HomeMy WebLinkAboutReso 029-97 Report TCI CableSvcRESOLUTION NO. 29 - 97
A RESOLUTION OF TIlE CITY COUNCIL
OF THE CITY OF DUBLIN
CONTAINING A REPORT OF sYSTEM PERFORMANCE,
QUALITY OF SERVICE, AND NOTED INADEQUACIES/VIOLATIONS
(TCI CABLE TELEVISION PROVIDER)
WHEREAS, Dublin Municipal Code Section 3.20.330 provides for a public Annual Review of
services provided by franchised cable television operators; and
WHEREAS, TCI currently holds the franchiSe for the provision of service within the City of
Dublin; and
WHEREAS, information was requested on February 5, 1997 from TCI in order to conduct the
review; and
WHEREAS, the City provided notice to TCI on February 5, 1997 that a Public Hearing would be
conducted on March 18, 1997; and
WHEREAS, attached hereto as Exhibit 1 and by reference incorporated into this resolution, is the
Annual Report dated March 13, 1997; and
WHEREAS, information submitted to the City of Dublin by TCI identifies that the firm has
commenced activities necessary to complete the City of Dublin system upgrade construction; and
WHEREAS, the City Council did conduct a public heating on March 18, 1997 and accepted
testimony relative to the performance of TCI; and
WHEREAS, as a result of this review certain inadequacies and or violations were determined to
exist; and
WHEREAS, in accordance with Municipal Code Section 3.20.330(A) the City must issue a report
within 30 days of the review; and
WHEREAS, the City may require that TCI correct inadequacies and violations within a reasonable
period of time or be subject to further remedies.
NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby adopt and issue the
report attached hereto as Extfibit 1 as the report required in section 3.20.330 (A) of the Dublin Municipal
Code.
BE IT FURTHER RESOLVED that the City Council has determined that inadequacies and or
violations exist in the manner in which TCI has performed in the City of Dublin. Exhibit 2 attached hereto
and by reference made a part hereof specifies the scope of the inadequacies and a time frame for TCI to
complete corrective action. Staff'is hereby authorized to forward this information to TCI.
BE IT FURTHER RESOLVED that Staff shall provide Notice to TCI that in the event there is a ,.
failure to comply with correcting the inadequacies / violations within the permitted time, shall be
considered a material breach and the City may proceed with an appropriate remedy.
PASSED, APPROVED AND ADOPTED this 18th day of March, 1997.
AYES: Councilmembers Barnes, Burton, Howard, Lockhart and Mayor Houston
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST: /,~/
H/cc-forms/
K2/G/3-18-9 7/resotciA.doc
Mayor
ANNUAL PERFORMANCE REVIEW OF TCI
Issued By City of Dublin March 13, 1997
Attached to this Performance Review are the following Exhibits:
A. Letter Dated February 5, 1997 to TCI from City of Dublin
Requesting Information To Conduct Performance Evaluation
Letter dated March 3, 1997 from TCI addressed To Paul Rankin,
Assistant City Manager Regarding 1996 Franchise Review
C. Comparison of Proposed June 1, 1997 Rates - Tri-Valley
Letter dated February 5, 1997 to Tom Baker, TCI from Paul Rankin
Regarding the status of Insurance/Bonds/Letter of Credit.
Eo
Response From TCI dated February 11, 1997 regarding Security
Fund.
PERFORMANCE REVIEW - Annual Report
Responses contained in items 1 (a) - 1 (d) (Exhibit B pages 1 and 2) reflect the submittal by TCI of an
Annual Report as required in Section 3.20.820 of the Dublin Municipal Code. The Company outlined
several tasks undertaken to develop the required upgrade to the existing system. The activities have
included securing a site for the transmission equipment as well as design related activities. The upgrade is
discussed in more detail later in this report.
As noted by TCI, Arts & Entertainment was temporarily dropped from the system in December and was
restored in January. This change will be addressed in greater detail in a separate agenda item analyzing
compliance with the FCC regulations. TCI also provided notices to Dublin Customers on or about
January 25, 1997, announcing that MTV, USA, American Movie Classics, and Nickelodeon would be
included in a separate Tier. The Channel Listing issued by TCI with their March billing, rescinded the
announcement of the new tier, and indicated that it would not be implemented March 1, 1997. The notice
indicated that the Company chose to test market the special tier in other systems.
Staffhas analyzed some of the subscriber data presented in Exhibit B by TCI, and noted the following
findings:
The total number of subscribers to either Limited Service Tier or Satellite Value Tier of cable
service in the City of Dublin decreased by <2.29%> between 1995 and 1996 (7,463 in 1995
and 7,292 in 1996). TCI representatives indicate that a portion of this change may be due to
changes in the type of service at the 224 unit Parkwood Apartments. Note: Satellite Value Tier
includes the Limited Service Channels.
Although there was an overall decline in the combined Limited and Satellite Value service
categories, when each service level is analyzed individually the Limited Service Tier (Basic
Broadcast Channels) actually had a small 0.75% increase in the number of subscribers.
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 1 of 7
In 1996 there was a 1.69% increase in the percentage of households which had an addressable
converter box. This allows subscription to premium channels and receipt of Pay - Per - View
Programming. 3,336 in 1995 and 3,383 in 1996. (Also, see note in next statement below.)
Approximately 46.39% of the Dublin Subscribers have an addressable Converter Box.
Note: This does not account for households which may have more than one converter box. All
boxes offered to Dublin Customers are addressable.
The total the number of subscribers to the four premium services with the most subscribers
(Disney, HBO, Movie Channel, and Showtime) there was a <5.13%> decrease in the number
of subscriPtions. Note: A single household may subscribe to more than one premium service.
Despite recent declines in subscribership, TCI enjoys the benefit of a very high rate of
subscriptions in this location compared to the number of households passed. This is partly
caused by the fact that off air signals cannot be easily received on a standard antenna. TCI
representatives calculate that they pass approximately 8,200 households (including commercial
establishments with service), which could subscribe to service. Based on the reported
subscriber figures for 1996, approximately 88.93% of the potential households are currently
subscribing to some level of service. Note: No adjustment has been made for any vacancy
factor or multiple units.
It would appear that some of the trends reflect recent press articles which identify a growing trend for
households to seek alternatives to Cable Television. This includes seeking alternative Direct Broadcast
Satellite systems. This competitive impact may be especially apparent given that the Limited Service Tier
had an increase in subscribers. This tier includes channels which are local networks and are typically not
included in the package offered to small home satellite systems.
Staff does not have adequate information to conclusively assess the cause for the decline in
subscribership, beyond what is presented in this report. Other possible reasons include public comments
indicating that the quantity of programming made available on the Dublin System is not state of the art.
TCI has committed to the provision of a system upgrade by December 31, 1997.
Section 5.5 of the Franchise Agreement with TCI identifies their obligations to support the Public
Educational Government (PEG) Programming. Some of the items noted in this section were one-time
actions which had already been fulfilled by Viacom in prior years. Section 5.5(d) requires TCI to provide
the use ora mobile studio van for at least 5 hours per week as part of the franchise Agreement. This is to
be available for PEG Access and TCI must also provide the technical personnel to supervise the operation
of the van and the equipment. It should be noted that this van and personnel are separate and apart from
the CTV operation. As the City Council is aware, the City has contracted with CTV for the televising of
City Council meetings. Mr. Baker generally describes in his response numbered 1 (d) the types of support
provided to CTV by TCI personnel and their mobile studio van. TCI edits and airs local school programs,
Chamber of Commerce Luncheons and the St. Patrick's Day Parade and other broadcasts independent of
CTV. Mr. Baker explained to Staff that he is sensitive to the need to fairly assign hours for this service
among the cities served and that the City is receiving allocated time in accordance with the agreement.
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 2 of 7
FINANCIAL INFORMATION
'Section 3.20.220 of the Municipal Code allows the City to request an audited accounting of the Franchise
Fees to be provided within 60 days of the close of the calendar year. On January 29, 1997 TCI did make a
payment of $148,846.97 for 1996 Franchise Fees. However, no detail was provided as to the computation
of the payment. Staff made the request for the audited report on February 5, 1997.
Staffwill provide an oral report on the status of the receipt of the report at the public hearing. In
discussions with Mr. Baker on March 10, 1997 he anticipated delivery of the report by March 14, 1997.
In the event that it is not received or that discrepancies are noted, it may be appropriate to consider
whether further action by the City Council is required. The lack of the availability of this report within
the prescribed time limits is noted and Staff has suggested that the report be required to be submitted
within 30 days.
TCI PROPOSED DUBLIN RATE CHANGE EFFECTIVE JUNE 1. 1997
Recently TCI has announced planned rate changes to become effective June 1, 1997. The following table
displays the current rate and proposed rates for selected services offered to Dublin Customers.
COMPARISON OF CURRENT DUBLIN RATES AND
RATES TCI HAS PROPOSED TO IMPLEMENT JUNE 1, 1997
Limited Service Tier
Limited Service
Franchise Fee Limited t $ 0.58
Current 1-Jun-97
i $ 11.66 $ 11.19
$ 0.56
FCC Fee $ 0.04 $ 0.05
TA_ L LI~MIT_~ED $ 12.28 [ $ 11.80
/ Satellite ~a~u~ ~e~ }
ISatelliteValue $ 12.16 $ 12.55
$ 0.61 $ 0.63
$ 12.77 $ 13.18
$ 12.28
$ 25.05
~ Franchise Fee Satellite Tier
~IA~L _SATELLIT~E
i. GRAND TOTAL
Converter
$ 11.80
$ 24.98
]Difference
-3.94%
3.21%
-0.30%
$ 3.00 102.70%
The rate shown for the converter box represents the amount filed by TCI as an "Operator Selected Rate."
They have calculated a Maximum Permitted Rate of $3.54. Mr. Baker has indicated in discussions with
Staff, that the rate to be charged to Dublin customers has not been determined. He is seeking approval
from TCI Management to implement a lower rate. The City does have the authority to review and
approve equipment rental rates.
At the January City Council meeting questions were also asked about charges to subscribers when a
change in service level is made. In the proposed June rate schedule TCI has proposed the following
changes to service rates:
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 3 of 7
Service Category_
Upgrade Or Downgrade If
Addressable Box Is In Place
Current Rate
$ 2.09
Proposed Rate
$ 2.09
$13.60
Upgrade -No Converter Box $ 20.04
Downgrade -No Converter Box $ 20.04 $ 7.30
Hourly Service Charge
$ 40.81 $ 30.45
Mr. Baker has explained to Staff that making changes to service levels when an addressable box is not in
place, requires the Company to dispatch a track to make the modification. Therefore, the rate for these
types of changes is higher than those that can be done remotely through an addressable box. The service
rates under Federal Law may also be reviewed by the local franchising authority.
COMPARISON OF RATES ON NEIGHBORING SYSTEMS
TCI provided Staff with updated data on comparative rates under their announced June 1, 1997 rate
proposal. EXHIBIT C includes a comparison of the proposed June 1, 1997 rate adjustments in 5 local
communities. As expressed by TCI officials in local press announcements programming costs are a
significant contributing factor to the proposed adjustments. Therefore, Staff has shown a per channel cost
in the comparison displayed in Exhibit C.
As shown, on a per channel basis Dublin and San Ramon rate payers pay a higher cost than neighboring
systems. In the Limited Tier Dublin rates will be approximately 5.18% more than the average per channel
cost between 5 systems in this area. The rate difference is the greatest on the Expanded Satellite Tier,
which is regulated by the FCC. Dublin rates on a per channel basis for this tier are approximately 22.09%
more than the average for the systems surveyed.
It should be noted that although the per channel costs are lower in the systems which offer more
programming, the total cost is more than Dublin subscribers currently pay. For example the combined
cost of Limited & Satellite Value in Dublin is proposed to be $24.98, while Livermore and Pleasanton
which receive more channels will pay $28.66. This is a difference of $3.68 per month. It is expected that
once the system upgrade is completed in Dublin the total rate for Dublin subscribers will also increase as
new programming is added, however, the per channel cost would be expected to drop significantly.
Mr. Baker met with Staff and provided some additional explanations regarding additional factors which
contribute to the calculation of the rates. As noted in his written response (Exhibit B -Response 2(b)) the
number of channels provided is only one component of the total rate. Mr. Baker noted that some of the
costs associated with cable television operations are allowed to be spread over the rate base on a per
subscriber basis. Therefore, if an jurisdiction has a smaller subscriber base the costs are higher. This also
results in different rates among systems carrying the same programming. TCI has also noted in their
response that the City had an independent Consultant review the base rate used to calculate the Limited
Service Tier Adjustment. (As shown in the preceding section this rate is actually scheduled to be reduced
in June).
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 4 of 7
Although the City has had a Consultant review the Limited Service Tier, a request has not been filed with
the FCC to request a review of the Satellite Value Tier. As previously noted, prior to filing such a request
the City would needto receive complaints regarding the rate for the Satellite Value tier. Given that the
combined Limited / Satellite Tiers will have a small decrease, it is unknown as to whether required
complaints will be received.
CUSTOMER SERVICE INFORMATION
TCI has provided limited information related to customer service statistics (Exhibit B - Response 3(a))
As noted in Mr. Baker's response the Company only tracks those items which require a response and do
not maintain statistics related to complaints called in which are resolved on the telephone, Further TCI
has provided no data for the period prior to August, which they state is when they formally assumed the
operation from Viacom.
In discussions with Staff, Mr. Baker indicated that many problems are items requiring customer education
about connection of equipment to the cable system. This includes customers attempting to hook-up video
games, "picture - in picture" features, etc. TCI believes that segregating these types of problems highlights
their feeling that the number of service calls, do not reflect failure of the cable system to operate properly.
The data in the response from Mr. Baker, appears to support the conclusion that service call frequency is
low for a system servicing over 7,000 households on a dally basis. Mr. Baker notes that it is one of the
lowest call rates compared to other TCI systems. Based on the August to December data, service calls
averaged less than 4 per day. Mr. Baker notes in response number 3(c) that there were no issues brought
forth by subscribers that resulted in any decision or action by the FCC.
SUBSCRIBER SATISFACTION OPINION REPORT NOT PROVIDED
Section 3.20.86003) of the Dublin Municipal Code requires the results of an annual opinion survey to be
/~' mbmitted to the City no later than two months following the end of the cable operator's fiscal year. Mr.
Baker has advised the City that the fiscal year for TCI ended on December 31, 1996. Staff requested the
survey document on February 5, 1997.
Mr. Baker indicates in his response that TCI has not conducted the required survey. It was also indicated
in discussions with Staff, that the Company officially assumed operation of the system in August of 1996,
which would somehow change the timing of the obligation for a 1996 report. It is Staff's position that the
timing of the TCI acquisition of Viacom, did not modify the requirement for the Company to submit the
survey within two month's of the end of the Fiscal Year. The Company elected to operate for 5 months
without preparing a survey and as part of their acquisition presumably had the oppommity to verify the
status of any efforts by Viacom to comply. Staff believes that it is noteworthy that there was a lack of any
customer survey data, during a period when the Company was making plans for programming changes.
Mr. Baker has indicated to Staffthat at this time the Company has not established a time frame for the
undertaking of a survey.
Based on the fact that the preparation of the report is a requirement of the Municipal Code, the City
Council may determine that this is an inadequacy and put the Company on notice that they must cure the
violation within a reasonable period of time. Staff would propose that the delivery should be made within
120 days. The City Council may wish to consider whether the completion of this report will
automatically meet the Company's obligation to provide a report at the end of the current year.
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 5 of 7
CONSTRUCTION / SYSTEM UPGRADE PLANS
In responses numbered 4a, 4b, and 4c (Exhibit B), Mr. Baker provided information about the constructio~
/ upgrade plans. Prior.to the purchase of Viacom, TCI entered into a Change of Control Consent
Agreement with'the City of Dublin. Section 6 of this agreement reads as follows: SECTION 6
TCIC agrees that it will cause the Franchisee to complete the Dublin portion of the voluntary
system upgrade currently under construction in Livermore, and shall offer expanded programming
on the Dublin system no later than December 31, 1997. If the Dublin portion of the voluntary
system up grade is not completed by January 1, 1998, TCIC will cause the Franchisee to pay the
Grantor liquidated damages as described in Section 4.3 of the Franchise Agreement...
The upgrade referred to in the agreement and now in operation in both Livermore and Pleasanton included
fiber optic links to panels located in neighborhoods. A coaxial cable similar to the type now in use was
used to connect the panels to individual households. The upgrade was supposed to provide improved
reliability for the system as well as increased channel capacity. In addition, it is Staff's understanding that
the design of the Livermore system provided for the ability in the future to offer a variety of services
beyond cable television programming.
Mr. Baker indicated to Staffthat he is continuing to press TCI Management for a decision on the upgrade
plans. Although he is hopeful for an early decision, TCI corporate officials are not anticipated to release
capital plans for their holdings until the second quarter. (After April 1 st) TCI has been extremely
noncommittal about specific plans for the Dublin upgrade other than to state that they are evaluating
alternative technologies which could increase channel capacity and reduce their capital outlay compared
to the system installed in Livermore.
City Staff does not have the expertise to evaluate the technical impact of the possible change in the type of
upgrade to be provided to the City of Dublin. Staff believes that a change in the design from the system
provided with the Livermore upgrade, may require an amendment to the Transfer Agreement. In the
event that this option is pursued Staff has indicated to Mr. Baker, that it would be our position that TCI
should absorb any consulting costs necessary to verify the impacts.
Staff is concerned with the lack of any document produced by the Company showing a schedule for the
completion. Staff has requested monthly reports as authorized under Municipal Code Section
3.20.440(B). TCI has indicated the publication of a progress report will occur when construction
commences. The Dublin Municipal Code clearly authorizes the City to request information indicating the
progress schedule, and projected dates of service. It is the interpretation of Staff that construction
includes the design of the system and securing sites for facilities. In essence the construction period has
already begun based on representations by TCI in Exhibit B. As stated in the TCI Annual Report (Exhibit
B Response 1 a.) the Company has proceeded with activities necessary to complete the upgrade. In
discussions with Staff, Mr. Baker has indicated that even the use of compression technology will require
physical alterations to the cable infrastructure, however, the design details differ depending on the overall
system design.
In the event that the upgrade is not complete by December 31, 1997, the liquidated damages section of the
Franchise Agreement provides for a penalty of $250 per day. TCI has indicated on several occaSions that
they are aware of the contractual obligation contained in Section 6 of the Transfer Agreement and they
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 6 of 7
irltend to comply. Staff would recommend that the requirement for meaningful monthly reports be
· required as a result of this review.
~--- REQUIRED SECURITY FUND / LETTER OF CREDIT
As a part of the annual review it is also appropriate to consider whether TCI is complying with its
obligations to provide insurance, bonds and Letters of Credit. Section 3.6 of the Franchise Agreement
requires the Cable Operator to deposit with the City $50,000 or provide a Letter of Credit in this amount.
Once the upgrade is complete the amount is to be reduced to $5,000. Dublin Municipal Code Section
3.20.380 identifies some of the purposes of the security fund. Further, the code states that the fund is to
be in the form of funds deposited with the City or a Letter of Credit.
The original Franchise Agreement was adopted by the City in 1985 and at that time, the date of the
planned upgrade was unknown. In response to an inquiry from Viacom, the Consultant that negotiated
the Franchise Agreement advised that the intent was to have the larger mount of funds available during
the period that the Company was obligated to provide the upgrade only, and not all years preceding the
decision to undertake an upgrade. Based on this understanding the City advised Viacom that only $5,000
was required until the Dublin portion of the upgrade was to commence. A letter dated February 10, 1986
clarifying this interpretation was executed by the City Manager and provided to Viacom. The City
currently holds a $5,000 Letter of Credit and Staff requested that the amount now be increased to the full
$50,000 (Exhibit D).
As noted in Exhibit 5, TCI advised Staff that they had continued to rely on the interpretation noted above
that the amount would be increased when an upgrade commenced. In discussions with Staff, TCI
representatives stated that it was their position that the larger amount did not have to be provided until
such time as they secured Building Construction Permits. As previously noted the Company has
processed a Site Development Review on a parcel to be used for the transmission facility. Further, TCI
has had a contractual obligation to complete the Dublin upgrade since execution of the agreement in
December of 1995.
TCI had also suggested to Staffin Exhibit E that the allowed form of the Security Fund should be a bond.
Although TCI has submitted a Bond, the City also holds a $5,000 Letter of Credit. Staff has informed
TCI that the only acceptable form of the security fund is a cash deposit or an irrevocable letter of credit.
These requirements are clearly dictated by the Municipal Code (Section 3.20.380) and the Franchise
Agreement.
The requirement for submittal of a $50,000 Security Fund in the form of cash or Letter of Credit be
included in the identified Inadequacies as a result of this review.
CONCLUSION
Changes have been observed in the subscribership over the past two years. The provision of services
under the corporate ownership of TCI is relatively new for the Dublin community. There are areas
identified in the report which require attention by the Company. The provision of information to the City
of Dublin and subscribers has been lacking specific details of planned changes. Although the Company
and the industry may be going through certain changes this should not impair its obligation to meet the
minimum requirements of adopted rules, regulations, and contractual obligations.
EXHIBIT 1
TCI Annual Performance Report
March 13, 1997
Page 7 of 7
Noted Inadequacies/Violations
As A Result Of Annual Performance Review
Conducted March 18, 1997
(TCI Cable Television Provider)
Issued By City of Dublin
Provision Of Subscriber Satisfaction Survey
Authorized By: Section 3.20.860 (B) Dublin Municipal Code
TCI shall conduct or make arrangements to obtain, and provide a copy of the subscriber
satisfaction survey report identifying satisfaction or dissatisfaction with the services provided by
TCI. TCI shall takes steps to comply with this requirement and provide the information within the
next 120 days.
e
Provision Of Monthly Progress Reports On the Progress of the Upgrade Construction
Authorized By: Section 3.20.440 (ti) Dublin Municipal Code
TCI shall provide meaningful monthly reports of the upgrade construction plans and schedule as
required by the Municipal Code. The report shall be provided not later than the 10th of each
month, with the next report due by April 10, 1997.
Obtaining City Approval of Any Changes to The Proposed Design of The Dublin Upgrade
Authorized By: Section 6 of the Change of Control Consent Agreement Dated December 11,
1995
In the stated agreement TCI committed to proceeding with the upgrade "...currently under
construction in Livermore..." TCI shall be responsible for obtaining City approval of any expansion
plan which deviates from the upgrade contemplated in the Change of Control Agreement. This
shall include but not be limited to reimbursement of City costs incurred analyzing the impact of the
change, as well as any costs resulting from delays.
e
Provision of a $50,000 Security Fund
Authorized By: Section 3.6 of the Franchise Agreement and Dublin Municipal Code Section
3.20.380
TCI shall provide the full Security Fund of $50,000. This shall be provided within 30 days. The
form of the security shall be either cash or a Letter of Credit in a form acceptable to the City.
EXHIBIT 2