Purpose of Request

The purpose of this item is to provide the City Council with an update on the progress of the proceedings for renewal of Charter Communication�s cable television franchise.  It will include a presentation of the results of a telephone survey designed to gauge community perceptions about Charter and the quality of its cable service, and a second presentation about the technical quality of Charter�s system. 

The Council will not be asked to take specific action this evening, but unless it directs otherwise it would be staff�s intent to proceed to solicit a proposal from Charter for renewal of its franchise.

Background

Charter Communications holds a franchise to offer cable television service in the City of Burbank.  The franchise was originally granted to Sammons Communications in 1995 and transferred to Charter by means of an agreement approved by the City Council in September of 1999.  The current franchise will expire on December 2, 2005.

The City�s authority to grant cable television franchises is regulated by the federal Cable Communications Policy Act of 1984, as amended by the Cable Television Consumer Protection and Competition Act of 1992 and by the Telecommunications Act of 1996 (collectively, the �Cable Act�).  The Cable Act permits a cable operator to request renewal of its franchise up to 36 months before the date of expiration.  Charter submitted its renewal request in December of 2002.  In May of 2003, the City Council authorized staff to �commence� the renewal process and begin gathering the necessary information to determine whether the franchise should be renewed, and if so, on what terms.

The Cable Act places limitations on the City�s ability to deny Charter�s request for renewal.  Under the Act, a �local franchising authority� such as Burbank may deny a renewal proposal only if it makes an adverse finding with respect to one or more of the following criteria:

1. Has the cable operator substantially complied with the material terms of the existing franchise and applicable law?

2. Has the cable operator�s quality of service, including signal quality, response to consumers� complaints and billing practices been reasonable in light of community needs?

3. Does the cable operator have the financial, legal and technical ability to provide the services, equipment and facilities offered in its proposal?

4. s the cable operator�s proposal reasonable to meet future cable-related interests and needs of the community, considering the cost of meeting those interests and needs? 

To assist in evaluating community satisfaction with Charter�s service and the technical condition of its physical plant, the City retained two consultants, both of whom will attend tonight�s council meeting and present their reports.[1]  They are:

1. True North Research, Inc.  True North, under the direction of Dr. Timothy McLarney, its president, conducted a comprehensive telephone survey of 416 Burbank households between March 12 and March 16, 2005.  This coincided with a similar survey of 417 Glendale households.  Dr. McLarney�s report combines the results obtained in both cities, and the consistency of responses between the two, we think, adds to its credibility.  The survey found that approximately 63% of households in Burbank subscribe to cable service through Charter.  Slightly less than two-thirds of those subscribers say they are either satisfied or �somewhat satisfied� with their cable service.  In the area of customer service, it appears that an inordinate number of customers reported having to contact Charter multiple times to resolve a problem, while an equal number said their problem was resolved within one day.  Of great interest is the high percentage (78%) who have watched Channel 6 in the past twelve months and the even higher number who are aware that Channel 6 is the local government channel.  Pertinent excerpts from True North�s written report are attached to this memorandum as Exhibit A.  Anyone interested in obtaining a complete copy may do so by contacting the City�s Public Information Office.

2.  Kramer.Firm, Inc.  Kramer.Firm, led by its president, Jonathan Kramer, was retained to assess the technical quality of Charter�s system.  Mr. Kramer has prepared three separate reports -- a Plant Safety Inspection report, a Signal Quality Inspection report, and an analysis of Charter�s �Proof-of-Performance� reports submitted to the Federal Communications Commission.  Pertinent excerpts of these reports are attached as Exhibits B-1, B-2 and B-3, respectively, and again complete copies are available in the Public Information Office.  Generally, Mr. Kramer finds most aspects of the system to be of good quality, with the exception of customer drops, where pervasive problems involving improper grounding and lack of proper separation from other utility facilities were noted.  He recommends that Charter be directed to addresses the causes of such substandard workmanship and undertake corrective measures.

Copies of both consultants� reports were provided in advance to Charter, which reviewed them and provided the City with written comments (attached as Exhibit C).  Charter elected not to comment on the True North survey.  As to the Kramer.Firm studies, Charter understandably highlights the positive aspects and minimizes the negative.  To some extent, Charter seeks to shift blame to others � homeowners who move or add equipment, other utility companies � while at the same time conveys concern about safety problems and a willingness to cooperate in resolving them.  Charter indicates that some problems have already been corrected, but that the more pervasive problems, such as the improper grounding of customer drops, may take as long as a year to address.

We have already informed Charter that we expect it to perform a more comprehensive review of its installations and that it propose a more aggressive schedule for fixing all code violations.[2]   

It is expected that Charter representatives will be at the Council meeting, and they should be offered an opportunity to address the Council on all of the foregoing matters.

Conclusion and Recommendation

As mentioned at the outset of this memorandum, the Council is not being asked to take specific action at this time, except to note and file the True North and Kramer.Firm studies.  In order to move the renewal process forward, staff intends to solicit a proposal from Charter for renewal of its franchise, unless the Council chooses to direct otherwise.

If the Council concurs, the appropriate action would be a motion to receive and file the True North and Kramer.Firm reports as mentioned in the memorandum from the City Attorneys Office dated October 4, 2005.

Please feel free to contact me at ext. 5715 if you have any questions about these matters.

cc:       Mary J. Alvord, City Manager

            Michael S. Flad, Assistant City Manager

            Michael McManus, Public Information Officer

City Attorney's Office

City of Burbank

 Memorandum

Date:              October 4, 2005

To:                  Honorable Mayor and Council Members

From:             Dennis A. Barlow, City Attorney

                        by:  Richard J. Morillo, Senior Assistant City Attorney

Subject:        Charter Communications � Stipulated Rate Resolution

Purpose of Request

This memorandum recommends that the City Council adopt a proposed Stipulated Rate Resolution finding and ordering Charter Communications (�Charter�) to reduce certain hourly service charge and equipment rates, and to implement certain refunds to its subscribers.  A similar Stipulated Rate Resolution is being considered this evening by the Glendale City Council.

Background

Charter is franchised to operate a cable television system in the City in accordance with a transfer of ownership from Marcus Cable Associates, LLC effective September 29, 1999.  The City of Burbank is a certified franchising authority under Federal Communications Commission (�FCC�) regulations and thereby has authority to regulate cable television subscriber rates charged by Charter in the Broadcast Basic tier of services and associated equipment.  

FCC regulations require Charter to demonstrate that its proposed rates are reasonable and comply with FCC standards.  The City may prescribe a reasonable rate for Broadcast Basic services and equipment if it determines that Charter�s proposed rate is unreasonable.  The measure of reasonableness is a balancing of factors including direct costs of obtaining programming, costs of franchise requirements and a reasonable rate of return.  The City may impose fines or forfeitures on Charter for refusing to comply with the City�s rate decision or refund order.  FCC Rules, 47 CFR '76.943. 

Charter proposed new rates for Broadcast Basic installation and equipment services on November 27, 2002 (�December 2002 filing�) and March 1, 2004 (�March 2004 filing�).  Upon request, Charter agreed to grant the City an extension of time in order to consolidate review both filings.

The cities of Glendale and Burbank jointly retained Front Range Consulting, Inc. (�FRC�) to review Charter�s rate filings.   FRC�s review revealed several problems and issues with Charter�s approach in preparing these filings.  Accordingly, FRC issued preliminary findings that certain basic service and installation charges were unreasonable.  The main items of concern were Charter�s monthly charge for �basic only� converter boxes and the accounting methods by which Charter derived its charges for service calls.  Charter disagreed with FRC�s conclusions.  Both the cities� staff members and Charter found that a long and continued disagreement over these equipment and installation rates and a possible appeal to the FCC would be extremely burdensome, costly and not in the public interest.

Charter then proposed a stipulation to resolve all of the issues surrounding these rate filings. The stipulation would require Charter to make one-time refunds to City subscribers in the approximate aggregate amount of $7,000 (for Burbank) based on a one-time credit of $0.25 per subscriber based upon a customer count of 27,862 as if April 30, 2005. 

The following are the basic points in the stipulation:

1. The Resolution shall be effective immediately upon its approval by the Burbank City Council.

2. Charter will maintain rates no higher than the Stipulated Rates until at least February 1, 2006.   Charter will not charge any rate higher than the rates as set.  It will not increase any such rates or impose on subscribers any other charge for basic service or equipment not specified in the Resolution unless such change is first filed with and approved by the City, in accordance with applicable law and regulations.  Charter may charge rates less than the maximum rates for basic service or equipment, as long as such rates are applied in a uniform and nondiscriminatory way, pursuant to applicable laws and regulations.

3. Charter will make its next annual rate filing on or about November 1, 2005, and subsequent annual rate filings on subsequent November 1 dates, unless and until Charter and the City otherwise agree on a mutually acceptable date.

4. Charter has 60 days to comply with the Resolution and to provide refunds.

5. Within 90 days, Charter will file with the City a certification to the effect that Charter has fully complied with all provisions of the Resolution, describing in detail the precise measures taken to implement those provisions and showing how any refunds were distributed.

6. Should any information come to the City's attention that Charter�s representations were inaccurate in any material way; the City reserves the right to take appropriate action.

7. In agreeing to the stipulation, Charter admits no fault or error in its rate filings and all parties have reserved all rights with regard to pending and future rate filings.

8. The proposed Resolution would reduce the following rates:

1. �Basic-only� converter charge from $0.56 to $.25 per month (decrease by $0.31)

2. Hourly service charge from $26.95 to $26.65 (decrease by $0.30)

3. Additional Outlet-Wired with initial install from $12.50 to $9.59 (decrease by $2.91)

4. Additional Outlet-Special Trip from $28.50 to $27.98 (decrease by $0.52)

5. AB Switch installation-Special Trip from $19.95 to $19.19 (decrease by $0.76)

Recommendation

It is recommended that the City Council approve the proposed stipulation by adopting the resolution entitled �A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK STIPULATING REGULATED CABLE RATES FOR CHARTER COMMUNICATIONS.�

cc:       Mary J. Alvord, City Manager

            Michael S. Flad, Assistant City Manager

            Michael McManus, Public Information Officer

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