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HomeMy WebLinkAbout05-20-99 WS ff MINUTES OF THE OCOEE CITY COMMISSION WORK SESSION HELD MAY 20, 1999 CALL TO ORDER Mayor Vandergrift called the work seSSiOn to order at 7:08 p.m. III the Commission Chambers. PRESENT: Mayor Vandergrift, Commissioners Anderson, Howell, and Parker. Also present were City Manager Shapiro, City Attorney Rosenthal, Community Relations/Projects Director Shira, Special Counsel Braulio Baez, and Deputy City Clerk Green. ABSENT: Commissioner Johnson. DISCUSSION RE CABLE TELEVISION Community Relations/Projects Director Shira explained that the workshop was fashioned to let Commission know what staff has been working on with Attorney Braulio L. Baez, of Leibowitz & Associates, P.A. Mr. Baez has been working with Time Warner about the City's cable television franchise renewal. Mrs. Shira said the purpose of this meeting is to share what they have been working on, to outline some issues which staff thinks are important and which they think are important to Commissioners, to get from Commission a sense of "are we on track," and to let Commission know what to expect from upcoming meetings. Mrs. Shira introduced Attorney Baez who said his purpose was to give a general overview of the renewal process, to update Commission with specifics on the progress so far, and to conclude with some of the issues that they have identified as critical and important to the City and are therefore to be included in negotiations throughout the renewal process. Mr. Baez said Time Warner is authorized to operate a cable television system in the City of Ocoee in accordance with the terms of a franchise granted to Cable Vision originally in Ordinance No. 786 which is set to expire July 3, 1999. He said federal law provides both formal and informal processes for franchise renewals, and those apply to the City's franchise with Time Warner. He said generally the renewal efforts proceed along both lines. The parties usually like to proceed along the informal track, but each of them seek to reserve their rights under the formal track in case anything goes wrong. He said to date the City and the Company have been proceeding mainly through the informal track. Mr. Baez briefly explained the three phases of the formal cable television franchise renewal proceeding. The first phase begins when the formal renewal process is invoked. It consists of the City having public hearings in order to carry out an ascertainment process. The first purpose of the ascertainment process is to gather information to ultimately determine what the key issues are for the City and the community and what the cable related interests and needs are. The second purpose of ascertainment is to enter into an evaluation process of the cable operator's performance (issues of compliance) under the existing franchise. When OCOEE CITY COMMISSION WORK SESSION MA Y 20,1999 ascertainment process is completed the City can issue an ascertainment report and request a renewal proposal from the cable operator. The second phase of the process begins once the formal renewal proposal is received from the cable operator. At that time the City enters into an evaluation of that proposal for purposes of deciding whether to renew the franchise or to issue a preliminary notice of non-renewal. The third phase involves a full evidentiary hearing whether the City Commission sits as the fact finder or not. The evidentiary hearing is a fairly drawn out process much akin to a trial. Standards that have to be considered: whether the cable operator is substantially complying, whether the operator's service is reasonable in light of the community's needs, whether the operator has the legal, financial, and technical capabilities to provide the services, facilities and equipment which are proposed in their formal proposal, and whether the proposal itself is reasonable to meet the future cable related needs of the community. Mr. Baez pointed out again that formal procedures have not been pursued thus far. He said the City and Time Warner have been proceeding with informal renewal negotiations. While it did take a while for these good faith negotiations to begin, as evidenced by Mr. Fogarty's presence today, they are engaged in discussions and Mr. Baez fully expects to take the informal process to a satisfactory conclusion. As part of the City's ongoing inquiry, the City had performed a financial audit of the franchise fee payments over 96/97 which found approximately $17,000.00 underpayment. Mr. Baez said the company still disputes some of the numbers that came up to that total. He said the results of the audit form part of the informal renewal negotiations. And further, he said staff has been gathering information to determine the City's priorities in the renewal process. Mr. Baez said issues identified for focus by the City include: Definition of gross revenues - Gross revenues that are generated by the franchisee from the operation of their cable system within the City become the basis upon which franchise fees are calculated. They represent compensation to the City for access to its rights-of-way. Federal law limits the percentage which a franchising authority can charge on gross revenues to 5 % . The City's current franchise fee is set at 3 %. Real debate lies in the determination of what services that are provided through that cable system are going to comprise the pool of revenues upon which the franchise fees will be calculated. He said two big issues are: (1) Open-access and internet services being provided through the cable system; inclusion of revenues for internet service are currently being negotiated all over the country, and (2) The thornier issue of the lease of excess capacity on the cable systems - i.e. lease to telecommunications companies. He said debate ranges on whether that lease of excess capacity is a cable service that will be subject to franchise fees. He said it has the potential for representing a lot of revenue in the future. Enhanced program customer service requirements - Local franchising authorities can require 2 OCOEE CITY COMMISSION WORK SESSION MAY 20,1999 more meaningful customer service requirements than minimum standards established by the FCC and have the ability to "put teeth in" these customer service requirements in the way of fines and other liquidated damages mechanisms. Mr. Baez said they have sought to include these mechanisms in the drafts they are discussing. This is in its most basic sense an incentive for the cable operator to stay true to the customer service requirements and to provide the level of service and attention to the residents that the City feels is appropriate. Mrs. Shira gave examples of complaints she has received from cable television customers. She said when she receives a complaint she calls Time Warner as though she was the customer and lately has been getting Time Warner representatives who don't know where Ocoee is, let alone what the particular issue might be. She said she needs to have communication from Time Warner about things happening in Ocoee. Mrs. Shira says she gets blindsided by brochures the customer has received that she knows nothing about. She said Time Warner needs to let her know about outages in the City so she can respond when citizens call her. Mayor Vandergrift asked how many calls per month had been received on average Mrs. Shira said she had received 20 to 30 calls in the last two months. Mrs. Shira said it needs to be the responsibility of Time Warner to notify someone at the City about problems with outages, providing service to a new subdivision, etc. Mr. Baez said they are seeking to fold all the issues which Mrs. Shira has raised into customer service requirements - include reporting requirements to the City. He said one of the points that they seek to get across is that, in a time of change, the City can be the cable operator's best friend. As the City is going to get a fair amount of calls, there needs to be a requirement to keep the City as involved and as informed as is possible. If the requirement is not met, then there are enforcement remedies available to the City. He said there are things that are happening now which will cause a spike in customer calls to the City. At the end of March the FCC's jurisdiction over rates for upper tier of services went away so the companies have less constraints in changing their rates for those types of systems. He said the City winds up being one of the focal points for complaints. He said the City needs to be aware of any construction that may cause calls. Then it will be easy to defuse complaints by responding that the City knows and the cable company is on top of it. Mayor Vandergrift asked if other Cites are requiring this notification in their franchises. Mr. Baez said some of the more modern franchises are including them. Mr. Shapiro said because of the engineering utilization permit, the City would be aware of where they were digging, but not why. Mr. Baez explained two high concept provisions: "state of the art" and "most favored nation." 3 OCOEE CITY COMMISSION WORK SESSION MAY 20, 1999 He said "state of the art" is some definition of what is state of the art in terms of facilities and technology. He said the purpose is to set the bar or create a target for the company to attain throughout the life of the franchise. He said the "most favored nation" concept seeks to give the company a push in the direction of "state of the art." These provisions conceptually seek to keep the City's system and services in as constant a state of improvement as is feasible given circumstances. The benefit to a small City is that it keeps the City moving with the times, and this is important to businesses which may consider moving to the area as well as to provide the benefits to the current residents. Mrs. Shira asked if a big city like Orlando or Orange County negotiates something with Time Warner that they are going to do for them and we are right next door, does that give us any ability to say well you are doing it right over there why shouldn't we also get that. Mr. Baez said generally that is the idea. There are technical circumstances that may prevent that from happening, but the motivation that you want to give the company is to keep the City's technology level in cable services and service level moving in a state of forward movement. Mayor Vandergrift asked if the representatives for Time Warner should be given an opportunity to speak at this time and City Attorney Rosenthal pointed out that this was not a public hearing nor a negotiating session with Time Warner. Mr. Baez said an issue important to the City is public, educational and governmental channel access (PEG). He said local authorities typically require one or more subscriber channels to be held back and placed in control of the City or an educational institution for their use in order to do community programming, disseminate information, and to deliver services to the residents. He said the change from County and City channels to only one government access channel in Ocoee would be addressed. Mr. Baez said one of the main purposes of the renewal negotiations is to establish channels of communication between the franchisee and the franchising authority in order to serve the purpose of delivering benefits to the community. He said the City can only do this if it is up to date, informed, and knows what is going on with its cable system. Mr. Baez addressed the audit report and the $17,000.00 underpayment. He said generally Time Warner has agreed to most of the elements on it, except underpayments which the auditor identified which were related to an issue called "fee on fee." There was a time when the computation of franchise fees included franchise fees - the 3 % was based on the entire bill including the franchise fees. There was an FCC decision that negated that concept, and most cable operators stopped paying on the "fee on fee" for a period of two years. A federal court ultimately reversed that finding the "fee on fee" to be proper. And Time Warner has offered 4 OCOEE CITY COMMISSION WORK SESSION MAY 20,1999 to pay it on a prospective basis - from the time the decision came down forward. He said the issue that remains is what to do with the payments held back for those two years based on the FCC decision. Discussions are continuing in an attempt to resolve that issue. Mr. Baez mentioned migrating of channels to a la carte services which results in reduction in number of channels available on upper tier but no reduction in rate so it is effectively a rate Illcrease. Mrs. Shira explained that basic service is not what most people consider basic service. She said what most people have in the range of channels without the premium channels is called standard service. When the current change takes effect, for customers to get what they are getting now will cost more money. Referring to a rate comparison provided by Mr. Spencer, Mrs. Shira asked if the comparison of Ocoee's rates to those for Orlando and Orange County was an "apples to apples" companson. Commissioner Anderson asked if the City Commission could establish a minimum amount to be on basic in the City without establishing a programming scenario. Mr. Baez explained his understanding of what the law requires for basic service is that there be locally available broadcasting channels, i.e. CBS, ABC, NBC, independents, government and educational access. He does not believe the Commission may require a specific tier of channels. He said the basic package is what you can receive on an antenna. Mr. Baez said the City cannot dictate programming Commissioner Anderson said if we sign a franchise in good faith we need to have a baseline. City Attorney Rosenthal said the standard is established by federal law rather than local law . City Manager Shapiro said that after they talked with Ms. Pickett and Mr. Spencer, the City did a receive a map showing where and when the services were being cut on. He said they were more than happy to help us with the sound issues in the building and there is no question that the fiber optics have created a much better picture. Mayor Vandergrift recalled some background and history of cable service in the City. Mr. David Spencer, Vice President and General Manager of the Orlando Time Warner Office, said he and Mr. John Fogarty, attorney from the Time Warner corporate office, were present to listen to Commission's issues and to respond to their questions. 5 OCOEE CITY COMMISSION WORK SESSION MAY 20, 1999 Attorney Fogarty presented their perspective on some of the key issues which Mr. Baez had outlined for Commission. Distinction between basic and standard (FCC refers to as CPST) service. He explained this distinction is now required by federal law, and the number of channels on basic and the number of channels on CPST is not an area treated in franchises. He said federal government does require that all the local broadcast channels and the PEG channels are on basic. The FCC has also encouraged cable providers to keep basic service limited to those channels so that it provides a very low priced alternative for those on limited incomes. Gross revenue and franchise fee - He said Time Warner is agreeable to providing the maximum franchise fee the law permits (5%). He said they have not problem with a change from 3 % to 5 % franchise fee, but would be more than happy to keep it at 3 % as the customer is concerned about the total amount paid to Time Warner each month. Commissioner Anderson commented that this fee would be passed through to customers so that Time Warner would not be incurring any additional expense. Customer service requirements - Time Warner is pledged to meet the customer service standards of the FCC and they have their own internal standards which they try to meet. He said if the franchise required Time Warner to exceed the FCC standards, the cost of doing that would be passed through to the subscribers. He said the FCC had considered carefully when they set that standard what is good customer service and what is affordable customer service. He said they are very committed to customer service State of the Art/Most Favored Nation - Mr. Fogarty said they are committed to providing an up-to-date advanced cable system that will provide the customers in Ocoee with a wide range of programming options with high quality signal and to maintain the system throughout the franchise term at a high level of operations that is consistent with the general standard throughout the industry. He said what they cannot agree to do is to say that when improvements are introduced in the industry that Ocoee is always going to be first, as they have 3,000 franchises around the country. Mr. Fogarty said what needs to be done now is to try to get the kind of language that puts this all down in writing, but hopefully we are all in agreement that we have a common aim and are not very far apart on where we want to be at the end. He said they are willing to work with the City to get it done in a way that will be good for the City and will be good for the customers here. Recess: 8:08 p.m. - 8:25 p.m. Commissioner Parker - Had no questions. 6 OCOEE CITY COMMISSION WORK SESSION MA Y 20, 1999 Commissioner Howell, noting from the news a big complaint across the country about cable TV rate hikes and poor service, asked how much the rate service in Ocoee has gone up in the last five years. Mr. Spencer said he did not know but would get the answer for him. Mrs. Shira said the FCC allows an increase of a percentage each year. Commissioner Howell recalled billing problems with cablevision when it was CVI and customer service personnel were not helpful. He said they had told him if he was unhappy with them he could buy a dish, and that is what he did. Commissioner Anderson said although the Commission has no control over this, he would like information on rate increases over the last five years for standard service and premium serVIce. Commissioner Anderson asked if night calls are answered by Time Warner or an answering service. Mr. Spencer said they are answered by Time Warner employees as their call center in Orlando is open 24 hours a day, seven days a week. The FCC standard on answered phones is that 90% of the calls must be answered within 30 seconds. Mayor Vandergrift asked what is the level of service requirement from call to getting service back in. Mr. Spencer said if they have a service interruption, but not a complete loss of service, the goal they strive for is to complete 95 % of them by the end of the next day. If the subscriber is completely without service, the goal is to restore service that same day. If there is an outage affecting multiple residences, the goal is within 11/2 hours. He personally receives a page on everyone of those that goes beyond two hours. Mr. Fogarty said Time Warner's goals are beyond the FCC standards. Commissioner Howell said on a recent pay-per-view the service went out and it did not come back until near the end of the program. He asked if there would be reimbursement for that. Mr. Spencer confirmed that credit would be given in that situation. Mr. Howell asked what the policy is on that, and if replay could be reordered. Mr. Spencer said most of the bigger events, such as wrestling matches, have the live event and immediately following they have a replay, and then within two to four days they have another replay. If something goes wrong with the service and you want to watch that, then you can watch the replay. It will be necessary to call in unless it is a programmer problem. Commissioner Anderson asked if there were a reason why local channels 2, 6, and 9 are not on 2, 6, and 9 on cable. Mr. Spencer explained that it had to do with engineering and federal rules. He said, from the engineering standpoint, it is the general practice to offset in order to 7 OCOEE CITY COMMISSION WORK SESSION MAY 20,1999 find problems before the customer sees them. He said this practice stems from the early days of cable. Mr. Spencer said there are federal rules now called "must carry rules" and broadcast stations choose either "must carry" or "retransmission consent." They have certain rights to channel placements and that was benchmarked when they started these rules and they had the right to stay on the channel they were currently on or elect to go to the channel that they broadcast on. They are where they are today because of the history and because of federal "must carry" and "retransmission consent" rules and what channel they have elected through those federal regulations. Mr. Fogarty explained that the broadcasters have a choice on what channels they want to be on based on certain criteria. Commissioner Anderson asked if, for example, Time Warner has a letter from Channel 6 saying they do not want to be on Channel 6. Mr. Fogarty said we would have some sort of election from Channel 6 if they chose "must carry" to indicate what channel they want to be on. Mr. Fogarty said by selecting "must carry" a station says to the cable operator you have to carry us, or by selecting "retransmission consent" a station indicates to the cable operator you cannot carry us without our consent. Commissioner Anderson asked if Channels 2, 6, 9 had the option to be on cable on those channels but chose to opt out of it. Mr. Fogarty said if they chose "must carry" status they should have elected the channel that they are on. Commissioner Anderson expressed concern about lengthy contracts (10 and 15 years) in times of great technological changes and in light of the rapid growth in the area. Mrs. Shira pointed out that ten years is the maximum length for franchises now. Mr. Fogarty said Time Warner does not view ten years as a long term contract. He said the industry is changing, there are a lot of developments going on, but they are not generally in areas that are based on the franchise. These are technology driven developments. He doesn't think the franchise is intended to or is going to impact those. He said the standard term throughout the industry would be in the 10 to 15 year range. Mayor Vandergrift pointed out that companies would be less likely to invest funds on advanced technology for a five year contract than a ten year contract. City Manager Shapiro pointed out that one of the reasons why there may be difference of 8 OCOEE CITY COMMISSION WORK SESSION MAY 20,1999 opinion is there is still a lot of negotiation to do and reminded about what Mr. Baez said about "state of the art" and that there are tradeoffs associated with state of the art versus term of contract. Commissioner Anderson asked Mrs. Shira if there were a reason why the City did not RFP this. Mrs. Shira said anybody can come in and ask for a franchise. Mr. Shapiro explained that RFP is not necessary for this as it is available to everyone, other companies could come in and lease out wires on Florida Power or the phone companies and they would have to negotiate a franchise through the same process. Mr. Shapiro said you never want to be in a situation where you have three franchise companies in a City with three different rates. Commissioner Anderson asked if when road runner comes in it would be an additional charge and Mr. Fogarty responded yes, as it would be an optional service. Mr. Baez clarified that when we throw out the word "competitive" it is not to suggest there is any other cable modem service available. Mr. Spencer said by the end of this year they will have all systems in Seminole and Orange Counties upgraded and they will be on the new channel line-up. He said their goal is to provide a line up and to service their product for a price that wins out over their competition. Mr. Shapiro pointed out that the City probably would not make the July 1 deadline (for franchise renewal), and would prefer to negotiate the best possible contract rather than accomplish it by July 1. Mr. Baez said he would prepare for an extension for the current franchise and Mr. Shapiro said it would be brought to Commission some time in June. Mr. Baez said, as is set out as part of the formal process, there are avenues for the company to challenge the decision not to renew a franchise. He said the outcome of that would depend on what the record of your considerations amounts to and what the reasons for your denial would be (evidentiary hearing). Mr. Baez said their approach to this renewal is to address a master ordinance that applies to every cable provider that eventually would be desiring to come in and from that would flow the franchise agreement. The federal law does not require a City to have a franchise but allows a City government to require a franchise for access to its rights-of-way. Mayor Vandergrift asked Mr. Baez if in the industry there was a move away from franchises to a per mile rental for right-of-way. Mr. Baez said the per linear mile concept is not usually found with providers who provide this type of service (whether telecommunications, cable or otherwise) . 9 OCOEE CITY COMMISSION WORK SESSION MAY 20,1999 Mr. Baez pointed out that there is an effort going on statewide on the part of telecommunications companies and, to some extent, the Florida Cable Association, to address the issue of establishing a unified telecommunications tax. He said the intended purpose of that tax is to eliminate, or fold in franchise fees, public service tax, and the gross receipts tax that flows to the state. The overall impact would represent a scaling back of cities' franchising authority. Mayo Vandergrift said there is an industry ploy by the heavier duty industries, such as the power companies, to get a law passed that said cities can't put in underground utilities and spread the cost out across the entire industry. He said there is nothing today that can stop Time Warner, Florida Power, or anyone from going out in some of the subdivisions that have underground cabling now and put in poles for overhead cables. There is not any real control over that and the point is that they are using this law. He said that when Florida Power was asked about putting in a 69 KVW line down Clarke Road underground they said the City would have to pay for it. With the technology that Time Warner is putting out now, we are used to seeing it strung on the poles, but wouldn't it have been a great step for us to bury a line that large underground to help the looks of the City. This is a law that the state has passed on the benefit of the utilities that flies in the face of compact communities. Mr. Baez said he is not aware of that law, but he does come from a telephone and electric background, and the Public Service Commission does have requirements as far as their rules that require electric and telephone utilities to underground their facilities in all new subdivisions. As the facilities come up for replacement due to wear and tear they have to underground them as well. When a City requests it, in the interim, when it is not due to be undergrounded by virtue of its replacement, then the utilities do have the right to get the incremental cost. Mr. Shapiro said we do that now under subdivision regulations. Mr. Shapiro said when there is a large KVW line that is not serving a particular development, but serving a quadrant of the City, that is when the power company said the City had to pay for it and would have to have the ugly overhead lines. Mayor Vandergrift asked if there were any chance that Time Warner were going to close down the service plaza in Ocoee and consolidate to the plant on American Boulevard. Mr. Spencer said in Ocoee they have a regional construction department and walk-in service with agents available during normal business hours. They own the building and have no plans to change the customer service aspect. Internal use as to whether it is a construction department or training facility can be changed from time to time. Mayor Vandergrift suggested that Time Warner should consider partnershipping with the City in paying for some of the incremental widening of that portion of Maguire Road near their facility. 10 OCOEE CITY COMMISSION WORK SESSION MAY 20, 1999 Mayor Vandergrift said that Ocoee residents need to have access to the Orange County Government Channel as well as the local channel. He said a network was needed that would cover all the cities in West Orange County. Mr. Shapiro pointed out that this is a very serious issue to staff and they have made it clear to Time Warner, that while we cannot demand it, that we certainly consider that an issue that may decide what kind of a franchise we have. He said as leaders in West Orange and as Ocoee is becoming the second largest City in Orange County, we need to know about Orange County government and the people surrounding Ocoee want to know about Ocoee's government. Mayor Vandergrift said he would like to see networking that would include the schools on a rotating basis. Mayor Vandergrift asked if Time Warner can control having commercials broadcast at the same volume as the programs and if all channels could be the same. Mr. Spencer said they should and do have some control. He said there are regulations in terms of volume levels as to what they can and cannot do with commercials. He said Time Warner runs checks on those very frequently. If there is an audio variation in decibel loudness that is noticeable between channels, call Time Warner to let them know what channels they are. Commissioner Anderson asked about the "parental control option." Mr. Spencer said that feature is built into the smart box at no extra charge (and is not available without the smart box). He said the feature allows locking out of any or all channels or programs by rating or channels by time of day. Mr. Anderson asked if it would be possible to bleep out four letter words. Mr. Spencer said there was nothing commercially available today to allow the consumer to do that to an audio program. There are several efforts going on industry wide in terms of program ratings that alert consumers to what type of material is in programs, both video and audio. Mr. Fogarty said that Time Warner is not legally entitled to interfere with broadcast signals. Mayo Vandergrift asked if we should be able to get a university on this side of town, if negotiating for the government channels now should include three channels as opposed to two. Mr. Baez pointed out that now would be the time to talk about it but pointed out that it is a double edged sword as anytime a subscriber channel is set aside for PEG use it is a loss of revenue to the City. In response to questions from Mayor Vandergrift, Mr. Spencer explained some technical aspects of the new fiber optics and noted that it is a rapidly evolving technology. Commissioner Anderson asked if in future the fibers are bi-directional if the City would receive two fees. Mr. Fogarty responded that franchise fees are based on revenues for cable 11 OCOEE CITY COMMISSION WORK SESSION MAY 20,1999 serVIce. Mr. Baez pointed out that the City received franchise fees on services that are provided over the cable system. If what Commissioner Anderson is describing constitutes a separate service for which they can charge, then there would be franchise fees. 9:35 p.m.- Mayor Vandergrift left the dais and Mayor Pro Tem Anderson chaired the remainder of the meeting. City Manager Shapiro commented that there would be negotiation as to what is meant by "cable service." ADJOURNMENT The meeting adjourned at 9:40 p.m. Attest: APPROVED City of Ocoee lita.JU ~./J.)...b /t(O 0 Marian Green, Deputy City Clerk ..........-~. --~..-~ J1; ,. 1 ~. '~\ \ -. --"-- 0) c::-;J'~~L Cv~()Al / )/ S. Scott Vandergrift, Mayor 'r( 12