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Home My WebLink AboutItem VI (D) Discussion and Action re: Cable TV Rate Regulation "CENTER OF GOOD LIVING-PRIDE OF WEST ORANGE" AGENDA 6-21-94 0� p OCciee ' Item VI D w ' ` ° CITY OF OCOEE COMMISSIONERS RUSTY Cs 150 N.LAIESHORE DRIVE PAUL W.FOSTER OCOEE FLORIDA 34761-2258 VERNG COMBS s :' ) �`y ••:;:�' �? I`��-�� JIM GLEASON lE• of G ,0�`J ELL RI ANA O MEMORANDUM TO: The Honorable Mayor and Board of City Commissioners FROM: Ellis Shapiro, City Manager DATE: June 16, 1994 RE: CABLE TELEVISION RATE REGULATION Attached to this memo is a staff report by Janet Resnik as well as a letter from our Cable television consultant regarding the issue of whether or not we wish to regulate cable rates in the City. The simple decision is the following: You must weigh the expense of approximately $20,000 of cost to the community to do a study that allows you to regulate cable television rates versus the non-regulation which allows cable television operators the ability to raise television rates in accordance with federal law at their pleasure. If you believe that we should be regulating this industry, then the $20,000 must be placed in the upcoming budget for this function. Respectfully Submitted, ESJ:fdg Attachments "CENTER OF GOOD LIVING-PRIDE OF WEST ORANGE" MAYOR•COMMISSIONER Ocoee S.SCOTT VANDERGRIFT 6// CITY OF OCOEERUSTY JOHNSON 150 N.LAKESHORE DRIVE PAUL W.FOSTER OCOEE FLORIDA 34761-2258 VERN COMBS C1° 4' (407)656-2322 JIM GLEASON of G O00 CITY MANAGER STAFF REPORT ELLIS SHAPIRO TO: THE HONORABLE MAYOR AND BOARD OF CITY COMMISSIONERS FROM: JANET G. RESNIK, CAPITAL PROJECTS/CONCURRENCY ANALYST DATE: JUNE 10, 1994 SUBJECT: CABLE TELEVISION RATE REGULATION ISSUE Should the Honorable Mayor and Board of City Commissioners issue formal notice to Cablevision Industries initiating cable television rate regulation by the City as the local franchise authority? BACKGROUND On October 5, 1993 , the City Commission adopted Resolution 93-14 , authorizing staff to file for certification with the Federal Communications Commission (FCC) . Certification was the first step in being recognized to regulate basic rates and equipment charges . On November 2, 1993 , the City Commission adopted Ordinance 93-19 . This was the next step in the process required by the FCC. The ordinance specifically provides for notice to the City of any rate changes and requires a public hearing to discuss rate changes and formal action by the City Commission to set a rate for basic service and equipment needed for that service . DISCUSSION The final step of the process would be for the City to formally notify Cablevision Industries of its intent to regulate the basic service tier rates and other charges allowed under the federal legislation. The FCC' s original benchmark set last year basically declared rates were, on average, 10% too high in non-competitive areas . Now the FCC believes it is closer to 17% . The FCC is now requiring all cable operators in non-competitive areas to reduce rates 17% below the September 1992 rates . (With adjustments for inflation, etc . ) Under these new regulations, all cable operators must reduce their rates by this amount, even if their rates are at or below the benchmark. Cable operators who do not reduce their rates accordingly are subject to refund liability unless they file a cost-of-service justifying their higher rates . It is staff' s opinion that Cablevision Industries will not reduce its rates automatically to follow the benchmark, but will instead file a cost-of-service showing if the City follows through with regulating rates . (")/e- The City of Winter Garden, who is also served by Cablevision Industries, has decided not to pursue rate regulation at this time. Apopka has certified and is in the process of putting together its ordinance establishing the process for regulating rates . Apopka is served by Cablevision of Central Florida. Orange County is currently regulating the rates of three cable operators - including Cablevision Industries . Staff indicates that the rate study is ongoing with Cablevision Industries so it does not yet have an indication on whether the rates will be reduced. The rate study is being handled in-house. The City of Ocoee has several options : (1) The City Commission can decide to take no action. This would mean that Cablevision Industries would go unregulated for basic tier service . (2) The City could wait to see the outcome of Orange County' s findings . (3) Or the City could file notice and do its own rate review. With most neighboring areas deciding to regulate rates, it will probably only be a matter of time before Ocoee is forced into the rate regulation business to keep its rates in line with others . It appears to be a matter of when regulation will start rather than if regulation will take place . It is hard to estimate how long it will be before Orange County completes its rate study and takes formal action to set a rate . In the meantime, the City could file its notice and obtain the same information that the County is now studying. We would then be in a position to follow through with our own review regardless of what happens with Orange County, or see what happens with the County' s study and then go from there . Last year the City collected about $40, 000 in franchise fees . An initial cost-of-service rate study review would probably cost $15, 000-$20, 000 between legal and accounting fees . The City may be able to work with Orange County to share information in order to keep our costs down. RECOMMENDATION It is respectfully recommended that the Honorable Mayor and Board of City Commissioners direct staff to issue formal notice to Cablevision Industries that the City of Ocoee is initiating rate regulation of its basic service tier. In the time period that Cablevision Industries has to respond with its rate justification, and the time following that Ocoee has to acquire any additional information and then study the material, the County may have already issued its ruling on rates . If that ruling reduces rates, the City would then have justification to at least match that reduction; or, if the ruling does not reduce rates, the City may decide not to proceed with a full rate study at this time and instead, keep the current rates based on the County' s findings . cc : Ellis Shapiro, City Manager Montye Beamer, Director of Administrative Services LETBawITz & ASSOCIATES, P.A. MATTHEW 1..LEIDOWITZ SUITE I4SD SUITE COs JOSEPH A.■[LISLE $UNSANk INTERNATIONAL CENTER LESS ELSA0 erctairr,M.W. ILA L.FELO WASHINGTON,DC.MX537 KARSTEN AM4i[ ONE SOUTHEAST THIRD AVENUE OP COUNSEL MIAMI,PLOMIDA 33131-17Is AARON P.SHAINIS. LEE FELTLMAN. TELEPHONE fao,yy 090•13a2 SANFORD L.SOMBER TELEOOPIER{3'OSI 530-8417 NOT ADMITTED ro June 13, /994 FLORIDA OAR )lr. Ellis Shapiro City Manager City of Ocoee 150 N. Lakeshore Drive Ocoee, Florida 34761 PE; Cable Television Rate Regulation Dear Mr. Shapiro: Having reviewed the "Staff Report" dated June 10, 1994 with respect to cable television rate regulation, we would suggest modifying the Recommendation section to clarify the City's obligations. Should the city issue local notice to the cable operator of its intent to regulate rates, the operator is required to submit a rate request (either FCC 393 benchmark or cost of service) within 30 days. The City is then obligated to evaluate the request and issue an order granting or denying the rates within a specified time period. The cable operator's rate request and responsive rate order are applicable to a specific franchising authority and not an entire cable system. Therefore, while any rate evaluation undertaken by the County may provide the majority of the analysis relied upon by the City, the City must ultimately issue an order with respect to rates within the franchise area. In addition, once the cable operator has submitted a rate request, the City does not have the option of simply choosing between the requested rates and those currently in place. Should the City fail to issue an order granting or denying the rates, the requested rates will automatically go into effect. Please call with any questions with respect to this issue. Sincerely L. urs, Feld ILFirg cc: Janet Resnick ?O 'd LIb60£990£ 'ON XV.4 S31MI00SSd18ZLIt1O 131 LZ:ZI NOW 66-£1-N[lf