payments; it was explained that GTE
did build a system in Cerritos as an experiment, they do
have a franchise in the City of Thousand Oaks, most of the
telephone companies are only picking selective markets to
determine how successful a second company will be or how
much money will be lost over a period of time, telephone
companies are also using the threat of coming into a
community as a means of getting cable companies to the
negotiating table, the issue with GTE may not have been
whether they could legally be granted a franchise because
in California the State has preempted the regulation of
telephone companies, and although they may have proposed to
provide cable to the City, GTE would have continued as a
telephone company therefore there would be no franchise fee
for the City; the Telecommunications Act now provides that
if a telephone company requests a cable franchise then they
are treated as a cable company for that purpose and
franchise fees can be required;
* It was noted that a cable provider should not be rewarded
with a franchise if they do not offer a reasonable
proposal;
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* Question was asked as to what that can be negotiated to
make the cable service better; scenario was also posed that
if a new agreement is negotiated and they continue to not
perf~rm, that simply means another franchise period of poor
serV1ce, likewise if there is a contract there is no
motivation for the cable provider to improve their service;
*
Enforcement capability is an important part of any
contract, a provision missing from most of the older
franchises, in the area of service, their telephone
responses, service responses, accuracy of billings, etc.
the City does have some authority, explaining that one of
the few things the Federal Cable Act gave cities was the
authority to establish consumer service standards and
enforcement, which includes financial penalties, and
permission of the cable company is not required to do so;
*
An initial step is for the city to adopt an ordinance
bringing the regulatory authority up to date with current
laws, including consumer service standards, then, when a
franchise agreement is negotiated the regulatory ordinance
is incorporated therein, therefore the agreement then has
an enforcement mechanism, however if they do not abide by
the service standards and the desire is to impose a fine,
the question becomes how does one collect the money, it is
not advisable to enter into a legal action although legally
correct, therefore enforcement generally needs to take
place before pursuing a lawsuit; at this point in time most
of the large cable firms accept the standards, an
irrevocable letter of credit is obtained from them, rather
than performance or~construction bonds, the letter of
credit contains language that states if they breach any
part of the franchise agreement, which includes the service
standards established by the ordinance, the company is
provided notice and an opportunity to cure, thereafter the
letter of credit can be used to collect daily liquidated
damages, the letter exists for the franchise term, if the
letter is exhausted it must be replenished, if not
replenished that becomes another breach of the franchise,
the cable company can not take action to prevent the
collection of damages, their recourse is to go to court
after the city has collected the liquidated damages, if a
court rules in their favor they get their money back,
therefore by this approach the city gets some relief as
part of the internal administrative process before it
reaches court;
*
A point was made that although strict requirements can be
established, occasionally they will need to be enforced;
the action of the city of Beverly Hills was cited as an
example of noncompliance with a three minute telephone
answer requirement, City staff was assigned to call the
cable company thirty times per day for three months,
utilizing a stop watch and log book, that provided the
necessary proof, the company was fined and additional
personnel and lines were added; and
Seal Beach is one step away from entering negotiations, a
draft ordinance with the service standards included has
been submitted to the City for consideration.
Mr. Pilnick said he wished to review his second report at this
time relating to the assessment of needs and interests with an
emphasis on public, educational and government access, another
report forthcoming in the near future that will cover
recommendations as to what is thought to be reasonable
objectives for the franchise renewal, including some ancillary
topics such as the disposition of the Old City Hall building.
*
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*
Should a situation arise where the City's cable provider
were to be taken over by Time Warner, question was posed as
to whether specific problems experienced in Los Alamitos
should be looked into at this point; the response was that
unfortunately if another company wants to buy the system
the City will have little ability to say no, those
companies will come to their own terms, and it will likely
not be known to the cities until there is a request to
transfer the franchise, the question is then whether the
city has any authority, the law states that if the buyer is
financially and technically qualified and will accept the
franchise as it exists with no changes, it is unlikely
anything will prevent them from taking over the system,
however if changes to the franchise are requested that
opens the door for the city to take further actions;
* Again with regard to problems that have been realized by
Los Alamitos, it was explained that the understanding is
that they arose as a result of upgrading the system, the
S~al Beach system has not been upgraded as yet, it is
believed the Los Alamitos problems are being resolved, and
explained that it is difficult to predict problems when a
system is being rebuilt; at this point it is nearly
impossible to write an agreement to anticipate technologies
and problems five to ten years in the future, and it is the
responsibility of the cable provider to deal with system
design and performance, not the City, the City is to
regulate the company so that they do what they are supposed
to do;
The consultant presented the conclusions from his more
extensive report; the City has been receiving $75,000 per
year from the cable company for access support, access
being three categories, public, educational, and
government; some communities use most of the resources to
support public access, as has been the case in Seal Beach,
other communities attempt to share the resources between
the three categories if the government and educational
agencies are interested;
*
* There is one school in Seal Beach, the School District is
in Los Alamitos, that is a problem from the standpoint of
coordinating the educational access needs;
* The $75,000 has generally been split three ways, $25,000
goes back to Comcast and they have the obligation to
utilize that money to produce about twenty-five local event
programs per year; another third is used to provide local
government cablecasts; the last third is used by the
Foundation to support other activities such as equipment
that may be needed, Leisure World use, etc.;
A comment was made that essentially $50,000 reverts to
Comcast for local origination and government access; the
$25,000 for government access is used by Comcast to provide
personnel and support for the Council and Commission
cablecasts; a further comment was that the personnel are
employed by Comcast, some are free-lance;
*
* Question was raised as to who chooses the programs that are
financed with those funds; response was that it is the
Foundation and Comcast, the Foundation does not have final
say over the content, Monday, Wednesday and Friday are
commercial days on the access channel, the company can run
whatever they choose, local monies do not pay for those
days, Tuesday and Thursday are local programs, special
events; example was made of the cablecasting of the
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*
Christmas Parade, no local personnel were involved this
past year, Comcast personnel did a terrible job and the
event can not be reshot;
Question was raised as to how that could happen, given the
money that is turned over to the company why the Foundation
does not have the ability to provide direction; response
was that in the past Comcast has utilized local personnel;
as to whom a letter of protest can be sent, the regional
manager was suggested; and a request was made that a letter
be forwarded advising that the Foundation and City Council
are unhappy with the practice of hiring outside individuals
to do cablecastings as there are local persons that are
competent and capable of producing a professional
production; the Foundation may choose to forwarded a letter
as well if they are displeased with a product, signed by
the chairperson; this to commence a paper trail;
*
Mention was made that if the idea is that at some point a
judge may consider this, it should be remembered that the
contractual parties are the City and the cable company, the
Foundation is a third party beneficiary even though there
are agreements between the Foundation and Comcast, in other
words it is the City that must make the determination as to
whether the company is in compliance with the franchise
agreement; a question also, if there was a function that
the company was to have done for the benefit of the
Foundation, yet did not do, does that make them in
noncompliance with the franchise agreement between the City
and the company, the cable companies often take the
position that their agreement is with the City, no matter
what the Foundation says, therefore the company assumes no
responsibility;
* The $75,000 per year is about two percent of the gross
revenue generated to Comcast in this City, multiplying the
$75,000 by fifty is the approximate gross revenue;
* The cable company does maintain the studio and staff, that
from the $75,000, some of the studio is used for their own
purposes however it is believed that the company would
argue that that is an in-kind contribution of some amount
over and above the $75,000 they provide;
To a question as to whether the two percent is felt to be
reasonable, it was explained that in the past where a
number of companies bid originally for a city franchise,
and felt there was only one opportunity to get the
franchise, they stretched their bids; an example would be
the bidding war of several companies for the Orange County
cities, and in the case of Los Alamitos they were the last
franchise available, the cable company wanted that
franchise therefore offered them seven percent of gross
revenues in addition to the five percent franchise fee,
however they turned out to be the only bidder, and Los
Alamitos received more than any other city;
*
*
Once a company is awarded a franchise it becomes more
difficult to extract funds from them, it is felt that the
two percent is achievable in the renewal however is likely
a figure that is higher than Comcast would like to agree to
therefore will require some negotiating, in recent years
most renewals have been in the range of one to two percent,
some higher depending upon the franchise term and other
factors;
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Comment was made that two percent was established when the
rates were a fraction of what they are today, there have
been no expenditures for equipment, materials, personnel,
automation, no funds seem to be going back into the system
yet Comcast will want to keep the City at the two percent,
the question is why wouldn't the City go to a higher
percentage given the increase of their rates by three to
four times the original fee;
* It was explained that the support factor was based on a
percentage of revenues, that amount fixed at $75,000, the
company has increased its rates, they make more money yet
there is no additional support; the franchise fee goes up,
the negative aspect is that that is reflected on the
billings, the cable company making the City appear to be
the villain; more recent agreements are based on a
percentage of revenues, the amount goes up as the rates
increase;
*
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* A comment was made that Comcast has not been in the
forefront of providing up-to-date equipment for local
origination programming, the Foundation purchased some
equipment that should have been provided by Comcast, in
turn they are using the equipment that the City purchased,
it is likely the Foundation should have been collecting
rent for the use of the equipment; the response was that
the argument of Comcast would be that it was their money
originally;
*
Question was raised as to whether Proposition 218 would
impact the franchise fee percentage should it be increased;
the response was that unofficial opinions have been that
the franchise fee does not fall under Proposition 218;
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* A Foundation member made the statement that the only
equipment in use by public access was provided by Group W,
no equipment has been provided by Comcast, except for the
studio editing bay;
* A request of a Councilmember was that the City Attorney
review the current contract to determine exactly what was
to have been provided, that information to be part of
negotiations to make sure the City receives what it was to
have received, and emphasized the need to know if the
company honored the contract as it relates to public
access;
* The consultant noted having been provided with considerable
information and materials thus far, pointed out the
environment for negotiations is different now than in the
past; he has adequate information to address franchise
compliance in his next report, in his opinion the company
failed in that regard, and concurred that that should be
reviewed by the City Attorney;
*
A Foundation member reported until just recently Comcast
has charged a $25 public access usage fee, once raised to
$35, also a $400 fee for use of the van, the Foundation
Board having requested information regarding the
maintenance fund for a number of years, etc.;
I
* Comment was made that there appears to be evidence of
noncompliance with the franchise agreement, that can be a
strong negotiating tool, however more importantly the
issues of noncompliance need to be taken care of in the
future; question was raised as to how much public access
and vehicle use money was paid that should not have been,
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and can it be recovered; a response was that possibly past
records could be reviewed to determine how many productions
there were per month, taking into consideration the fee
increase, etc.
It was the order of the Chair, with consent of the Council, to
declare a recess at 9:50 a.m. The Council reconvened at 10:00
a.m. with Mayor Forsythe calling the meeting to order.
* In speaking to some of the public access producers it has
been indicated that support for public access in the past
has not been as adequate as would have been liked, the
feeling is that as a minimum there should be the same level
of resources as they have had and in fact should be higher,
possibly double; if doubled it would be a contribution from
Comcast in the five to seven percent range, which is
considerably higher than most companies are willing to
provide, therefore if the goal is to substantially increase
the level of public access support it may be difficult to
get Comcast to commit, or if they do, the city may need to
concede in other areas that it does not wish to, the
argument of Comcast will again be that they are maintaining
a studio, even though they are receiving some payment for
that, that is an additional cost over the two percent,
therefore are actually providing two and a half to three
percent, and if that is doubled it falls within the five to
seven percent range;
*
Comment was made that if the company had done everything
that they had said they would, the two to two and a half
percent scenario would not be too bad;
A Board member explained that of the $75,000, two-thirds is
returned to Comcast, therefore public access is operating
on $25,000 plus the annual interest;
* It was pointed out that once the system is upgraded for the
first time there will be two-way communication capability,
the present system theoretically has that capability yet
has never been activated and probably could not be without
many technical difficulties; the way in which Comcast is
upgrading their systems now is by bringing bundles of
optical fibre into a neighborhood of five hundred or so
homes, not into every home as the equipment cost is about
$5,000 per location, they terminate the fibre in a housing
known as a node, the coaxial cable is brought the remainder
of the way, ninety percent of that system then has a high
two-way capability, channel capacity, etc. as fibre cable
can handle much more information than can coaxial cable, is
more reliable, improved picture, an obviously better
system;
*
*
with specific reference to access, by means of a two-way
system many cities and educational institutions are for the
first time beginning to look at the cable system as a tool
that can help them; most school districts have little
enthusiasm for using a television studio and a one-way
channel that goes to cable subscribers in their homes when
most are not going to look at the program, it does not help
educate the students or is it cheaper, the wrong median for
the wrong audience as far as they are concerned; the
conclusion after being involved in several hundred cities
is that the existing systems can be utilized only minimally
for education, maybe by a community college once in a while
for an educational purpose;
1-30-97
*
with the two-way system the situation becomes completely
different; the Los Alamitos School District is already
using a network that is provided by GTE, paying a high
price for it, the network is connecting all schools, is
being utilized initially for data communication, not for
television, administrative communications, lunch and
attendance records, etc., however the next step will be to
use the system for computer assisted instruction,
encyclopedia access, connection to the internet; the desire
is that the cable network will be an alternative, not
necessarily for new services but services at less cost,
when the companies upgrade they can usually provide those
services at less cost because the capital costs of the
upgrade are actually being paid for by the cable
subscribers, and provldes the extra capacity for such
closed circuit communications;
*
Question was raised as to what category a citizen
educational program would fall, not necessarily school
district or government originated; the response was most
likely the government category, depending upon the service;
what most cities have done is merely cablecast Council
meetings which is compatible with a one-way channel and a
studio or studio equipment, however with a two-way system
cities are beginning to look at what is called electronic
city hall services, this makes information available to the
public without having to go to city hall, some cities
looking at the permitting process, in a larger city
geographic information that shows what pipelines, etc. are
under City streets, some services made available via
computer, others by means of the television, some agencies
are providing tax roll information, assessment records,
museum and college information, etc.; that is not to say
all of those types of services will be economically
feasible for Seal Beach, however often become economically
feasible if one can combine with other cities or agencies;
training of fire service personnel at more than one fire
station at one time is another service that can become
available;
* Comment was that the increased availability of services
sounds good however the question is how that can be applied
with another cable system such as within the School
District, and it is not foreseen as feasible with Comcast;
* Response to the comment was that there are some things the
City can do in the agreement that will help get started in
those areas; first, every public building in the City needs
to be connected on a two-way basis to the cable system so
that they not only receive but they can transmit as well,
the local school can transmit to the School District if
there is an interconnection system between the system in
Los Alamitos and the system in Seal Beach, that being one
item to be negotiated;
It was clarified that access is no longer one-way
television rather one-way television plus two-way closed
circuit communications, which means there should be
connection to every public building in the transmission and
reception mode, an allocation of band widths by the cable
company so that schools and cities can communicate with one
another with a certain channel capacity that they can use
at a free or very favorable rate; the cable company can do
no more than can the telephone company, the problem is that
telephone company rates are not affordable, the hope is
that by calling this access, favorable economic treatment
will be realized;
*
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1-30-97
*
Public access in Seal Beach in the past has gotten the bulk
if not all of the funding available for any access use, yet
public access feels that that is not enough, in the future
the City will likely have two more categories, pUblic
access plus education and government; those have been
limited in the past yet in the next ten to fifteen years
new services will be developed therefore those categories
will probably be looking for some seed money as well, which
may mean that resources of funds will be required; with
respect to the School District given the majority of their
area is located in Los Alamitos, possibly that city will
come to agreement to meet their needs;
* It was stated that whatever funding is realized from the
cable company, the City should retain the flexibility to
reallocate that funding as time goes by, it can be
distributed to whatever the City desires so long as it is
cable related, as priorities three years from now may not
be what is priority now;
* The Foundation up to this time has been involved with one-
way television, now there will be one-way television and
two-way communications which could be television or data,
and if the desire is that the Foundation is to handle that,
they must broaden their experience level and show an
interest in that area; the mission may change;
The next report will cover items such as the regulatory and
technical environment, what can be expected in the future
with regard to technology, what are the constraints that
must be dealt with in terms of State and Federal laws, will
cover the cable system renewal, how good or bad the system
is now, the most likely upgrade as far as Comcast is
concerned, there will be a compliance review, ancillary
issues such as the Old city Hall lease, some franchise
renewal objectives, which seldom vary, rather it is the
priorities that vary, some of those can be discussed with
the city Attorney in a closed session;
*
* The Old City Hall was leased to CHP 80 in about 1984 for a
period of forty years, in turn the area was subleased to
Comcast for thirteen years, which expires in March; there
is supposition of CHP 80 being bankrupt, in receivership,
or whatever, the question being what happens to the
sublease once it expires, although there has been a
foreclosure notice on the building that does not affect the
City's ownership however it does affect the Comcast st~dio,
a situation that the company could take advantage of,
perhaps move the studio, maybe out of the City, yet the
general manager assures that as a contingency they are
looking for other space within the city, however with that
deadline being fairly short it may be advisable to meet
with Comcast to obtain a firmer indication of their
intentions;
A member of the Council noted her research of the old City
Hall building several years ago, explaining that the
interest of CHP 80, the firm that retrofitted the building,
is in the leasehold agreement only, they have the right to
sublease to anyone they choose, and it is felt that the
City has no input into that;
*
* A member of staff reported having a discussion with the
trustee for CHP 80 who indicated confidence that private
lenders will come forth to assume the note payment and
default will be avoided; CHP 80 is presently in
negotiations with Comcast, the indication is that they are
1-30-97
motivated to stay within the Old City Hall facility, yet
they may only be interested in the upstairs studio;
*
As to their current leased space, a Foundation member
mentioned the studio, office space for the local manager,
an engineers office and storage area; noted that there
would not be adequate room on the second floor to house
those;
I
* If the city were to go after Comcast for some of the things
they were to have done under the current agreement,
equipment as an example, question was posed as to whether
the city would need to then give up something in its
current negotiations to accomplish what should have been
done in the past; the response was that that can not be
answered yes or no, possibly a pattern of noncompliance can
give some leverage, there is no guarantee that the City
will get everything it wants, there have been situations in
other agencies where there has been an equivalent of a cash
out when a company has not done something and there is
proof they have not, a compromise situation;
* To the above a scenario was mentioned of going month to
month until the cable provider resolves the issues of the
current contract prior to entering into negotiations for a
new contract;
*
It was pointed out that there is a downside to a month to
month arrangement, it does prevent them from having a
franchise that they can do something with, however the
company will place the City on the bottom of the list for
upgrading the system and new services, and should the month
to month continue for a period of time the end result is
that the citizens are being penalized rather than the
company;
I
* The Manager concurred that his experiences with cable
negotiations have not been unlike those described by the
consultant, the deadlines come and go, and if a month to
month situation goes on for some time after the franchise
expiration, the cable companies use that as an excuse to
not make the investment in the community; his belief is
that the extent of investment a cable company makes in a
community is an economic decision to position themselves in
the competitive marketplace, sometimes a company has been
known to go forward with system improvements prior to
finalization and signing of a renewal franchise; his
preference is that this issue move forward towards
negotiations and that effort be put forth to obtain as much
as possible for the City;
* As to submittal of proposals, the consultant explained
informal procedures allow that to be done in any manner
desired, and experience has shown that nothing is gained by
asking the company to submit a proposal first;
*
Preference was indicated that this issue be postponed until
such time as the sublease of the Old City Hall building is
resolved;
I
* There was agreement by the consultant with the preference
of the Manager, it should be assumed at this point that the
existing agreement will need to be extended as this process
will not be completed by March, some cities do extend for a
specific number of months, some month to month;
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1-30-97
*
Again, the next report should be forthcoming within a
couple of weeks, upon Council review the next step is for
the City to establish its priorities, things that are a
must, those that would be nice but not mandatory, there are
many possibilities, one could be to allow the cable company
a longer period of time to upgrade the system as an
example, that defers the expenditure of considerable money
by them, which is a savings, and in turn could be
translated into access money;
* The Manager said he did not feel as much may be at stake
with the foreclosure issue as is thought, a trustee sale is
scheduled for February 18th, between now and then CHP 80
may resolve that issue;
* Concern was expressed that Comcast may use the issue of the
Old city Hall as an excuse to move their facilities to
their Santa Ana complex; response was that the existing
franchise does not allow them to do that and any renewal
franchise would do the same, it is not unreasonable to
require them to maintain a studio in Seal Beach;
* It was again pointed out that the foreclosure relates only
to the leasehold agreement not the building and property;
* It was noted that the City has received all payments from
CHP 80, however they failed to make the balloon payment to
MIF, the lease mortgage holder, if the payment is not made
the lease reverts to MIF, who then becomes the landlord of
Comcast, and would make payments to the City;
It was again suggested that the City could make their
proposal first; comment was made that a number of things
the city will be asking for are already anticipated to
happen;
*
* It was mentioned that the .company is already putting in
fibre optics in Leisure World, question was raised as to
how many nodes there may be; the response again was that
that is a marketing decision, has little to do with the
renewal;
* A member of the Foundation Board noted there is local
control to some degree now, however it is uncertain whether
the public access coordinator will continue under a new
contract, uncertainty also as to whether Comcast wants to
use local public access people, and inquired if there is a
City department that could oversee; noted also that the
coordinator teaches public access to local residents; too,
the existing contract calls for one full-time public access
coordinator;
*
To a question as to how other cities handle the coordinator
position, the response was that it varies, sometimes it can
be negotiated with the cable company to keep that
responsibility, others have a commission or board which is
somewhat broader than merely public access and includes
government and educational, the larger cities can generally
afford a staff person, some cities, having the same cable
provider, have a consortium;
* Mention was made that under the new laws the cable company
may spend money on equipment but not necessarily personnel;
response was that if the company gives the city money they
will likely not care, the issue of who runs what and how is
not something that needs to be a worry right now, the key
is to get as much as possible allocated to funding,
1-30-97
*
capacity, interconnect of public buildings, etc. which
allows the City to get into some of the new services by
itself or with another city without having to do all of
these things over again;
Another member of the Foundation expressed appreciation to
the consultant, Mr. Pilnick, and said he hoped this
presentation has made those present more aware of the
restraints placed on city council's regarding cable
franchises, suggested that the Council relook at his memo
dated July, of concern is that these negotiations and
discussions remain confidential; the consultant is doing an
excellent job compiling reports from the resources that
have been supplied to him, stated an uncertainty as to
whether the reports, either legally or morally, need to be
open to the public at this time, and should public access
to the reports be required he felt certain the consultant
would not include specifics of negotiations on behalf of
the city; suggested that one or two of the Councilmembers
be selected to meet closely with the City Manager, the
consultant, and the Assistant to the City Manager, possibly
in small work sessions so that some of the areas that have
not been discussed publicly can be in a confidential
manner, then those Council persons can report back to the
non-participating members, again in a confidential manner;
*
He noted that cable company contracts can be very
difficult, the new technologies are felt to be a benefit to
this City; PacBel1 is coming shortly, it is competition to
the local cable company, that is a positive as there are a
number of people who are looking for options, that becomes
a bartering chip by asking why the cable company can not
can do something that PacBell can; re-evaluating what you
want, or who or how your resource is reestablished and paid
is very important, how the cable company has stood with the
Cable Foundation in the past must be looked at; the Council
must make the decision as to how they want to oversee all
of the entities that are paid, public, educational, and
governmental; it is important as well that the Council
provide ideas and information to the consultant and the
Manager;
* The Board member offered to respond to questions as a
citizen and to Board decisions regarding public access as a
separate issue; stated he does have questions, his concerns
have been passed on to the City Manager and the consultant,
particularly what is negotiated, what the priority list
will be, and what becomes open to the public;
* In response, when the recommended renewal objectives are
developed they will be provided as a separate supplement
and a decision can be made at that time whether or not to
make them public;
*
The Board member stated his opinion that to compile a paper
trail for the past fifteen years is literally impossible;
what needs to be looked at is not today or tomorrow, rather
three to four years from now, new service possibilities, a
strong base that can be added to; he reminded that at the
end of the contract period everything stops unless it has
been discussed; will the franchise fees be pro-rated on a
month by month basis if that kind 'of agreement is entered
into, it is critical to know how much the franchise fees
are, that is then divided by twelve, a check in that amount
is expected every month; another concern is the public
access factor, they have been provided $75,000 per year,
does that get pro-rated or does it go away; noted having
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*
further concerns relating to negotiations; and reminded of
the importance for the Councilmembers to submit their own
priority list;
Mention was made of the issue brought forth relating to
pro-ration of the $75,000, etc.; the Manager responded that
he would discuss that concern with the City Attorney,
however as a general rule if the franchise expires and no
action is taken, the agreement continues as if it were
still in place and the terms remain the same, however
concurred that it may be well to press the urgency of this
process and convert to monthly payments pending a formal
action;
* To that comment the consultant recommended that the
agreement not be allowed to expire, otherwise the attorneys
for both parties will work on this for years; the cable
company will be breaking the law by operating without a
franchise, will cause the city all of the difficulties it
can, will say they have no obligation to pay the franchise
fee, no obligation to pay access, etc.; although the desire
may be to complete this process as quickly as possible yet
if the cable company is not cooperative an extension of the
existing agreement at least keeps certain obligations
going, such as the $75,000 per year, maintaining the
studio, etc. until those issues are confirmed in a new
agreement;
*
A third member of the Foundation suggested the City may
want to look at what areas Seal Beach gets its franchise
fees from as that relates to the subscriber base, whether
it is Seal Beach proper, the city limits, Sunset, Surfside,
Island Village, asked if the rights-of-way into those areas
give the city extra control, clarifying that his question
was mostly specific to areas in the County; the response
was certainty there are no franchise fees from those areas,
generally a franchise agreement covers only the territory
of the City and if a larger system extends into other
communities there are separate franchises and payment of
fees for those;
* It was noted that Island Village is in the City of Long
Beach, Los Angeles County;
*
Having reviewed the Cable Act, the member stated the only
area the City can get a percentage of franchise fees is
from 'cable services', telephone, internet access, two-way
communication options will not result in a franchise fee,
and even though the City might like to have those services,
he did not feel those should be looked at for Comcast to
make extra revenue with anticipation that the City would
realize extra revenue as well; the response was that it is
unclear at this time, there are a number of legal cases
where cities are claiming they do have the right to claim
revenue on these new services, the cable companies claiming
they do not, that likely not to be resolved for a couple of
years; new agreements contain language that states the city
retains the right to collect revenue on non-cable services
to the extent permitted by law, an example is that the
cable companies argue that California says you can not
regulate a telephone company therefore when the cable
company provides telephone services they are a telephone
company, everyone knows the intent of the Act but it is yet
uncertain what it means;
* In response to comments relating to contractual terms which
have been specifically preempted by State or Federal law,
1-30-97
the response was that that will be dealt with in the final
recommendations, programming and rights can not be
negotiated, most everything else can;
*
with regard to a previous comment regarding the cable
company honoring current obligations, the member indicated
possibly that should be determined prior to any contract
renewal;
*
A Foundation member noted that the consultant had indicated
how difficult it is to take on a cable company, and he is
aware of only about four cases nationwide; said
accountability is important however it is not certain it is
financially feasible to challenge a cable company on
accountability, and it is unlikely there is a ten year file
of written complaints; it is believed there are some
exciting things coming that could potentially cost the
company as far as upgrades and implementation and options
in the future; of interest is that the telephone companies
decided they were going to enter the cable business, cable
companies in turn decided to get into the telephone
business, and in his opinion, in five years the cable
company will be in the cable business, the telephone
company will be in the telephone business except for some
technological things, fibre optics is going in, that has
nothing to do with the franchise, it is merely something
the cable companies must do or they will not have
subscribers; he expressed faith in the consultant and cited
the Old City Hall as an interesting situation, a buy-back
for a dollar has been something suggested for years; he
passed out a rate sheet that he computed for the three
tiers, basic cable in Seal Beach now costs about $30 per
month since so many of the original services have been
taken away;
with regard to open video systems, a Foundation member said
his understanding of Section 301 of the Cable Act includes
phone companies and satellites, therefore he would think
that satellite, being wireless, would be the same as GTE
wireless, to that the cable companies argue those companies
do not have to provide the local services that cable
companies have had to do over the years, FCC regulation
761505 states that operators must satisfy the same PEG,
public, education, governmental, obligations as local cable
operators by connecting with PEG feeds, at their expense,
and sharing the cost of providing PEG services, and nothing
seems to overturn that regulation; response was that
telephone companies can now get into the video business
three ways, they can acquire a franchise from the local
community, as was done in San Jose and Thousand Oaks, they
are then likened to a cable company and the same rules can
be applied to them, or they can offer microwave service,
which is what PacBel1 will be doing in Southern California,
they do not need a franchise as it is an over the air
transmission licensed by the FCC, they merely pay a
business tax, sell their service and an antenna, or, they
can provide an open video system which is similar to a
common carrier, build cable network facilities and operate
them for video services without a franchise however they
must lease two-thirds of their capacity to someone else,
they can not sell retail to the home, and most of the
telephone companies have indicated they are not much
interested in that method as they would be losing
considerable money by giving up programming rights for two-
thirds of their channels, they are also responsible for PEG
access as is the local operator;
*
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AYES:
NOES:
1-30-97
The Foundation member mentioned certain things that were
not provided by the cable company yet required by Code,
local origination channel or channels, government access
channel or channels, educational access channel or
channels, public access channel or channels, and a closed
circuit community access two-way system, yet stated there
is only channel three, public access gets two days a week
with some Saturday playback, also, local origination
programming is not to primarily consist of programs that
can be received off the airwaves; there was to have been a
security bond provided by Comcast to the city until the end
of the franchise; reference was made to Code provisions
relating to termination and renewal, grantee violation of
any material provisions of the franchise, the practice of
any fraud or deceit by the grantee of the grantor, even in
the event of neglect the City has the right to terminate;
response was that the intent is to be firm with the cable
company, however with regard to any compliance or non-
compliance issue whether it is best to try to force action
now or defer and obtain more through a new agreement, that
is a decision for the City;
* The Manager suggested the focus be on a penalty provision
as opposed to litigation threats;
*
* Even though the company has been in a non-compliance mode
in the past that can be used as a negotiation tool; it was
suggested however that there be some caution in that
Leisure World does have a separate agreement, realizing
similar terms as the City;
*
The Board member indicated preference for a month to month
or quarterly extension of the contract so long as the
franchise and PEG payments continue to be made, there may
be a potential for competition and the more interested the
cable provider may be in executing a long term contract,
the short term extensions make the company less attractive
to sell as well;
* Comment was made that the City is not without resources in
this negotiation, not necessarily to terminate their
services yet make them less than pleased;
* It was noted that things agreed to fifteen years ago may
not have been done, however this agreement should be framed
so that can not happen again;
* There was mention also that discussion of negative issues
should not take place in this type of forum.
Forsythe moved, second by Hastings, to designate Councilmembers
Brown and Campbell to meet with the City Manager and Mr. Pilnick
to discuss specifics of the cable television franchise renewal.
Brown, Campbell, Forsythe, Fulton, Hastings
None Motion carried
ADJOURNMENT
It was the order of the Chair, with consent of the Council, to
adjourn this meeting until Monday, February 10th at 6:30 p.m. to
meet in Closed Session if deemed necessary. The meeting was
adjourned by unanimous consen t 11:18 a.m.
of the
1-30-97 / 2-10-97
Approved:
J~/~~T'/~.
- . May
Attest:
I
Seal Beach, California
February 10, 1997
The regular adjourned meeting scheduled for 6:30 p.m. this date
was canceled due to the lack of Closed Session items requiring
discussion.
Seal Beach, California
February 10, 1997
I
The city Council of the city of Seal Beach met in regular
session at 7:03 p.m. with Mayor Forsythe calling the meeting to
order with the Salute to the Flag.
ROLL CALL
Present: Mayor Forsythe
Councilmembers Brown, Campbell, Fulton, Hastings
Absent: None
Also present: Mr. Till, City Manager
Mr. Barrow, City Attorney
Mr. Whittenberg, Director of Development
Services
Mr. Badum, City Engineer/Director of Public
Works
Chief Stearns, Police Department
Ms. Stoddard, Director of Administrative
Services
Ms. Beard, Director of Parks and Recreation
Ms. Yeo, city Clerk
APPROVAL OF AGENDA I
Councilmember Campbell requested that Item "H", the Parks and
Recreation Commission meeting schedule, be removed from the
Consent Calendar for separate consideration, and the City Clerk
requested that Item "F", Council minutes, be removed. Hastings
moved, second by Brown, to approve the order of the agenda as
revised.
AYES:
NOES:
Brown, Campbell, Forsythe, Fulton, Hastings
None Motion carried