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HomeMy WebLinkAboutAgenda Report - July 18, 1984 (74)C COLMIL APPRUVM Mr. Harold E. Horn. President of CIC Associates NBOXIATM addressed the Council regarding the possibility of his cammT WITH caTpany being retained to assist the City of Lodi CrIC ASSOCIATES through the "refranchising" process of its cable franchise. Mrs. Deanna Enright. Manager. Lodi Cable T.V. addressed the Council regarding the matter voicing her conce m - that such an action might be premature. Ms. Biright also spoke about possible upgrades to their equipment, etc. Following a lengthy discussion. with questions being directed to Mr. Hom. Ms. Enright. and to Staff. Council, on rnotion of Council him ber Olson, Hinctrm, second, authorized the City Manager to proceed to negotiate a contract with CrIC Associates to assist, the City of Lodi through the "refranchising" process of the cable franchise. 0 CTIC Asso ciates February 8, 1984 Mr. Henry A� Glaves City Manager City of Lodi City Hall Lodi, California 95240 Dear Mr. Glaves: In response to our recent conversation. I'm enclosing a brief descrip- tion of the services CTIC Associates can provide the City of Lodi as it considers Its options regarding the cable franchise renegotlation... CTIC Associates has assisted many of our c1lenti through the "refranchising" process andwould be plea -sed to be of assistance to ldi in this ii;a-paclty. CTIC Associates typically recommends that municipal governments proceed with a thorough perforwance review of the existing operattorn before finally determining the course of action It wishes to pursue regarding the future of the existing franchisee. Such a performance review should one *=pass an analysi's of the financial And technical his-teVy of Che 87-Wtvm as WW -11 as An examination of ordinance compliance and subscriber sat I-sfaction. Thls rev-1-ew will allow for a factual framework from which the City can most effectively examine its alternialves. Unless local conditions indicate the option Is unac.,c e -p table, we normally start a renegotiation assignment- under the assumption that an existing local company should be seriously considered or renewal. If the study of existing operations indicates thin- s I% not a preferable option, the City, is, always in a n- positioto consider competitive proposals. I.P. Q.V*ar to receive good quality bids from reputable qoapanies it will be necessary to have a solid fae-tual basis for a refusal- to renew, otherwise competing companie-s may be fearful that they would someday- receive- similar unfavorable cons Lderatiom. While no city should ever be put in a position to guarantee a continuation. of a fran- chise beyond its expiration da-te, good performance by a company should, receive consideration. in order to establish a factual basis for coniideration for renewal or extension of a franchise we typically proceed as follows: a. Engineering Review of Existing System We would have our Direc ter of Technical Service" 7:•rform an eval- uation to determine the causes and extent of any 'technic -a' )r operating I= NOrN48EAL"GAMSV7Et1 SWE 2M 4(KMJD?LA VA22311(7G3)845-1700 Mr. Henry A. Claves -2- Lodi, California February 8, 1986 problems that may exist and suggest possible remedies that may be needed to assure improvedreliability and acceptability of signal quality. The evaluation will include an engineering appraisal of the aystem design, quality of received television signals, whether off --air or by micro- wave, the possible excessive deterioration of amplifiers, construction prac- tices, maintenance procedures, and most importantly, the quality of signals as delivered to subscribers. The results of this engineering evaluation will provide- the City with an objective basis for understanding the cause and extent of any problems and possible remedies that may need to be made by the cable operator to assure improved reliability and acceptable television signal quality. Such information will assist the City in unwerstandi,n problems the cable operator may be having and will provide a factual basis for frsy nego>tiatian-a that may be necessary. There is often a combination of factors both within- and beyond the control of a cable operator that affect the syotem's perfor--an a. In order to do the best possible eva_uation it is important to have the cooperation and assistance of the cable oi.. rator. We would wan -t the operator to participate in the tests and, in a" ition, we would also like to have a representative of the City view the tests. It is not necessary that the City representative have a working knowledge of cable engineering and electronics, but if such a person is available on staff it would be helpful. b. Financial Review of Existing System We would also propose to independently examine and determine the financial status of the existing, system as it is essential to the establish- ment of parameters for negotiation strategies. It if. not In the City's Interest or that of the operator to make demands that would financially destroy the system. At the same time, the company should not be receiving more income from the Lodi system than is warranted. Using CTIC's financial reporting forms we would determine, with the cooperation of the cable company, the following kinds of informatian: o What system modernization and rebuilding is planned? At what annual cost and on what schedule? o What new services are propose.i and what is their estimated impact on expenditures and revenuep" ti Mr. Henry A. Glaves -3- Lodi, California February 8, 1984 o What accounting practices have been utilized and to what extent have they been consistently followed over the years? This would include a comparison of the company's accounting assumptions to industry wide practices regarding such items as rates of depreciation, capitaliza- tion and expensing of costs, determinations of capital structure and amortization of indebtedness. o Clow do the operating expenditures compare with Industry norms? Does the system appear from this data to be efficiently run or are some of the expenditures unusually high -n coeparison with similar type cable systems with simila=r signal problems and levels of penetration? o What has been the rate of return and what Is the projected rate of return assuming any proposed rate increases? Once a factual framework his been established, the City is in a strong position to consider whether it wishes to renegotiate with -its exis-ting ope- rator for an extended franchise term or whether ft wishes to employ a compe- titive refranchising process. c. Developing Negotiation 8trateg es aed Actual KegotiatYgas If the City wishes torenegotiate its agreement with the existing ope- rator upon completion of the technical and financial evaluation of the exist- ing system, a senior staff member of CTIC Associates would begin sessions with local Clay officials in developing specific negotiation strategies. If desired by the City actual negotiations would then be performed by the City staff or alternatively include a CTIC representative to assure the company and City are fully understanding each other- and to assist the City. in under- standing possible consequences of counter, offers. d. Competitive Proposal, Process If the City elects not to proceed with renegotiation of the franchise with the existing company, a competitive re -franchising process cava be employed. Essentially, such a process would be similar to a new franchising process involving the release of a Request for Proposals, evaluating the proposals received and awarding a new franchise pr+,r to the expiration of the current franchise. Of course, the present company would be free to participate in the competitive process. Mr. Henry A. Glaves -4- Lodi, California February 8, 1984 As you consider various approaches for technical assistance, we would be pleased to prepare an estimate of costs that would reflect your particular procedures and interests. We have had extensive experience in renego 'ations as you can see from the attached i- s -t of clie=nts. leo two renegot ati-en pro- jects are the same, so specific estimates Saeed to be based on the unique characteristics of your particular system. costs, however-, usually range between $15-30,000. I plan to be in California du=ring the week of February 37 thru March i, 1984. If you would be interested in having me meet with you and. any other officials during that period, I will make eve;•y effort to arrange a sc-heciule that could be mutually convenient. Such a visit would permit me to elaborate In greater detail the va-rious tasks described above and, to discuss some of the practical and legal constraints involved in a renegotiation process:. I greatly appreciate your considering our firm for this assignment and look forward to visiting with you. Bes - regards, r► Harold E. Horn President HEH/ba CONSULTANT QUALIFICATIONS The Cable Television Information Canter of the Urban Institute was created in 1973 to advise and assist local governments on public policy issues pertaining to cable television. A nonprofit organization funded by grants from the Ford and Markle Foundations and by consulting contracts with client communities, the Center has helped more than 2,500 local governments understand and make objective decisions about the complex questions surrounding cable television. Upon completion of the grant program. the Center—In a major- decision to continue its educational mission --became an independent non-profit coir, ra- tion on January 1, 1980. During that year, the Center was- supported by member communities. educational services and contract work performed- exclu sively for local governments. Due to a decision by the Internal Revenue Service that the Cable Tele- vision Information Center could no longer continue its. nonprofit status while it receives most of its financial support for consulting services, the Center has recently reorganised into two groups. The Cabe Television Information Center continues as a nonprofit membership organization of local governments dedicated to providing education- al and informational services to local governments and the general public about the public policy issues pertaining to cable television. CTIC Associates has been organized by the professional staff of the Center as a private, for profit, organization to perform all consulting and technical assistance work for local governments. - z - The major distinction between the two organizations is that whenever there is a contract to perform work for local governments, the contract must be performed by CTIC Associates and any earnings will be subject to income taxes. CTIC Associates will continue to provide high quality, objective, tech- nical and consulting assistance to local governments In the same spirit and dedication as evidenced in the past eleven years of. The Cable Television Information Center. CTIC Associates is staffed by highly experienced professionals with many years of service working in and for local and state governments. This type of background provides local officials with expert a sis-tance grounded in a full understanding of local issues and the local decisionmak-ing process. CTIC Associates also has some of the top talent in cable engineering, cable finance, communications- law and community programming whose sole object,,* is to represent the interests of municipalities in these highly complex matters. Because the Center and CTIC Associates have no ties with the cable industry and because they work exclusively for local governments:, they have acquired a unique status as being highly objective and well-regarded by the Federal Communications Commission (FCC), local officials and members of the cable Industry itself. With fast paced advances being made in both technology and the types of services available to subscribers, cable television is becoming the conduit for entertainment and information services that go far beyond what is commonly thought of as television today. What once were considered to be futuristic "blue sky" types of services, now are emerging as realities. Cable television 0 .• - A -3- will undoubtedly play an important role in all our lives by delivering not only entertainment television services, but government: services, home security systems-, education and Information and data retrieval. In addition, because of the multiplicity of channels that can be made available on a modern cable N system (36 to 116 channels), the medium of television can now be accessible to a broad spectrum of society for noncommercial local programming, delivery of social services and interconnection of public ittz! tutienai facilities. For these reasons, one of the primary functions of CTIC Associates is to assist local officials in appreciating the powerful long-term potentials of cable television for their community. In addition to helping individual communities, the Center has worked with several state municipal leagues by serving on panels, conduct -Ing seminars and preparing articles for league publications. InA a similar rote, the Center often has appeared on conference programs for the National League of Cities, the International City Management Association and- the National Association of Counties. Center personnel assisted the National League of Cities in the preparation and review of a pamphlet for public officials qn the local regulation of cable television, and served on the FCC's Federal, State, Local Advisory Committee on cable regulation. The Center has recently published a comprehensive two -volume handbook on -cable for local officials that is being widely utilized across the country. In addition, the Center recen-tly coop- erated with the International City Management Association in the development of a new book on telecommunications for local government officials and has assisted the ICMA Committee on Telecoomunications. The Center is regularly -4- �a> asked to testify before the Senate and douse Subcommittees on Communications on local officials' views with regard to cable regulation and local policy F issues. The Center and OTIC Associates offer several levels of service to local officials. The Center's information service consists of a monthly newsletter to member local governments which analyzes issues of immediate interest, plus a variety of publications containing baste information on cable, including: federal regulation, how to plan an ordinance, how to select a eag=le system operator and reports on the technology, economics, uses and technical standards of cable television. CTIC Associates, the consulting group, is available to local governments to examine specific problems they may be experiencing. This examination may entail: (1) drafting and/or reviewing regulatory documents; (2) preparing franchise ord-finance and contracts; (3) providing assistance With legal and practical issues relating to the issuance of a Request for Proposals; (4) preparing instructions and. proposal documents -for franchise bidding,; (5) assisting in all phases of evaluation o•f applications for the cable television franchise, including evaluation of competing proposals for eventual franchise award; (6) evaluating requests for subscriber rate increases; (7) assisting in renegotiating franchises; (8) evaluating the technical performance of an existing cable system; (q) assisting in establishing local government channels and identifying local uses of this technology. .jam . � • • -3- In addition, the staff of CTIC Associates is available for field visits, public presentations and work sessions with communities:. Our renegotiation Work has been for Burbank/Glendale, California-; Eugene/ Springfield/Laae County, Oregon; Sunnyvale, California-.* Austin, Texas•, Corpus Christi, Texas; Santa Barbara, California; Portsmouth, Ohio; Pocatello, Idaho; Tallahasee, Florida; Long Beach, California; Parsons, lEansaa:; .iack"n Missis- s ppi; Longview and Diboll, Texas. Other negotiation assistance performed by the OTIC Associates has included Altoona, Pennsylvania; Ltinthburl, Virginia; and Charlottesville, Virginia. Currently CTIC is assisting Des Heihe&, Iowa; Ponca City, Oklahoma; Lubbock, Texas; Winston-Salem, North Car-oltna:; Tuscaloosa, Alabama; Gainesville, Florida,; Harin County, California:; and San Juan Capistrano, California. Local governments, which have had- continuing contact with us. over the last eleven years., know they can rely on the OTIC Associates to be up-to-date on all aspects of the federal, state and local regulatory process, and to have a perspective on current induntry trends and new developments.