HomeMy WebLinkAboutAgenda Report - July 3, 1985 PHTo: The Honorable Mayor and
Members of the City Council
-a: City Manager
Subject: 'Cable Television Franchise Renewal
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At the regular adjourned City Council meeting of May 29, 1985 Mr. Harold
Horn of OTIC Associates, the City's cable television consultant, made
reference to a letter he had written to the City in February in which he
outlines the steps to be taken in complying with the new Cable
Ccmmnications Policy Act of 1984 as it relates to franchise renewal.
Attached, for your information and review, is a copy of that letter.
%'IC Associates
February 22, 1984
Mr. Henry A. Glaves
City Manager
City of Lodi
City Hall
Lodi, CA 95240
Dear Henry:
At long last we have receCved an initial response to our request
for information from King Videocable Company of odi, via Malarkey -
Taylor associates, their consulting firm. You may recall we requested
the company to fill out several forms last October 16, 1984.
We are continuing our discussions with Malarkey -Taylor for cer-
tain financial information that was not included as requested, i.e.,
balance sheet, sources and uses statement, and depreciation figures. We
have agreed with Malarkey -Taylor that the pro forma forecast financial
information and their specific technical proposal for future rebuild/
upgrade of the Lodi system could wait until the City has had the oppor-
tunity to examine community needs and review our findings regarding the
present operations.
As you are aware, since we first started our discussions regarding
potential renewal of the Lodi franchise, the new Cable Cotwaunications
Policy act of 1984 has been enacted by Congress and signed by the Presi-
dent. This new law took effect on December 29, 1984.
Procedurally everything we have done to date is in conformity with
the new law. The new law does, however, require very specific legal
steps that we will need to follow to protect the City`s interests.
To comply with these new requirements I aia listing below the steps
necessary to be taken and I am relating these requirements to the tasks we
agreed to perform in our contract with the City. The time table can of
course be modified to meet your needs more precisely.
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Mr. Henry A. Glaves, City Manager
February 22, 1985
Page 2
1. Background: The new Act provides that durbig the sLx-moatli
period which begins with the 36t1i menth before the franchise
expiration, the City may on its own initiative or shall at the
request of the cable company, commence proceedings which afford
the public appropriate notice a:rd participation for the purpose
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of:
a. identifying .iue future cable -related needs and
interests; and
b. reviewing the performance of the cable operator
under the franchise during the then current
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franchise term.
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If I have counted correctly, February 20, 1985 is the start
of the 36th month prior to the expiration of the existing fran-
chise on February 20, 1988. The six-month period for commenc-
ing with Steps a. and b. above would end on August 20, 1985.
2. Performance The contract we entered into with the City
_Review:
of Lodi on October 4, 1984 provides for a performance re,7iew of
the cable operator (Task 1) (we are now examining in our Gffices
company generated information regarding their current operations).
An on -scene technical examination of the existing system is
proposed to be conducted by our Director of Technical Services,
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William Kohutanycz, on *larch 6, 7, and 8, 1985 (Task 1-a). Mr.
Kohutanycz will perform an engineering appraisal of the system`
design, quality of received television signals, look for system
deterioration, examine construction and maintenance practices
and procedures; and look at the quality of signals being deliver-
ed at the extremities of the existing system. While in Lodi,
Mr. Kohutanycz will also examine the company complaint files
and all files in which complaints have been made directly to
the City regarding the cable company operations. A cross-check
will also be made to determine if existing city regulatory re-
quirements detailed in Ordinance 855, Resolution No. 3158 (es-
pecially Section 10), and Resolution 80-64 have been complied
with. It would be helpful, if you, or appropriate department
heads that have any regular contact with the cable company,
could make some time available to Mr. Kohutanycz to present any
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observations that would be helpful in establishing any addition-
al factual basis regarding the company's performance over the
last several years.
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Mr. Henry A. Glaves, City Manager
February 22, 1985
Page 3
Task 1-b of our contract relates to a financial review
of the existing system. This task is currently underway in
our offices based on information recently supplied by the
company.
Task 1-c that involves our review of the City's ordi-
nances that regulate cable television is also currently
underway in our offices. We will be presenting suggestions
for updating these ordinances and resolutions to conform to
current practices and to comply with the new Cable Communi-
cations Policy Act of 1984. This report and recommendation
will be presented at a future work session with the City
Administration, City Attorney and City Council. Changes
suggested by the City would then be incorporated in further
revisions until the draft ordinance reflects the City
Council's policy decisions.
Sometime during the last two weeks of April CTLC will
plan on zompleting the preparation of a discussion paper
which will include our findings in Tasks 1-a, b, and c. At
this time it would be appropriate to have the proposed policy
workshop with the City staff and City Council. We would an-
ticipate this work session might require a half day and hope-
fully would result in direction to the consultant for revisions
in the.regulatory ordinance, identification of community needs
and desires, and clarifications, if needed, regarding the con-
sultants' evaluation of the cable company's perfor,nance.
3: Identifying Community Needs: The perception of community needs
the s.'-aff 4ad City Council and the level of effort desired
cy the City to identify those needs (see federal requirement
(la) above) should be addressed at that workshop. If you and the
Council deem it advisable, the workshop could be publicized as
a public hearing in which the City might solicit public part.ict.-
pation in hearing our findings to date, and urging the public
to participate in identifying cable -related needs and reviewing
the cable company performance. Alternatively, a separate
public heari.ng could be conducted at a subsequent time to
receive public input (to comply with the federal requirement Eor
public participation).
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Mr. henry A. Glaves, City Manager
February 22, 1985
Page 4
Evaluating community needs can range from a simple process of
conducting public hearings; or perhaps educational workshops,
then public hearings; or more elaborate community needs assess-
ments conducted by your consultant through a questionnaire and
interview process or public attitude survey that would provide
public input on both community needs and cable system performance.
The hearing process, if conducted with the workshop (or perhaps
later in the week during the same trip to Lodi) could be done
within the resources provided in our current contract. A more
elaborate community needs assessment would need to be negatiated
as an extension of our existing contract. We have experience in
all these differing levels of effort, but essentially it is a
policy question the City will need to decide as to the level of
effort the City would be most comfortable with.
4. Prepare -list of_rejuire_:n_ents to be included in _a Company proposal
for franchise renewal: Upon completion of the proceedings des-
cribed above (identification of needs and reviewing cable company
performance) the City may require the cable company to present
a proposal that will address the requirements identified by the
City.
The new legislation contemplates the City receiving a proposal
from the company under either a formal or informal procedure. In
order to facilitate the company's development of such a proposal
they should at least receive an indication from the City of such.
material that It may require, including, if appropriate, a pro-
posal to upgrade the cable system (626(b)(2)*). Before granting
or denying a proposal the City will need to "afford the public
adequate notice and opportunity for comment."
Under the new law the City in its request for proposal
to the company (A) may establish requirements for facilities and
equipment, but (Bj may not _ establish requirements for video pro-
rammin.----------- --------
g __-� g or of _er-nformation_services.
A. Facility and equipment requirements defined in the
Congressional Committee Report (Aug. 1, 1984) which
constitute part of the legislative history that guides
interpretation of the Act, set forth the follow,'nds
*Cable Communications Policy Act of 1984.
Mr. aenry A. Glaves, City Manager
February 22, 1985
Page 5
"Facility and equipment requirements may in-
clude requirements which relate to channel capacity;
system configuration and capacity, including insti-
tutional and subscriber network; headends and hubs;
two-way capability; addressability; trunk and feeder
cable; and any other facility or equipment require
inent, which is related to the establishment and
operation of the cable syste,s including microwave
facilities, antennae, satellite earth stations, up-
links, studios and production facilities, vans
and cameras for PEG use." [Public, Educational,
Government use.]
B. A City may not re uq ire directly or indirectly as part
of the franchise renewal the provision a`
video or or o_ther_information _services _ or even a broad �cate-
gory of video or other informatton service. However,
the City may enforce any provisions agreed to that
stipulate broad categories of video programming (e.g.,
children's programming; programming in a particular
foreign language; programming which is of primary
interest to a particular minority group; news and
public affairs programming.; sports program(mtng).and
other services offered by the cable operator and in-
corporated into a new franclitse.
"The Committee does not Laterad by this provi-
sion to give franchisLag aathoritte.y Lndirectly,
such as through the renewal process, the authority
to require the cable operator to offer certain
program services or service packages."
Procedurally, we will assist the City in developing the details
and instructions to the Company for items to be included .in
their proposal. Depending upon the level of effort decided
upon by the City in identifying commmunity needs (item 3 above)
the development of this request Eor proposal to the company
could take place as early as the first two weeks in May or as
late as perhaps two or three months longer (July or August,
1985).
5. Receive company proposal [Perhaps as early as first two weeks
of June or as late as September 1935.1
Mr. Henry A. Glaves, City Manager.
February 22, 1935
Page b
G. CTIC will complete the evaluation and analysis of company pro-
posal and prepare recommendations for City considerattoa. The
new law states that any findings and requirements made of a
cable company are to be examined as to the cost implications
on the company (i.e., company's ability to earn a fair rate
of return on its investment and the impact of such costs on
subscriber rates). This step will require 30-45 days [end of
July or October 1985].
7. CTIC will discuss with the City the results of the evaluation
of the company proposal, and develop strategies and procedures
with City for starting informal negotiations with cable company.
[First part of September or November.]
8. Schedule negotiation sessions as needed between City and company.
[September -November.]
DISCUSSION: Cf these Informal rnegottattons fail to mace pro-
gress, one or both parties my resort to formal
procedures outlined in Cable Communications Policy
Act of 1984. [See Step 4 above.] If formal pro-
cedures are needed the first two steps (needs
identification and system performance evaluation)
may not need to be repeated if both activities
have been well documented and the public has been
afforded an opportunity to participate.
Formal Renewal Procedure:
The first action required by the new law would be
for City Council within four months to renew the
franchise, or issue a preliminary assessment that
franchise should not be renewed.
Second Action - City Council, on its own initiative
or at the request of the company shall commence an
administrative proceeding and give prompt public
notice of such proceeding to the cable operator
and the public.
Mr. Henry A. Glaves, City Manager
February 22, 1985
Page 7
The Administrative proceeding shall consider whether -
"(A) the cable operator has substantially
complied with the material terms of the existing
franchise and with applicable.law;
"(B) the quality of the operator's service,
including signal quality, response to consumer
complaints, and billing practices, but without
regard to the mix, quality, or level of cable ser-
vices or other services provided over the system,
has been reasonable in light of community needs;
"(C) the operator has the financial, legal,
and technical ability to provide the services,
facilities, and equipment as set forth in the
operator's proposal; and
"(D) the operator's proposal is reasonable
to meet the future cable -related community needs
and interests, taking into account the cost of
meeting such needs and interests."
Both the cable company and the franchising author-
ity have the right to introduce evidence (including
evidence related to issues raised in the initial
proceeding in which the City prepared its needs
assessment and conducted a system performance
evaluation).
NOTE: The consultant's report on performance and
the documentation of community needs, the
evaluation of the company proposal, and the
transcripts of Public Hearings all become
important legal documents.
Both parties have the right to require production
of evidence and to question witnesses.
Mr. Henry A. Glaves, City Manager.
February 22, 1985
Page 8
A transcript is required to be made of these pro-
ceedings.
Upon completion of the administrative proceeding the
City shall issue a written decision granting or
denying the proposal for renewal based upon the
record of such proceeding, and transmit a copy of
such decision to the cable operator. Such decision
requires the City to state its reasons for renewal
or denial. A denial must be based on one or more
adverse findings of items (A), (B), (C) and (D).
A denial based on failure to substantially comply
with material terms of the existing franchise or
on events considered in item (A), (B) (above) can
not be made unless the City has provided the company
with notice and an opportunity to cure the problem.
Further, a denial by the City can not be accomplish-
ed if it can be documented (by the company) that
the City has waived its right to object, or has
effectively acquiesced.
Any final decision by City to deny the cable company
a renewal of franchise or where a company can
claim it was adversely affected by failur:: of the
City to act in accordance with the procedural re-
quirements of the new Federal Act (described above),
may be appealed by the company to a Federal District
Court, or State court of general jurisdiction.
The Court can grant relief to the cable company if
it finds that City was not in compliance with
procedural requirements, or the cable company can
demonstrate that the adverse tinding by the City
was not supported by a preponderance of the
evidence based on the record of the proceedings.
9. (a) CTIC would prepare contract orrlinanee to include
results of informal negotiations between_ City
and Company [October -November].
NOTE: [If formal procedures have by now been initiated,
these steps, a and b, could be delayed for up to four
months.]
Ask
Mr. Henry A. Glaves, City Manager
February 22, 1985
Page 9.
(b) Place new regulatory ordinance on first reading
November—December]. (Must take into consideration
State/local legal time requirement.)
10. Adoption of final contract ordinance, which would become
effective upon Council approval and company acceptance
[during November or December 1985].
The above outline and discussion of procedural steps is of course
tentative and subject to the City's modification -and approval. The
cable company's needs and concerns regarding the tLne table and the
suggested formal vs informal procedures also have to be taken into
consideration.
As shown above, several of the steps required under the new law were
anticipated as part of the initial contract between the City and CTIC.
There are some additional steps, however, that need to be considered and
upon approval by the City some modification of the CTIC contract will be
necessary.
For example, the evaluation of the existing system was contemplated
and cowered in the contract. This part of the evaluation will be pre—
sented in the discussion paper originally contemplated. The new law
clearly requires a two—step process in which the existing system is
evaluated and then (after the City presents the company with its require—
ments)'the company presents its proposed system_ for providing services
for a new franchise period. �^
The new elements of work include:
(a) The preparation of a statement of City regiitreinents (to be
developed from CTIC system evaluation, workshop, hearings,
and City needs assessments) [see Item 4].
Estimated professional time —
2 days
-Production
$1,440.00
160.00
$1,600.00
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Me. Henry A. Glaves, City Manager
February 22, 1985
Page 10
(b) Evaluation of proposed system. This will require a review
of financial pro forma information from company as well as a
technical evaluation of proposed system. Part of this was
anticipated in our initial work plan, but a separate report
is now required that would examine the financial impact of any
City requirements [see Item 6].
Estimated professional time
Technical Evaluation - 2 days $1,280.00
Financial Evaluation - 2 days 1,280.00
Project Manager - .5 days 360.00
Production 200.00
$3,120.00
(c) Community needs study (Item 3). Depending upon level of ef-
fort deemed necessary by City, this could range from virtually
no additional cost by using information gained by public hear-
ing and City's current knowlege of community needs, to special
community surveys, and needs assessment studies. These types
of studies can range $10-12,000. Alternatively they might be
performed in-house by the City. We can discuss this in greater
detail depending upon your perception of need.
(d) Item No. 7 (above) involves a presentation of CTIC"s evaluation
of the company's proposal and developing strategies for nego-
tiation. Originally this step was anticipated to be included
as part of the policy workshop (contract Task 2). The profes-
sional time was already anticipated. The additional cost will
be trip expenses - $1,140.00.
Henry, I apologize for the length of this letter. It seems impor-
tant that now that we have received the first information from the
company and that we are now dealing in a completely different regula-
tory environment with the passage of the new Act, that it is appropriate
to advise you and the City Council how we perceive Lodi to be affected by
these changes.
Discussion Paper
for the
City of Lodi, California
Reviewing Performance of the
King Videocable Company and
=
Examining Regulatory Options
of the City Pertaining to
Cable Television
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May 20, 1985
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TABLE OF CONTENTS
Page
CHAPTER I:
INTRODUCTION
I- 1
CHAPTER II:
TECHNICAL REVIEW OF CABLE SYSTEM
A. General System Description
B. System Compliance -
II- 8
C. Technical Evaluation/System Operations
II -12
D. Conclusion
II -17
CHAPTER III:
FINANCIAL REVIEW
IYI- 1
A. Introduction
III- 1
B. Revenues and Subscribership
III- 1
C. Operating ExpF.naes
III- 4
D. Capital Expenditure
III- 8
E. System Profitability
III- 9
CHAPTER IV:
SERVICES REVIEW
IV- 1
A. Introduction
IV- 1
B. Current Services Available to Lodi
Subscribers
IV- 1
C. Services Available to Cable Operators
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Nationally
IV- 3
D. Services Available in Other Communities
IV- 4
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E. Support for Community Programming
IV- 6
F. Summary
IV- 8
Table IV -1. Current Subscriber Services Offered
by King Video Cable in Lodi,
California - May 1985
IV -10
Table IV -2. King Video CableAM -
Lodi: Services and Rates
IV -11
Table IV -3. King Video Cable -
Lodi: Local Program Production
Em
Facilities
IV -12
Table IV -4. King Video Cable -
Lodi: Support for Community Programming
IV 13
Table IV -5. Comparison of Cable Systems and
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Services in Nine Cities
IV -14 s
CHAPTER V:
EXAMINING REGULATORY OPTIONS OF THE CITY
V-
APPENDIX A:
SATELLITE SERVICES AVAILABLE TO CABLE OPERATORS
- MAY 1985
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This discussion paper has been prepared in accordance with the agree-
ment between the City of Lodi and OTIC Associates. The purpose of this
Op
paper, along with analysis of existing and proposed regulations is to
present CTIC's findings, conclusions and recommendations regarding the
existing operations of the local cable system - King Video Cable Company. ;.
The new Cable Communications Policy Act of 1984 establishes a proce-
dure for the consideration of requests for cable franchise renewal. One of
the requirements in this process is to review the performance of the cable
f operator under the current franchise. 4
CTIC requested from the cable company that several forms be filled out
regarding its present operation. These have been reviewed and analyzed by
CTIC's professional staff. In addition CTIC's Director of Technical Ser-
vices conducted an on-scene technical examination of the cable system in
Lodi on March 6, 7, and 8, 1985.
1 Chapter II of this discussion paper presents a technical review of the
existing system, the extent to which the,present system is in compliance
with the City's franchise agreement and its regulatory ordinance and makes
suggestions that the City may wish to consider when establishing its basic
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requirements for a proposal from the company regarding its request for a
renewal of its franchise.
Chapter III presents an analysis of the financial inf;,rmation supplied
by King Video. Detailed, authenticated financial information is essential
under the new _federal legislation in order to examine the cost implications
of community requirements or company initiated expansion and system improve-
ments. The impact on the company's ability to earn a fair rate of return
and the cost impact of improvements on subscriber rates are both essential
examinations. In addition, the City is required to determine if the cable
"W_ company has the financial ability to continue to service the community and
that the company's eventual proposal is "reasonable to meet the future
cable -related community needs and interests taking into account the cost of
meeting such needs and interests." If the company should ever seek future
modifications of its proposal or in the services the system provides, the
P" basic determinations, of necessity, will rely on an evaluation of the
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company's financial circumstances.
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J Chapter IV describes the present services being offered in Lodi and
makes a comparison with several cities of similar demographics that have
recently undergone renegotiations. This information is provided as a type
of benchmark as officials in Lodi examine their options.and consider what
they may wish to require in their request for a proposal from the company.
1 Chapter V provides a review of the current regulatory ordinances of
the City of Lodi and makes a number of suggestions for consideration of the
City Council as it evaluates the type o:: regulations it wishes to require in
any renewal of a franchise.
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This discussion paper is intended to provide a base of information to
assist the City in formulating its requirements for a franchise renewal.
The evaluation of the present cable operations preseuted in this paper are
from the perspective of an independent outside source that has had extensive
experience in evaluating cable companies on behalf of local governments for
the last thirteen years. Of equal or of even more importance to the overall
evaluation of the performance of the company is tha subjective and objective
information from the subscribers themselves and from the City officials who -
have been monitoring the company since it took ever the operation of the
1 Lodi facilities. These observations should be documented through a public
hearing process prior to identifying the future requirements to be made of
the company.
As a part of identifying the future needs of the community <which is
the second major requirement of the new Cable Act) the City may wish to look
at several different approaches. Some of them were pointed out in a letter
from CTIC to the City Manager on February 22, 1985, in which we describe the
new process required under Federal legislation. The level of effort of such
a study need not be extensive if the City Council feels it already has a
good idea of the Community's needs. Additional public hearings may be
necessary and specific needs assessment questionnaires or public attitude
surveys may also assist in identifying the needs of the community that may
be served by cable television.
Once the City completes its review of the performance of the existing
cable oeprator and identifies the future cable related needs and interests,
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CHAPTER II: TECHNICAL REVIEW
On March 6, 7 and 8, 1985, CTIC Associates conducted an on-site review
of King Videocable Inc.'s (King Video) operations in Lodi for the primary
purpose of developing an understanding of the local system to assist the City
in its ongoing franchise review/renegotiations process. This review examined
the Lodi system in terms of compliance with franchise requirements, the make-
up and capabilities of the system, the interaction between the City and
the company and the technical quality of received and delivered signals.
This chapter of our report will be presented in four major sections. J
The first will provide a general description of the system, the second will
address compliance points. The third section will explain the methodology
used and the results of our technical quality examination, and the fourth
will present our overall conclusions.
A. GENERAL SYSTEM DESCRIPTION
The Lodi cable system is designed as a standalone system with all but
one signal carried on the system received or processed at a single headend
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The one exception to this is off -air Channel 2, KTVU from Oakland which is
received at a remote site, approximately six miles south of Lodi and relayed
to the headend utilizing the upstream capabilities of one of the system's
trunk cables. KTW is received and relayed in this manner because even with
this extra processing, the signal from the remote site is of higher quality
than a signal received directly at the headend. As off -air television
signals may be affected by local environmental factors in the vicinity of
the receive;site,_this is not an uncommon feature of some cable systems.
At the headend, the off air reception facilities consist of a 220 foot
Tri -Ex T -26H guyed tower, using an assortment of off air antennas and
Scientific Atlanta (SA) signal processors to receive and process signal.s.
Satellite signals are received using 3 SA five meter antennas, Avantek and
M/A Com low noise amplifiers and SA receivers and modulators. The headend
is also equipped with two spare satellite receivers and one spare tuneable
modulator (Tomco) that can be used if primary equipment fails or has to be
maintained. At the time of our visit the standby modulator was in use to
provide the signal for Showtime on Channel J. This modulator was function-
ing adequately, however, the overall quality of its signal was less than
other adjacent channels and was also introducing a slight amount of
interference on Channel 13, CBN. The interference noted was not overly
severe and would likely not be found objectionable by subscribers. As
this spare modulator was to be replaced later that day with the primary SA
unit we would find its use as an emergency standby to be acceptable but
would suggest that it be fully examined/ adjusted if longer term use was
envisioned.
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In addition to off air and satellite television signals, the Lodi sys-
tem
ys-
tem also carries FM and audio services which are received in the same manner
as the television signals. "Local" FM signals (Stockton, Sacramento, San
Francisco, Angwin, as well as Lodi) are received directly off air at the
qW headend and are processed using Catel FMP rocessors. Stereo audio from
satellite channels (Showtime, MTV, HBO, the Nashville Network, and Disney)
plus six audio only. satellite services are processed using Wegener equipment.
In delivering these services to subscribers, King Video has recently moved
all of the audio services out of the standard FM broadcast band (88-108 MHz)
to a higher frequency. This was done basically with a security goal in mind
and requires the subscriber to this service to have a special FM converter to
"translate" these higher frequencies back to frequencies their FM receivers
can process. Before these FM converters became available, audio signals
were simply carried in the standard FM spectrum, which made them very
vulnerable to piracy using a FM -VHF splitter available at many retail
outlets.
Signal security also plays a part in the way in which King Video de-
livers video programming to subscribers. King Video currently offers two
tiers of basic channels which it designates as ;Basic and Tier. Its Tier is
made up of four satellite services (USA, Nashville, MTV and CNN) plus two
San Francisco broadcast stations. Basic consists of all other channels
(broadcast, ESPN, CBN, community programming) except the four premium chan-
nels (Showtime'HBO, Disney and Playboy) for which separate monthly fees
are charged.
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In delivering these channels, King Video transmits all Basic channels
without modification (other than frequency translations to the proper chan-
nels) but scrambles all Tier and Premium channels so that only authorized
subscribers may receive them. All of these channels are scrambled using
Hamlin scramblers which require subscribers to have Hamlin converters to,
descramble the signals. However, two premium channels, Showtime and HBO, are
also scrambled using equipment manufactured by OAK with these signals then
placed on channels other than those used to carry the same programming
scrambled with the Hamlin equipment. The reason that two scrambling systems
are used is because the OAK system was the first installed. This system
allows the cable company to use a relatively inexpensive, single channel
descrambler for basic subscribers who want to receive i pay service rather
than requiring more expensive multichannel converters. When Showtime was
first offered in Lodi (8/12/79) the single channel OAK decoder seemed like a
reasonable method for delivering this pay channel. Later as the tier was
introduced, a multichannel converter was required and the Hamlin converter was
ultimately selected. Some of OAK -s multichannel converters were also used,
however, King Video was not satisfied with their overall performance and the
Hamlin converters were selected. At this time King Video is also experiencing
some trouble with the OAK single channel converters and hopes to eventually
phase all of these units out of use.
In order to deliver all of its channels to subscribers, King Video
utilizes approximately 135 miles of single cable plant (100 aerial, 35
underground). Like many older systems, the Lodi plant consists of a mix
of different types of equipment. Generally the system has been constructed
II -5
with CommScope cable (older P-1 type and newer P -III type) with active elec-
tronics made by Jerrold (older) and Sylvania (newer). The system is currently
operating to 234 Mhz, or to Channel 25 although King Video does program Chan-
nel 26 with Channel 4 from San Francisco. It does not promote this channel
in any of its literature as it cannot guarantee the quality with which it can
be delivered. In responding to CTIC's technical forms King Video has stated
that it expects that most of the cable system should be able to carry frequen-
cies up to 270 MHz (about 30 channels) but noted that some older sections may
not be able to handle these frequencies well. During CTIC's later signal
quality observations in the field, Channel 26 was seen to be at a lesser
quality than other system channels. Although no precise measurements were
made, visual observations showed a picture that was noisier than other chan-
nels (perceptible "snow" in the picture) at a number of test points. One
possible explanation for this performance would be a "roll off" in higher
frequency, or, the signal levels being significantly lower at a given point,
than a good design would call for. It may be that the system, or most of it,
could handle frequencies to 270 MHz, but it also seems obvious that additional
effort would be required to proof and balance the system at these frequencies.
King Video's reference of a 270 liz capacity for most of the system, may
be a result of the actual configuration of the system in Lodi. Basically,
two trunks leave the headend on Stockton Street. One of these goes south
and provides service to relatively few Lodi residents, but does serve homes
outside the City limits and extends to the remote reception site. The other
trunk goes north to Kettleman Lane where it splits and ultimately serves the
majority of Lodi residents. This major trunk goes north on Stockton to
II -6
Kettleman where it splits with one leg going straight, one going east and
then north on Central Avenue, with the remaining leg going west and split-
ting to go north on Hutchins, Ham Lane and Lower Sacramento Road.
When the Lodi system was expanded to include the midband channels (9
channels located "between" VHF channel 6 and 7) primary concern was to see
that the trunks would be able to carry these frequencies. The same type of
emphasis was used when additional channels above channel 13 were added, which
is common. practice -in the cable industry. In the Lodi system however, a good
amount of distribution electronics (bridger amplifiers and line extenders)
are also used. While all trunk amplifiers may be fully capable of operating
to 270 MHz, according to King Video, all distribution amplifiers may not have
been fully upgraded or replaced, which would explain the apparent rolloffs of
channel 26 noted in our field observations. The extent and location of any
older distribution amplifiers is not. known at this time.
Given the fact that it is likely .the distribution lines from the trunk
(including feeder cable, bridger amplifiers and line extenders) may be the
weakest section of the system because of the different types of equipment
that may be used, we should note that normal quality expectations may not
hold true. Normally we can expect that worst-case system performance will
occur at the farthest distance from the system's headend. This is because
signal quality is basically determined by the number of active devices (i.e.,
amplifiers) a signal must pass through to reach a given point. For this
reason, the system's extremities, at the ends of the longest amplifier
cascades are usually representative of worst-case performance. In the Lodi
sy&tem, since there may be sections of the "old" distribution from any
II --7
point in the trunk, the expected "location" of worst-case performance can
not be predicted.
We should note here that our field observations (discussed in detail
in the following section) did not show generally poor ..ignal quality at any
point tested. These observations did show, however, that channel 26 appeared
to be rolling off at a number of points. Thus while the system is currently
performing adequately it appears that further channel expansion could
require significant effort to insure that all segments of the system can
function at higher frequencies.
While the Lodi system has existed since 1968 and is largely made up
of older types of equipment and cable, King Video has Also updated its
design requirements in the last few years. In doing this it has constructed
new developments with systems that can ultimately carry 400 to 450 MHz.
Since these frequencies can not be delivered to these new sections through
the existing plant, King Video has only activated the new sections to 300
MHz. It would be relatively easy to upgrade these new sections when higher
frequencies can be delivered to them.
Overall we found that the Lodi system is currently capable of function-
ing acceptably but feel that significant effort would be required to expand
service and remain flexible over the term of a renewed franchise. As the
existing system is currently programmed at or near its capacity, some of the
system is at an age where replacement will soon become necessary (especially
the distribution system and house drops) and that other sections will need
replacement based on normal maintenance (e.g., certain underground areas with
a high water table), a major rebuild of the system appears to be indicated.
II -8
Exactly how much of the system would need to be totally replaced will be
uncertain until a section by section appraisal of the system can be made. We
would expect that most of the newer sections of the plant (new development,
replaced drops...) could be "re -used" -
B. SYSTEM COMPLIANCE
Chater 8A - Community Antenna Television of the Lodi City Code estab-
lished the basic requirements of the cable system operator. Rather
than discuss each individual section of the Code, we will only highlight
those sections in which specific requirements are sat. Generally we
will proceed consecutively from section to section.
Sections 8A-11.. .Payment - Requires Grantee to pay 3 percent
franchise fee on monthly gross revenues to
City; to be paid on a quarterly basis or as
directed. City records indicate that payments
have been made, although the schedule of these
payments is somewhat irregular.
Sections 8A-12. Financial statements: Inspection - Among other
things, requires the franchisee to file within
90 days of the end of its fiscal year, a finan-
cial statement prepared by a certified public
accountant or public accountant showing in detail
gross annual receipts. Further, Grantee is to pay,
within 15 days, any franchise fee due.
S. James & Co. of Portland, Oregon. This letter,
indicated that such a bond from Safeco Insurance
Section 8A-13
Rates - As modified in May of 1980, the franchisee
is only required to notify the City 30 days prior to
any rate change or modification. Examination of the
City Clerk's files indicated that this requirement has
generally been met, however, copies of notifications
for all rate increase are not contained in these
files, but are reflected at the appropriate times,
in the Record.
Section 8A-17
Procedure following acceptance of franchise - Para-
graph a. of this section is a standard requirement for
the operator to file with the City, copies of all peti-
tions, applications and communications to the FCC or
other regulatory bodies or agencies. Our examinations
of the City Clerk's files did not show those "normal"
communications usually submitted under such a require-
ment, e.g., annual proof of performance tests, earth
station license, or requests to use protected frequen-
cies.
Section 8A-18
Construction and Installation Requirements - Para=
graph a. states that the system "shall be constructed
or installed in streets in accordance with.good
engineering practice..." While CTIC was not present
during construction, our limited visual examination
of the system showed that the existing system
appears to be generally the result of construction
in accordance with good engineering practice, which,
we must note, has evolved since the early sections
of the system was installed. We should emphasize
that this requirement and conclusion are based
on the physical appearance of the system, and do
not necessarily imply any evaluation of quality
of delivered service.
Section 8A-22
Surety Bond Required - The Grantee is required to
file and maintain in full force over the life
of the franchise, a corporate surety bond in the
amount of $25,000, renewable annually.
The last reference to such a bond in the files
wasfoundin a letter dated 4/11/77 from Fred
S. James & Co. of Portland, Oregon. This letter,
indicated that such a bond from Safeco Insurance
II -10
Co. had been on file with the City since 4/70
and continues in full force and effect. It would
be advisable to seek a current verification of
this information.
Section 8A-23 Liability Insurance Required - The Grantee is re-
quired to indemnify the City, its officers and -
its employers against all claims, demands, actions...
The Granted is also required to maintain its own
liability insurance, and to file with the City
Council copies of such policies or certificates of
insurance.
Review of the City Clerk's files shows a certificate
of insurance from Parker, Smith and Feek, Inc. for
an insurance policy (Transamerica Ins. Co. #19188705,
effective 7/1/84, expiration 7/1/85) which exceeds
the monetary limits set by this section. We note,
however, that this certificate only gives a 10 -day
notice of cancellation or reduction, as opposed to
the 30 -day notice required in this section.
Section 8A-25 Operational Standards - The overall requirements of
this section are addressed in the section of this
report dealing with system performance.
.Section 8A-2§,,,., Filing with the City - "All matters herein provided
to be filed with the City, unless provided othe.-wise
herein shall be filed with the City Manager."
As has been noted previously, most, if not all of the
areas in which there is a question of actual. compliance,
deal with the Grantee's filings with the City. To be
perfectly fair we must note that there are two possible
explanations for these.questions: (1) the required
Information was not filed, or (2) the information
was filed with a different office and was not
discovered in our examinations.
Section 8A-27 Location of Office; Telephone Connection - The Gran-
tee is required to maintain a local office within the
City as well as having a local telephone number.
Both of these requirements are being met.
Section 8A-29 Signed Contract Required - The Grantee is required
to use a contract form for all subscribers incorporat-
ing a provision basically noting that in providing
service, the Grantee makes use of public right-of-ways,
the continued use of which is not guaranteed.
If this is denied the Grantee will make reasonable
efforts to provided service over alternate routes,
however the subscriber will make no claims against
the City or Grantee, if this use is denied.
Paragraph 9 of the King Video Cable Company condi-
tions of agreement (see Appendix) contains these
basic parts but does specify the use of "poles"
rather than public rights of way, and has the
subscriber agree to make no claims against the
company or utility companies. This item goes
on to state, that if the use of said poles is
denied, the customer grants to the company, the
right to install its own poles, or do necessary
guying or place ditches in order to continue its
service.
Section 8A-31 Free Service - The Grantee is required to provide
free of charge a service drop for all public and non -
.profit public schools, city police and fire stations,
city recreation centers, church recreation rooms
and any additional municipal buildings designated
by the City Council. If the necessary drop would
be in excess of 150 feet, the Grantee is permitted
to charge time and material for excess footage.
According to King Video connections have been made
to City Hall, the City utility building, three Lodi
Fire Stations, the Public Library, the public hospi-
tal, two high schools, three juunior high schools
and approximately 10 elementary schools and two
churches. We also note that the system has been
designed so that live video feeds may be originated
Lrom the City Council and the School Board using two
dedicated cables.
C. TECHNICAL EVALUATION/SYSTEM OPERATIONS
The first step in CTIC's on-site evaluation was the examination of
received signal quality at the system headend. This step is a vital
part of any examination as there can be no expectation of acceptable de-
livered signal quality (to subscribers) unless acceptable quality signals
are first received by/at the headend: The cable distribution system
cannot improve the quality of a "poorly received" signal.
Observations at the headend showed that most signals were receiv-
dWE with gcod quality, however, there are a few exceptions •which were
discussed earlier that should again be noted. These exceptions center
around the fact that a standby modulator was being used for Showtime
or Channel 23 during our examinations. The observed performance o.l.
this modulator indicated that it would be sufficient: for standby use
but should not be used full-time without adjustment or repair. Its
performance in carrying Showtime was slightly noisier than other channels
but was still acceptable, however it was also interfering slightly with
Channel 13 - CBN. The "normal" Scientific Atlanta modulator for Showtime
had been repaired and was scheduled for installation at the time of
.z
our examination.
The second step in our on-site evaluation was to determine the qual-
ity of signals that were being delivered to subscribers' homes. As it
is infeasable in a limited timeframe to conduct a statistically valid
y�-
sampling of signal quality in actual residences in Lodi (given the numbers
II -13
involved and the difficulties often encountered in coordinating access to
private homes) delivered signal quality was evaluated by proxy with exami-
nations conducted at the and of -the longest amplifier cascades in the
service area. As the actual amount of degradation a signal will suffer
is largely determined by the number of amplifiers the signals must pass
through to reach a given subscriber, the extreme points in the distribu-
tion system are reasonably representative of worst-case system perfor-
mance. In addition to the system extremities, examinations were also
conducted at a number of other test points in the distribution system
to represent average system performance for reasons discussed in the first
section of this chapter.
The test points chosen were:
Approximate Location
#1 Almond, West of Cherokee
#2 Sacramento, north of Yosemite
#3 Ham Lane at Lake Home
#4 Le Bee Court at Edgewood
#5 Turner at Lincoln
#b Miwok Drive at Mokelumne River Drive
#7 Beckman at Black Diamond
#8 Ham Lane at Port Chelsea
#4 Lodi Avenue at Wood Drive
#10 Oak, between Rose and Crescent
Allowing for the different types and qualities of the various signals
carried on the system, observations showed generally good quality signals
in all but three "cases" seen at a number of test points. Two of these excep-
tions involve single channels (Channel 2 or Channel 10) and may.be headend
or reception related. The other exception could also be considered as
a
II -14
affecting a single channel (Channel 26, which is not promoted by the
company) but is an indication of the distribution system performance.
In the first two cases, minor degradation in the form of additional
noise was seen on Channel 2 at a number of testpoints (numbers 2, 4, 7
AN and 8). In the case of Channel 10, interference, as the apparent result
PP of co -channel pickup with another signal (potentially off -air Channel
10 from Modesto) was seen at a number of locations (numbers 3, 4 and 9).
_ In all these cases the interference seen was noticeable at close observa-
tions (18"-24") but would likely not be noticeable or objectionable to
subscribers at normal viewing distances. Although this performance was
Am
not initially seen at the headend, its appearance at various locations
throughout the system, appears to indicate a possible reception related
cause rather than a "problem" with the distribution system. While the
problem noted was not severe, King Video should continue to monitor the
situation, to determine the cause, and whether any corrective measures
are indicated.
The other case, noted for Channel 26, was basically the observation
of additional noise at most testpoints (Numbers 3-10). The actual amount
of noise varied from point to point, from a relatively minor level to a
more objectionable level. Rather than being reception related, this
problem appeared to be simply due to the fact that the distribution
system was "rolling off" beyond Channel 25 (or decreasing In -signal
strength) more rapidly than would be called for in a normal design. As
the. level or strength of the desired signal decreases, the impact of
M1Y;.
11-15
system noise becomes more significant, and can increase to the threshold
of visibility or to become objectionable. We must point out that King
Video does not market or promote Channel 25 to its subscribers and simply
allows any subscriber with the proper equipment to receive it. As it is
not a defined part of its channel offerings, the weakness of this chan—
nel does not indicate that it is not necessarily meeting all of its
performance requirements, but does point out an overall "weakness" in
the distribution system in Lodi. Basically, the distribution system
appears to be operating at its maximum useable capacity with the delivery
of Channel 25. The delivery of any channels beyond this cannot be
guaranteed and would likely require a significant amount of effort, in
termo of limited upgrade to be able to deliver more charnels accept—
ably.
Overall, our examination showed that the cable system is capable of
delivering generally good quality signals to ends of the longest amplifier
cascades, within the present operating parameters. On the whole our
examination showed that the system appears to be well constructed, given
the overall age of the system and should be able to deliver good quality
signals to all subscribers at this time.
While at this time, the system should be able to deliver good qual—
ity signals, we should note that given the large number of individual
components in the system (headend, cable, amplifiers, passives, drops) it
is quite likely that a single component could fail unexpectedly affecting
one or more subscribers services. Such an occurrence is even more likely
given the advanced age of the system. We point this out to stress that in
these cases timely maintenance (preventative and on demand) and service are
necessary to maintain and restore service.
Based upon the City's impressions, the company has generally been
responsive to service and maintenance requirements, however, we must note
that the company's records do not make verification of these impressions
possible. Over the life of the franchise, the Lodi system, like many
others, has "suffered" from its share of employee turnover. Also, like
many older systems, it did not have structured plans for maintenance and
recordkeeping. Preventative maintenance may have been done (and since
the City has not received a flood of calls over the life of the fran-
chise, some maintenance probably was done) however, there were no records
kept, either with required tests or with results, to allow the company to
analyze its history for any significant trends. Subscriber complaint
records were kept, however, with the exception of eight months in 1983,
no weekly or monthly summaries were compiled. Instead, complaint and
service call records were filed in each subscriber's individual record.
This allows the company to investigate a specific customer's record, but
does not allow a review of the type of service calls required over. time
for the entire system.
The lack of this type of information makes it difficult, if not
impossible for us to perform an objective examination of King Video's
past performance in these areas. This situation should change in the
near future. In the recent past King Video has reviewed its operations
1
II -17
PF
and has (or will) taken steps to update its procedures. Steps taken
range from the obvious (communications of service call procedures to the
after hours answering service as of 11/84), to the somewhat more subtle
(establishment of weekly, monthly and semi annual preventative main-
tenance schedules). The company has also recently changed from its
paper based system for billing and service calls to an on-line computer
based operation. As can be expected with new computer systems, all of
the bugs have not yet been worked out, and the system can only give a
basic manpower report - or a simple.listing of activity. With the proper
subroutine, this system should be able to provide a weekly or monthly sum-
mary of service calls by "cause or cure". These improvements can not of
course recreate the past, but they should serve to simplify any future
monitoring of system performance and operations.
D. CONrLUSION
Overall our examination of system performance indicated that while
the system currently appears to be delivering good quality signals, it is
not reasonable to expect the existing system to be able to meet the
community's needs over the term of a new or extended franchise without
II -18
While a component by component check of the system was not done, factors
Indicate that a major rebuild project would be more suitable than a limited
effort attempting to expand the channel capacity of the existing system.
Given the age and system design, a limited upgrade could prove counter pro-
ductive due to increased maintenance and service requirements. The same
type of increased maintenance requirements can also be expected eventually
if the present system were to remain unchanged as continual aging takes its
toll on system components.
As noted earlier, our compliance check has noted a few areas in which
full compliance is not readily apparent, mainly in the area of the company's
filings with the City. Not diminishing the importance of these filings, we
would note that it is possible that information may have been filed in other
areas or that there has been some misunderstanding of requirements and pro-
cedure. We would expect that the company should have no problem complying
with these requirements as they are neither unusual nor onerous.
CHAPTER III: FINANCIAL REVIEW
A. INTRODUCTION
This section of the report analyzes the fivancial condition of the
CATV system serving Lodi, California. King Video has provided three years
of historical financial data covering 1982,1983 and 1984. For these years,
fairly detailed revenue data was provided. However, only summary operating
expense data was provided for 1982 and 1983. In addition, the operator was
unable to provide us with the requested Balance Sheets or Sources and Uses
of Funds Statements. The operator states that it does not keep detailed
financial records for its subsidiaries.
As noted elsewhere in our report, the franchisee has not complied with
the financial report filling requirements of the ordinance. Because accurate
financial records are required in future contract modifications or renego-
tiations, we recommend that the City take steps to improve enforcement of
this franchise requirement, and expand the requirement to include more de-
tailed operating expenses, accounting assumptions, and system demographics.
B. REVENUES AND SUBSCRIBERSHIP
A
III -2
average of 55-56 percent. The portion of the cable plant serving the City
of Lodi consists of 135 plant miles and passes 16,800 homes. Lodi accounts
for 80 percent of system mileage and 93 percent of homes passed. Subscriber -
ship in Lodi totalled 8,000 in 1984 or 94 percent of system subscribership.
Market penetration in Lodi is approximately equivalent to the system -wide
penetration of 47 percent.
Over the past three years, the operator has constructed 30 miles of new
plant of which 11 have been within the City of Lodi. An additional 1800
homes have been passed by cable plant over this period, of which 1300 exist
within Lodi. The implication of this information is that the operator has
been constructing in very high density areas within Lodi (118 homes per
mile) and in very low density areas (26 homes per mile) outside Lodi.
The subscriber base has grown 11 percent over the past three years, al-
most identical to growth in homes passed. As such, no real improvement in
market penetration has occurred since 1982.
The cable system passes an average of 107 homes per cable -mile; 124
homes per cable mile within Lodi. System densities are one indication of f
v,
profit potential, since the higher the density the lower the average v
investment for homes passed. System density in excess of 100 homes per
mile is generally considered a favorable indication for a system to have
profit potential.
The system also serves 24 commercial subscribers, all of which are
based in Lodi.
III -3
The following table
shows the sources of revenue from the Lodi portion
of the system for 1982,
1983 and 1984:
tween 1982 and 1983.
Revenue reports reflect that approximately
$OOOs
base is selecting an additional outlet of cable
service at a monthly rate of
1982
1983
1984
Basic Revenue
$ 786
$ 894
$ 930
Second Set Revenue
53
55
58
Pay TV
404
462
630
Other
-
6
23
Total
$1,243
$1,418
$1,641
Average Monthly Revenue
per Subscriber
$14.06
$15.35
$17.09
The basic revenues reported reflect a basic
service rate increase be-
tween 1982 and 1983.
Revenue reports reflect that approximately
30 percent of the subscriber
base is selecting an additional outlet of cable
service at a monthly rate of
$2.00 per month.
Pay television revenues have shown the most
notable improvement over
the past three years. Between 1983 and 1984 pay
television revenue improves
over 36 percent.
The growth in monthly revenues per subscriber between 1982 and 1983 of
about 8 percent appears attributable to increase
in basic fees. The eleven
percent increase in revenue per subscriber between 1983 and 1984 appears
III -4
attributable to increases in pay service revenues. There was an overall
14 percent increase in total revenues between 1982 and 1983 and a 15 per-
cent increase between 1983 and 1984. -
The Lodi portion of the system accounts for about 94 percent of system
revenues and about 1.8 percent of King Broadcasting Company revenue for 1984
or 10 percent of its CATV division revenues.
C. OPERATING EXPENSES
In CATV operations, expenses are generally allocated between plant,
origination, and general, selling and administrative (GSA) categories.
Plant expenses represent those costs associated with maintaining the
distribution plant. The largest cost item under plant expense is typically
salary costs for technical staff.
King reports seven plant staff in 1982 through 1984. This staff con-
sists of two installers, three technicians, and a two-man construction
crew. Average salary in 1984 for plant staff was $15,429. This appears
to be a reasonable plant staff for a system of this size.
Unfortunately no detailed expense items were provided for 1982 or 1983.
In 1.984, plant maintenance averaged $244 per mile which is somewhat high and
111-5
Vehicle expense was reported ar $19,000 on 1984. This appears consis-
tent with the probable number of vehicles associated with the size of the
staff and system.
Total plant expense in 1984 was $219,000 of which $111;000 was capital-
ized. We are surprised to see such a high level of capitalized expense in
1984, since only eight miles of new plant was added. Reported plant ex-
pense for 1982 and 1983 was $251,000 and $167,000 respectively. While
this shows a decline in plant operating costs over time, capitalized
expense was not identified for these years and therefore it is difficult
to inr�erpret whether a real decline occurred. Staffing levels have re-
mained unchanged since 1982.
Origination expenses are those costs associated with producing or ac-
quiring programming for transmission over the cable system. The largest
origination cost is associated with satellite and pay television program-
ming.
In 1984, King reports spending 97 cents per subscriber per month for
ESPN, MTV, USA and CNN. Pay service expense appears to have averaged around
40 percent of pay television revenues in 1984. This level of expense is
consistent with other systems we have reviewed with similar rate structures.
Production expense associated with local programming totalled $47,000 in
1984. King reports one full-time director and two part-time cameramen for
local production. A production coordinator was added in 1984.
Total origination expense increased 50 percent between 1983 and 1984.
This increase in likely attributable to additional pay service revenues and
the additional local production staff.
III -6
Total General Selling and Administrative costs in 1984 are reported at
$427,000, an increase of 33 percent over 1983 but less than the $455,000 re-
ported for 1982. Because expense itemization was not provided for 1982 or
1983, we are unable to determine the categories of expense responsible for
these increases.
King maintains an administrative staff of 11 which is fairly large on a
comparative basis of administrative staff per subscriber. Typically adminis-
trative staffing average one per 2,000 subscribers. In this case the ratio
is one per 770 subscribers. Most unusual is a sales staff of three plus a
Marketing Manager for a system this size. For most small systems, the mar-
keting manager position is a regional position.
Most other categories of.expense detailed under the administrative
category in 1984 appear reasonable and consistent with other systems we have
reviewed.
The Lodi system receives a corporate overhead allocation based on a ratio
of the system's basic subscribers to the company's total basic subscriber
base. Reported corporate overhead allocation for 1982, 1983, and 1984 totals
$80,000, $64,000, and $60,000 respectively. These allocations average 4.7
percent of system revenues or about $8.84 per subscriber per year. On a com-
parative basis with other systems we have reviewed, this overhead allocation
is very reasonable and compares favorably with the overhead allocations of
many multiple system operators.
III -7
The following table shows the average annual operating expense per sub-
scriber.
Operating Expense per Subscriber
1982 $137.449
1983 $ 98.442
1984 $113.000
Overall, operating expenses on a per -subscriber basis appear quite rea-
sonable. We are unable to specify the causes for the 28 percent decline in
operating expense per subscriber between 1982 and 1983 or the 15 percent
increase between 1983 and 1984 because expense details were not provided for
1982 and 1983. However, we speculate that perhaps in 1983 a significantly
higher percentage of operating costs qualified for capitalization and thus
net operating costs may have declined while gross costs remained conotant
or increased. Between 1983 and 1984, it is likely that a principal cause
for increased operating costs per subscriber is programming costs. Many
satellite service providers increased their fees to operators in 1984. In
addition, as per -subscriber expenditure on pay services increased.in 1984,
the amount attributable to pay service providers also increased.
Operating expenses on a per -subscriber basis increased 15 percent in
1984 while average revenues increased 11 percent.
The relationship between expenses and revenues was .81 in 1982 but im-
proved dramatically to .53 in 1983 and .55 in 1984. Operating ratio® fir
1983 and 1984 are very favorable.
III -8
D. CAPITAL EXPENDITURE
Within the franchise area, King reports the following capital expendi-
tures over the past three years:
$OOOs
Headend
$150
Distribution Plant
102
Drops
144
Converters
160
Leasehold Improvement
6
Program Origination Studio
22
Tools, Test Equipment
3
Vehicles
23
$610
The 11 utiles of plant added since 1982 appear to have been constructed
at an average cost of $9,273 per mile.
.Expenditure for drops (connecting subscriber homes to the distribution
plant) appears quite high. King added 630 new subscribers between 1982 and
1984. Given a reasonable turnover factor, cost per drop appears to exceed
$100. Typically drop costs average $40-$50 per drop including capitalized
labor. However, some of this cost may be attributable to drop replacemeat
given the relative age of the system.
The $160,000 reported expenditure for converters appears reasonable as
does reported expenditures for vehicles.
II1-9
total system. According to supplemental information provided, capital expen—
diture in the first month of 1985 totalled $289,000 for the entire financial
entity.
Since 1970, the operator reports $3.121 million in capital expenditures
Item
for the entire system. More than half of that expenditure has occurred with—
In the past five years.
E. SYSTEM PROFITABILITY
The operator reports the following annual income statement for the fran—
chise area for 1982 through 1984.
*Less Investment Tax Credit at 10 percent
$OOOs
1982
1983
1984
Revenue........ ............. .....
1243
1418
1641
Expenses .........................
1013
758
904
Operating Inc. ....................
230
660
737
Depreciation ..................
252
144
175
Pretax Income ....................
(22)
516
562
Pretax Cash Flow .................
230
660
737
Estimated Tax Liability (Benefit)*
(48%) ..........................
(25)
238
234
Estimated After Tax Income .......
3
278
328
Estimated After Tax Cash Flow ....
255
422
503
Less Capital Expenditure .........
154
103
353
Estimated Net Cash Flow to Parent ..
101
319
150
*Less Investment Tax Credit at 10 percent
III -10
a
King was unable to provide tax or interest expense for the individual
subsidiary for 1982 through 1984 since these expenses are consolidated -on a
corporate level. However, for the purpose of this analysis we estimated a
RIM
am tax liability at 48 percent of pretax earning less investment tax credits
associated with capital expenditures.
The operator reports a pre-tax loss of $22,000 in 1982. We estimate a
tax benefit of $25,000 on a $22,000 loss when Investment Tax Credit are
added, yielding a positive net income of $3,000. This would result in an
after-tax cash flow of $255,000 which exceeds reported capital expenditures
for the system by $101,000. In other words, we estimate the system returned
$101,000 to the parent in net cash benefit in 1982.
We estimate after tax cash flow of $422,000 in 1983 which, less the
$103,000 reported capital expenditure, should have returned $319,000 in net
cash flow to the parent that year. We estimate net cash flow to the parent
of about $150,000 in 1984.
The net value of plant and equipment is estimated by the operator's
consultant at the following:
$1,122,494 in 1982
$1,224,494 in 1983
$1,496,494 in 1984
These figures yield a return on investment* of less than 1 percent in
1982, 23 percent in 1983 and 22 percent in 1984. If working capital is added
to the investment base, returns on investment for the years examined are again
et income divided by net assets.
negligible for 1982, 20 percent in 1983 and 19 percent. in 1984. The three-
year average annual return in investment would be 13.5 percent.
Overall the system appears to have made substantial improvements in
profitability and cash flow over the past three years.
In our opinion, this system could fairly support a system rebuild if
such was negotiated as part of a new agreement. We estimate such a rebuild
could be accomplished at approximately $1.4 to $1.7 million. If this was
accomplished over a two-year period, 60 to 70 percent of needed funds could
be derived from the systems operating cash flow.
The parent co -pang, King Broadcasting Company had $25.5 million in cur-
rent assets as of June 30, 1984 with a current ratio (relationship between
current assets and current liabilities) of 1.56. Total assets were $96.3.
million. Net income for fiscal 1984 was $8.8 million and cash flow total-
led $17.4 million. Scheduled maturity of long-term liaiblities in 1985
total $5.884 million. The firm generated a 17.6 percent return on equity
and a 12.4 percent return on fixed assets.
CATV operations assets account for 22.5 percent of King's total non-
current assets and 17.8 percent of its revenues.
Both subsidiary and parent appear to be in a strong financial position.
CHAPTER IV: SERVICES
A. INTRODUCTION
In this chapter we are presenting a description and analysis of the
services offered to Lodi subscribers by King Video. As a prerequisite to
the renewal process, the City of Lodi may wish to consider the services now
available as they relate to services available in other communities as well
as the types of services available to cable operators for distribution.
This chapter includes three main discussions. The first is a review
of the current services in Lodi. The second is a comparison of the Lodi
service lineup and rates with cities of similar size and location in
reference to major population centers, and with cable systems of approxi-
mately the same age. The third topic of this section of our report exam-
ines the support for Local Origination and Access Program Production,
including channels, studios, production equipment and other support such
as staff and operating expenses. The reader is referred to Tables IV -1
through IV -5 for further elaboration of these issues.
B. CURRENT SERVICES AVAILABLE TO LODI SUBSCRIBERS
IV -2
Tier 1 Basic has a $9.50 monthly charge and includes 12 channels of
programming, including nine broadcast services, satellite services ESPN
(sports programming) and CBN (religious oriented family programming) and
one Community Programming channel which offers locally produced video
programming and automated information such as time, Weather, public ser-
vice announcements and advertisements.
Tier 2 offers an additional six channels of service including two San
Francisco broadcast stations and satellite services USA Network (sports and
entertainment), MTV (rock music videos), The Nashville Network (country
music videos) and CNN (24 hour/day news). Tier 2 is priced at $6.95 if
taken with Basic Tier 1, at $3.50 if one pay service is subscribed to and
at no charge if two pay services are taken. Pay services available include
HBO, Showtime and The Disney Channel, each with an "a Is carte" price of
$11.95 and The Playboy Channel with a monthly charge of $8.95. King Video
offers discount for multi -pay subscribers as well, with two pays available
for $20.45 and three pay services available for $30.45. These fees are of
course in addition to the fee for Basic Services.
Table IV -2 presents all of the rates for King Video -Lodi services. A
variety of Sample Costs are presented on this Table which demonstrate the
effect of the above mentioned discounts. For example, Basic Tier 1, Tier 2
and one pay service would cost $9.50 plus $3.50 plus either $8.95 or $11.95
for totals of $21.95 (with the Playboy Channel) or $24.95 (any one of the
other three pay options.) The discount packages are designed to encourage
subscribers to take multi -pays, as can be seen. By adding one more pay ser-
vice to the package just described, the monthly fee would then be $29.95 -
IV -3
$9.50 for Basic Tier 1, no charge for Tier 2, plus $20.45 for the two pay
services. Thus the "per -service" price diminishes the greater the number
of services which are subscribed to.
King Video also provides a package of FM/Audio services which includes
11 regional FM services, six satellite audio services, two basic service
audio simulcasts and three pay service audio simulcasts. This package has
a $4.00 monthly charge.
C. SERVICES AVAILABLE TO CABLE OPERATORS NATIONALLY
Currently there are over 50 Basic and Premium services distributed
via satellite to cable systems across the country. The Lodi system has a
representative sample of some of the more popular programming services,
however there are other services which the City may be interested in.
Although the Cable Act prohibits franchising authorities from requiring
specific services by name, the City may be interested in the general types
of programming available. A list of programming eervices is provided in
Appendix A. These include programming geared for specific audiences such
as minorities, children, senior citizens and the hearing impaired. Also
there are a variety of programming services with specific interest orienta-
tions, such as religious programming sponsored by a variety of denominations,
public affairs programming covering the U.S. House of Representatives,
financial and business news, educational services, health and family care
services, a 24 hour weather service, cultural programming, more types of
IV -4
music video programming, additional sports programming, and Spanish lan-
guage programming. The City of Lodi may wish to review this universe of
available programming to determine which types of services may be of
Interest to Lodi residents.
D. SERVICES AVAILABLE IN OTHER COMMUNITIES
Table IV -5 presents cable system data and services provided currently
in Lodi with eight other communities. Selection of the comparison cities was
based on several factors. All of the communities, like Lodi, are in the popu-
lation range of approximately 25,000 to 40,000. All nine cities are between
20-40 miles of another larger city which is a larger television market center,
and thus the primary source of broadcast television stations. Most all of the
nine cities originally received cable television services in the mid 1960'x,
an additional reflection of the ability to receive broadcast services. Of
the nine cities, Lodi, and Charlottesville, Virginia are currently involved
with "pre -renegotiation" activities with their respective cable operators.
The cable systems in Battle Creek, Michigan and Fort Huron, Michigan were
both upgraded in the mid to late 1970-s from 12 channel configurations, and
Port Huron is now gearing up for an additional upgrade. Blacksburg, Virginia,
Petaluma, California, Midland, Michigan, Bowling Green, Ohio, and Columbus,
Indiana have all had recent renewals of their cable franchises with rebuild/
upgrades in process. We present this comparative data for the further in-
formation of the City of Lodi for use with its franchise renewal process.
PR
IV -5
As can be seen from Table IV -5, most of the comparison cities have be-
tween 30-35 channel capacity. The Basic/Tier 1 services offer from 12. to
25 services at monthly fees from $6.75 to $12.95. Five of the cities,
including Lodi, offer a second level of basic service, with channel numbers
ranging from 18 to 30 (cumulative --including Tier 1 services) with monthly
fees ranging from $9.75 to $12.60. In Lodi, King Video is charging $16.45
for this package, but as noted above, this fee decreases with the Discount
Packages. Numbers of premium options ranges from one to six, at rates from
$8.50 to $11.95. (It should be noted that the Bowling Green system is
going to be expanded to 30 channels by June 1985 and plans are to add more
premium and basic services but these data were not yet available.)
At least four of the comparison cities are two-way capable. Only one
system, the one in Port Huron, MI, will offer a pay-per-view channel as a
part of its proposed upgrade - a service in which special sports or enter-
tainment events are offered one program at a time for one fee for the pro-
gram.
The services affered by King Video are reasonably typical for a sys-
tem of Its age aad size; however as mentioned above, there are quite a few
a:.ditional types of programming available to cable operators today which
are not represented in Lodi. Additionally; the rates offered by King Video
are somewhat higher than average until a subscriber reaches a level of Basic
plus multi -pay whereupon the discounts take effect. This is a marketing
devise used by many cable operators, however it may place limitations on
certain subscribers not interested in spending $30/month on cable service.
IV -6
E. SUPPORT FOR COMMMITY PROGRAMMING
Table IV -3 presents the production facilities and equipment currently
available for local program production in Lodi. Table IV -4 presents the
Operating Budget and Staff support provided during 1984 by King Video -Lodi
and the hours of Local Origination and Access programming cablecast on the
one Community Channel.
As we understand it, this channel includes automated community bulle-
tin board information, time, weather, advertisements and public service
announcements, plus the Local Origination (LO) and Access video programming.
It appears from the types of programming described in King Video's submission
and the supportive letters from citizens and community groups that the
services offered on this :hannel are popular. This suggests to us that an
additional item of consideration for Lodi City officials would be the
addition of one or two channels for these purposes. If the community is
very interested in this local communications medium it quite possibly
would be able to produce enough programming to justify another channel with
video services; thus allowing retention of the one community channel for
automated information that would be solely dedicated for this purpose.
King Video offers program producers a reasonable amount of production
equipment. The equipment which is leased offers good supplemental capacity
and the permanent addition of this equipment may be appropriate. However,
there appears to be an absence of post -production editing facilities which
may be an item for future consideration. For the dedicated access users, the
IV -7
addition of another portable unit may be appropriate, perhaps in the 3/4"
format so that it is compatible with the LO/Access shared use equipment.
The VHS video recorders are useful as this format is compatible with many
home VCRs and offers subscribers the option of home glavback.
King Video provides one full time and two part-time staff for commun-
ity production. No information was provided regarding the hours during
which community producers had access to facilities. Future consideration
may need to be given to additional part-time staff to allow more hours of
availability. Additionally, King Video did not mention if it conducts any
training for community producers, which might be useful to the community.
King Video has presented some documentation of community support for these
kind of services so it is certainly aware of the "good will" factor wnich is
created by these activities.
As noted in the previous section, we looked at other communities which
had conducted renewals with their cable operators recently. According to
the Renewal Case Studies provided in Paul Kagan's Cable TV Franchising news-
letter, facilities and support for local origination and access program
production were often included with system upgrades. In Eowling Green,
before the renewal of its cable franchise, only one automated access
channel was provided by the cable operator. The new agreement calls for
the cable operator to provide an additional channel for combined Public and
Educational access uses, with another channel to be made available after
this channel was used 806 of the time weekdays during 5 and 11:30 p.m. The
cable operator would also provide portable facilities, personnel and a
studio, probably at the university.
IV -8
Also according to Cable TV Franchising, the cable operator in Columbus.
IN will be providing a new access studio and three access channels as a
part of its renewal agreement. According to company representatives, currently
two channels are active, with one channel used to cablecast LO and Access
programming. Five full-time staff are currently employed to.support community
programming and 25 to 50 hours a week of video.programming is cablecast.
No information about operating expenses was provided.
In Midland, Michigan, the renewal agreement calls for $90,000 in ac-
cess support over the first three years, with an initial grant of $45,000
made immediately. The operator will provide two access channels in place
of one which was shared between producers in two cities which have adjoin-
ing franchises. According to that cable operator, one full-time staff
member is employed for access, with one intern also available to assist
users. Currently about 25 hours of programming is cablecast per week.
F. SUMMARY
During this pre -renewal time frame, it is important for Lodi City offi-
cials to examine the current capabilities of its cable system in conjunction
with the needs and desires of the community regarding the future uses of
the cable system. The variety of services available to cable operators and
the potential for cable system utilization are great and will continue to
expand over the next decade as the cable industry matures. The services
and facilities currently provided by King Video are reasonable for a system
IV -9
of its age. However the City should give attention to future needs and
interests regarding cable television services in the City as it proceeds
through franchise renegotiations.
REFERENCES:
The data presented on Table IV -5 were gathered from a variety of sources.
The Broadcasting Yearbook 1985 and Cablefile '85 were used for initial selec-
tion. Our staff then called the various cable operators for clarification
and further information. We gratefully acknowledge the assistance of these
'. cable operators. For the Cities of Midland, MI, Bowling Green, OH, and
Columbus, IN, we referred to Paul Kagan's Cable TV Franchising newsletter
which features "Renewal Case Studies" periodically.
Cable TV Franchising: March 27, 1984 "Renewal Case Study #11: Bowling
Green,; OW!, p • 6. -
January
•.January 20, 1984 "Renewal Case Study X18: Columbus, IN", p. 6.
February 29, 1984 "Renewal Case Study #9: Midland, MI", p. 6.
6
i
IV -10
TABLE IV -1
CURRENT.SUBSCRIBER SERVICES OFFERED BY KING VIDEO CABLE
IN LODI, CALIFORNIA - MAY 1985
CHANNELS
Basic Service:
2
KTVU
(IND)
Oakland
3
KCRA
(NBC)
Sacramento
4
KRBK
(IND)
Sacramento
6
KVIE
(PBS)
Sacramento
8
KTXL
(IND)
Sacramento
9
KXTV
(CBS)
Sacramento
10
KCSO
(IND)
Modesto
11
KICU
(IND)
San Jose
12
KOVR
(ABC)
Sacramento
5
ESPN
7
Community
Channel (Time, Weather, local announcements,
Local Origination)
13
CBN
Tier 2
15 USA Network
16 Nashville
17 MTV
18 CNN
19 KGO (ABC) San Francisco
22 KBHK (IND) San Francisco
.Premium Services
14 Disney Channel
23 Showtime
24 HBO
25 The Playboy Channel
FM Audio Services
11 Regional FM Stations
6 Satellite Stations
2 Basic Service Simulcast Stations
3 Premium Service Simulcast Stations
I
IV -11
TABLE IV -2
KING VIDEO CABLE - LODI: SERVICES AND RATES
Basic Service -
12 channels
- $
9.50
Tier - 6 channels
o with
Basic only
- $
6.95
($16.45
with Basic)
o with
1 pay service
- $
3.50
($13.00
plus pay.
service fee)
o with
2 pay services
- No
charge
($ 9.50
plus pay
service fee)
Installation
Additional Outlets
FM Audio Services
Pay Services:
o HBO
o Showtime
o Disney Channel
o Playboy Channel
Discount packages:
2 pay services
3 pay services
Converter Rental (optional)
Remote Converter
SAMPLE COSTS:
Basic, Tier, 1 Pay Service
$25.00
$ 2.00 each
$ 4.50
- $11.95
- $11.95
- $11.95
- $ 8.95
- $20.45
- $30.45
$ 2.00
$ 4.95
- $21.95 (Playboy)
- $24.95 (HBO, Showtime or
Disney)
Basic, Tier, 2 Pay Services - $29.95
Basic, Tier, 3 Pay Services - $39.95
Basic, Tier, 2 Pay Service
1 Additional outlet and FM/
Audio Services - $36.45
IV-13
TABLE IV-4
KING VIDEO CABLE- LODI: SUPPORT FOR COMMUNITY PROGRAMMING
1984 Operating Budget
Amam
Local Origination: $26,465:
Access: 8,885
Total: $35,350
1984 Staff Percent of Time Allocations:
LO Access I-Net
Production Coordinator: 1 - FT 65 25 10 100%
Camera Crew: 2 - PT 50 40 10 a 100%
Hours of Programming
Local Origination: 16 hrs./week
Access: 5-7 hrs./week =
I Date of Award 1 1968 1 1963 1
�'-
I I �-
-
1965 1967 1969 1964 1
1972 1 1964, 1 1966 1
1 Renewal
TABLE IV -5:
COMPARISON OF CABLE SYSTEMS AND SERVICES IN NINE CITIES
I
I Rebuild Date I - 1
1978 11976/1985
{
-2-
I -3- i -4- I +5- 1 -6- I -7- I
-8-
167
I
ILODI,
ICHARLOTTESVILLE,IPORT HURON, (BATTLE CREEK,IBLACKSBURG,IPETALUMA, IMIDLAND, IBOHLING GREEN, ICOLUMBUS, I
1 Home Passed 16 800
IFRANCHISE AREA:
ICA
IVA
IMI IMI IVA ICA IMI 10H
IIN I
12,302
9,462 1
King
10,000 1 8 800 I
I Channel Capacityl Capacity24 1
30 1
1
1 CABLE OPERATOR
I Video
I Jefferson
I HarronI TCI -Taft I Booth I Viacom ( Gerity i
Wood ( Cox I
IPOPULATION (1980)
1 35,000
1 40,000
1 34,000 1 36,000 1 31,000 { 34,000 I 37,000 1
26,000 1 31,000
32 I 13 I 28 l
ISYSTEM DATA
I
1
I
I I 1 I
I Date of Award 1 1968 1 1963 1
1965 I 1965 1 1964 1 1964 1
1972 1 1964 1 1966 1
1 Activation Date—T 1968 1 1963
1965 1967 1969 1964 1
1972 1 1964, 1 1966 1
1 Renewal
I
I Rebuild Date I - 1
1978 11976/1985
{
1977 ( 1983 I 1983 I
1984 i 1984 I 1983 1
I Plant Miles 135
167
238
351 150 300
209 88 i76 I
1 Home Passed 16 800
18 000
13 223
30 000 11 000 16 3607—lTT--r
7 -1T --r 9,000 12 030 I
Basic Subs. 8#000 1
12,302
9,462 1
19,000 1 6,700 1 1
10,000 1 8 800 I
I Channel Capacityl Capacity24 1
30 1
1
24 1 30 1 35 1
32 1 54 1 35 1
Activated
, I
I Channels 1 22 I
27 {
27 1
23 1 20 1 28 I
32 I 13 I 28 l
i Basic Service:
I Tier
I# Channels
12
12
12
12
17 25
20
12 24
I Monthl Fee
$ 9.50
$ 6.75
$ 11.50
$ 8.35
$ 9.70 $ 9.08
$ 8.50
$ 7.95 $12.95 I
1 Tier
2
2
2
2
- -
2
- -
I# Channels
18
26
30
21
- -
2
- - I
I MonthlZ Fee 1
$16.45
1 9.75
12.45
1 12.60
1- -1
12.50 1
- - I
1 Pay Services/
(HBO, Sho, TDCIHBO,
TMC @
(Sho, TDC @
(HBO, CMAX @
JHBD, Sho @ (HBO, Sho
(HBO, CMAX
ITMC @ $9.00 (HBO, CMAX,1
I Monthly Fee
1@ $11.95;
1$9.95; CMAX @
1$8.95; CMAX
1$10.50
1$9.95; HTS 1@ $11.95;
1@ $8.50;
1 1TDC @ I
I
1TPC @ $8.95
1$7.95
1@ $8.00;
1
1@ $9.90 ITDC @
ITDC, PAS @1
1$9.00
1
1
1
ITMC, HBO,
1
1 1$10.95
1$10.00
1 1
1
1
1
IPAS @ $9.95
1
1 1
1
1 1 I
1 Discount
IT2 $6.95 withl
I
I
I (HBO, 6 Shot
I I
I Packages
(Basic, $3.50
1 -
I -
I -
I - 1 $21.40;
1
I
1w/1 pay, NIC
I
I
I
I ITDC $6.95
1
i I.
1 IW/2
pays
I
1 0 Pay per
I'
I
I
I
I I
1
I i rl
I View Channels
I-
I Two -Slay
I
I
I
1 No
1 Capable I No
I Capable
I Capable I Capable
Notes_:
I
(
IServices Re-IPlant
Miles,
I I
I
(System expands I
I
I
(
Ipresented
(Homes Passed
I I
I
Ito 30 channels I
I
1
late Proposedj6
Basic Subs.l
I
I
1by June, 1985. 1
I
I
I
Ifor 1985 up-linclude
I I
I
I I
{
l
Igrade.
ISpringfield,
I I
1
I I
I
I
I
I
IMI franchise.)
I
I
I I
i aey; nnv - nome Dox vrrice; bno - snovcime; nrb - nome Team bpores; vv" - Cinemax; 1
1 TDC - The Disney Channel; PAS - Pro An Sports System; TPC - The Playboy Channel TMC - The Movie Channel
( I
CHAPTER V: REVIEW OF REGULATORY ORDINANCE
CTIC has reviewed Chapter 8A of the Lodi City Code regarding Community
Antenna Television and also Ordinance 855 (December 6, 1967) that was the
originating ordinance, and Ordinance 1202 (May 7, 1980) that amended Chapter
8A. These ordinances constitute the local regulatory procedures that would
apply to any cable company wishing to serve Lodi. Other relevant documents
reviewed were Resolution 3158 th;.t awarded the current franchise to Multi
View Systems, Inc., established a franchise fee of 6 percent and required
Council approval for change of rates; a certification stating that on
February 18, 1970 the City Council authorized the transfer of the franchise
from Multi View System, Inc. to King Video Cable Company; and Resolution
80 -64 -May 1980, amending Resolution 3158 to change franchise fee to 3 percent
of gross receipts, and to effectively eliminate rate regulation (by Ordinance
1202), except to require the filing of rate changes with City Council 30 days
prior to effective date of change.
The basic underlying ordinance and Code are very well done and contain
many features that are continuing to be used by cities even 18 years later.
The ordinance is similar to those adopted in many California cities in the late
11
1960s. Considering that the FCC had not yet adopted its franchising standards
by then and have subsequently made many changes, much of the present code is
still excellent and being recommended to be continued as originally written.
V-2
Several new eections are suggested from our collective experience with
hundreds of local governments as they have dealt with operating problems with
cable companies over the last several years. Additional sections are proposed
that would recognize needed changes to reflect the new Cable Communications
Policy Act of 1984.
While the proposed language adds considerably more words to a well pre-
pared original ordinance, we feel that the added protection recommended may
save the City from a series of potential problems. Like most ordinances, they
are written for the protection of the parties involved but hopefully may
never be needed for actual performance purposes. Today cable companies trade
and transfer properties often and local system managers are constantly being
moved. A system that has no problems one day, overnight has multiple prob-
lems that may require City intervention to clarify or clean up an undesirable
set of problems.
In our opinion the primary deficiency of the present code is that it does
not provide enough "teeth" to cause effective enforcement of its requirements,
except by revoking the franchise itself.
In the proposed sections that follow we would recommend consideration of
several sections to increase the City's ability to enforce ordinance require-
ments and to cause system improvements.
o A complaint procedure that requires system testing when
necessary and a corrective procedure required;
ffs o A penalty or liquidated damages section that can be used
to achieve compliance short of trying to revoke a fran-
chise (which is legally and practically difficult to
accomplish);
V-3
o An expanded revocation/termination section;
o A "state-of-the-art" clause that can give some flexibility
in accomplishing future changes in the system;
o A security fund from which to draw upon to pay liquidated
damages if and when they occur; -
o A construction bond to cover both initial construction of
a cable system and future reconstruction or rebuilding of
system;
o A strengthened section dealing with transfers and assignment
of a franchise.
o Servicestandards and requirements to make improvements
when needed;
o A section requiring continuity of service;
o A section requiring periodic performance evaluation sessions;
The second set of recommendations deals with suggestions that will
update the present ordinance to comply with the new federal Cable Communica-
tions Policy Act of 1984.
o New definitions for "Basic Service," "Cable Services,"
"Cable System," and other more minor definitions;
o Grant of authority
o Renewal procedures;
o Required services and facilities;
o Access channels;
o Waiver from ordinance requirements;
V-4
In conclusion we would also recommend that some changes and additions
be made to present wording of some existing sections.
- o Repeal definitions section 8A-1 "CATV" that excludes
"Fay TV" also Section 9b - of Ordinance 855 that also
prohibits "Pay TV";
o Increase application fee (Section 8A-4) from $250.00 to
probably $5,000, or to cover City's costs, whatever they
might be;
o Remove requirement from application (8A -4(e) that requires
a description of every public street that will be used
to construct a cable system;
o Replace Franchise Renewal section (Section 8A-8) with new
federal requirement (see enclosed wording);
o Add broadcaster and copyright liability provision to
insurance requirements and examine if present limits
listed are still adequate;
o Require more specific financial record-keeping regarding
the operating costs and profitability of the Lodi system.
PROPOSED PROVISIONS TO INCREASE ENFORCEMENT CAPABILITY
e1�
■
v -S
b. A Grantee shall maintain a central office within or in close proxim—
ity to the City, which shall be open during all usual business hours, have a
publicly -listed telephone with a toll-free number and sufficient lines; and be
SO operated that complaints and requests for repairs, billing or adjustments
shall be received on a twenty-four (24) hour basis.
C. A Grantee shall maintain a repair and maintenance crew capable of
responding to subscriber complaints or requests for service within twenty-four
(24) hours after receipt of the complaint or request. No charge shall be
made to the subscriber for this service unless such maintenance or repair is
required as a result of damage caused by subscriber. A Grantee may charge
for service calls to the subscribers' home that are not the result of cable
failure upon approval of a rate and equitable procedure by the City..
•i. A Grantee shall establish procedures for receiving, acting upon,
and resolving subscriber complaints to the satisfaction of the City Manager's
Office. A Grantee shall furnish a notice of such procedures to each sub-
scriber at the time of initial subscription to the system and annually
thereafter.
e. A Grantee shall keep a maintenance service log which will indi-
cate the nature of each service complaint, the date and time it was received,
the disposition of said complaint and the time .and date thereof. This -og
shall be made available for periodic inspection by representatives of the City
Manager. All service complaint entries shall be retained on file for a period
consisting of the most recent three (3) years.
v-6
f. When there have been similar complaints made or when there exists
other evidence, which, in the judgment of the City Manager casts doubt on the
reliability or quality of cable service, the City Manager shall have the right
and authority to compel a Grantee to test, analyze, and report on the per-
formance of the system. Such report shall be delivered to the City Manager
no later than fourteen (14) days after the City Manager formally notifies the
Grantee and shall include the following information: the nature of the com-
plaints which precipitated the special tests; what system components were
tested, the equipment used, and procedures employed in said tasting; the
results of such tests; and the method in which said complaints were reso?.ved.
g. The City Manager may require that tests and analyses shall be
supervised by a professional engineer not on the permanent staff of a Grantee.
The aforesaid engineer should sign all records of the special tests and for-
ward to the City Manager such records with a report interpreting the results
of the tests and recommending actions to be taken by a Grantee and the City.
h. The City"s right under this section, shall be limited to requiring
tests, analyses, and reports covering specific subjects and characteristics
s» -,Pd on said complaints or other evidence when and under such circumstances
F
r. she City has reasonable grounds to believe that the complaints or other
1 ideuce requires the': tests be performed to protect the public against
substandard cable service.
v-7
SECTION REFUNDS
a. Subscribers not satisfied that services have been provided as out-
lined in this ordinance and the Franchise Agreement shall be encouraged to
notify the System Manager. The Grantee shall work with the subscriber to
resolve the problem within 48 hours, and upon request by a subscriber, the
Grantee shall credit the subscriber's account on a pro rata basis for loss
of service commencing 48 hours after notification of the Grantee.
b. A grantee shall, at the time of initial subscription to the system,
and annually thereafter furnish a notice to subscribers of their right to a
refund for any loss or interruption of service for 48 hours or more.
SECTION . LIQUIDATED DAMAGES
By acceptance of the franchise granted by the City, a Grantee understands
and shall agree that failure to comply with any time and performance requirements
as stipulated in this ordinance and franchise agreement will result in damage
to the City, and that it is and will be impracticable to determine the actual
amount of such damage.in the event of delay or non performance; the fran-
chise agreement shall include provisions for liquidated damages to be paid
by the Grantee, in amounts set forth in the franchise agreement and chargeable
to the security fund for the following concerns:
a. Failure to complete system construction or reconstruction in accor-
dance with Section and Section , unless the Council specifically
V-8
approves the delay by motion or resolution, due to the occurrence of condi—
tions.beyond Grantee's control, a Grantee shall pay Five Hundred Dollars
($500.00) per day for each day, or part thereof, the deficiency continues.
b. Failure to provide upon written request, data, documents, reports,
information or to cooperate with City during an application process or CATV
system review, a Grantee shall pay Fifty Dollars ($50.00) per day, or part
thereof, each violation occurs or continues.
c. Failure to test, analyze and report on the performance of the system
following a written request pursuant to this ordinance, a Grantee shall pay
to City One Hundred Dollars ($100.00) per day for each day, or part thereof,
that such noncompliance continues.
d. For failure to provide in a continuing manner the types of services
proposed in the accepted application, unless the Council specifically approves
Grantee a delay or change, or the Grantee has obtained modification of its
obligation under Section 625 of the Cable Communications Policy Act of 1984;
Grantee shall pay to the City Five Hundred Dollars ($500.00) per day for each
day, or part thereof, that each noncompliance continues.
e. Forty-five (45) days following adoption of a resolution by the City
Council in accordance with Section determining a failure of Grantee to
comply with operational, maintenance or technical standards, grantee shall pay
to the City Five Hundred Dollars ($500.00) for each day, or part thereof,
that such non-compliance continues.
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V-9
f. Any other action or non -action by the Grantee, as agreed upon between
the City and Grantee, and set forth in the franchise agreement. Nothing in
this section shall preclude further liquidated damages as agreed upon by the
parties in the franchise agreement.
SECTION . FORFEITURE AND TERMINATION
a. In addition to all other rights and powers retained by the City un-
der this ordinance or otherwise, the City reserves the right to forfeit and
terminate a franchise and all rights and privileges of a Grantee in the event
of a material breach of its terms and conditions. In interpreting this ordi-
nance, material provisions shall include all labeled as such and all others,
which, under all the facts and circumstances indicated, are a significant
provision of the franchise agreement. A material breach by Grantee shall
include, but shall not be limited to the following:
(1) Violation of any material provision of the franchise or any ma-
terial rule, order, regulation or determination of the City made pursuant to
gr the franchise;
(2) Attempt to evade any material provision of the franchise or prac-
tices any fraud or deceit upon the City or its subscribers or customers;
(3) Failure to begin or complete system construction, reconstruction
or system extension, or system improvement as provided.under the franchise;
(4) Failure to provide the types of services promised; assuming
Grantee has unsuccessfully pursued whatever recrurse is available under Sec-
tion 625 of the Cable Cormunications Policy Act of 1984;
V-10
(5) Failure to restore service after ninety-six (96) consecutive hours
of interrupted service, except when approval of such interruption is obtained
from the City; or
(6) Material misrepresentation of fact in the application for or ne-
gotiation of the franchise.
b. The foregoing shall not constitute a material breach if the viola-
tion occurs but it is without fault of a Grantee or occurs as a result of
circumstances beyond its control. Grantee shall not be excused by mere
economic hardship nor by misfeasance or malfeasance of its shareholders,
directors, officers, or employees.
c. The City may make a written demand that a Grantee comply with any
such provision, rules, order, or determination under or pursuant to this ordi-
nance and franchise agreement. If the violation by the Grantee continues for
a period of thirty (30). days following such written demand without written
proof that the corrective action has been taken or is being actively and
expeditiously pursued, the City may place the issue of termination of a
franchise before the City Council. The City shall causeto be served upon
Grantee, at least twenty (20) days prior to the date of such a Council
meeting, a written notice of intent to request such termination and the time
and place of the meeting. Public notice shall be given of the meeting and
t
v-11
d. The City Council shall hear and consider the issue and shall hear
any person interested therein, and shall determine in its discretion, whether
or not any violation by the Grantee has occurred.
e. If the City Council shall determine the violation by a Grantee
was the fault of Grantee and within its control, the Council may, by resolu-
tion, declare that the franchise of the Grantee shall be forfeited and ter-.
urinated unless there is compliance within such period as the City Council
may, fix, such period not to be less than sixty (50) days, provided no oppor-
tunity for compliance need be granted for fraud or misrepresentation.
f. The issue of forfeiture and termination shall automatically be
placed upon the Council agenda at the expiration of the time set by it for
compliance. The Council then may terminate a franchise forthwith upon
finding that Grantee has failed to achieve compliance or may further extend
the period, in its discretion.
SECTION . NEW DEVELOPbENTS
a. Subsequent to each Performance Evaluation Session, as set forth in
Section the City Council shall have the authority to c_der a public hearing
on the provision of additional channel capacity by Grantee or #:�^_ the inclusion
V-12
in the Grantee's CATV system of "state of the art" technology or upgraded fa-
cilities. Notice of such hearing shall be provided to Grantee and the Public
not later than thirty (30) days prior to such hearing.
b. If after such hearing, the City Council determines that (1) there
exists a reasonable need and derand for additional channel capacity and/or
state of the art technology or upgraded facilities, and (2) provision has been
made or will be made for adequate rates which will allow Grantee a fair rate
of return on its investment (including the investment requ`:ed to provide the
additional channels and/or the state-of-the-art technology or upgraded facili-
ties), and (3) will not result in economic waste for the Grantee, the City
Council may order Grantee to provide a specified number of additional chan-
nels and/or specified state-of-the-art technology or upgraded facilities.
Without implying any limitations as to other provisions of this ordinance,
this Section is deemed a material provision within the meaning of Section
of this ordinance.
SECTION SECURITY FUND
RM
a. Within thirty (30) days after the award or renewal of a franchise,
a Grantee shall deposit with the City a cash security bond or letter of
credit in the amount of $50,000. The cash bond or letter of credit shall be
used to insure the faithful performance by a Grantee of all provisions of
this ordinance and resulting franchise agreement; and compliance with all
13
division or office of the City having jurisdiction over its acts or defaults
under a franchise and the payment by the Grantee of any penalties, liquidat—
ed damages, claims, liens and taxes due the City which arise by reason of
the construction, operation or maintenance of the system, including cost of
removal or abandonment of any property of Grantee.
b. The cash bond or letter of credit shall be maintained at $50,000
during the entire term of a franchise, even if amounts have to be withdrawn
pursuant to subdivision a. or c. of this section. The Grantee shall keep
the same in force and effect at all times throughout the existence of the
franchise .and thereafter until Grantee has liquidated all of its obligations
with the City that may have arisen from the acceptance of the franchise
ordinance by Grantee or from the exercise of any right or privilege granted
hereunder, including the removal of all poles, wires, cables, ur_derground
conduits, manholes, and other conductors and fixtures incident to the main—
tenance and operation of its CATV system, should such removal be required by
City Council or undertaken by Granted upon the termination of the franchise.
C. If a Grantee fails to pay to the City any compensation within the
time fixed herein; or, fails, after ten (10) days' notice to pay to the City
any taxes due and unpaid; or fails to repay the city within ten (10) days,
any damages, costs or expenses which the City is compelled to pay by reason
of any act or default of the Grantee in connection a frac_..%ise; or,
fails, after ten (10) days' notice by the City of such failure to comply
with any provision of a franchise which the City reasonablq determines can
V-14
be remedied by demand on the cash bond or letter of credit the City may
immediately require payment of the amount thereof, with interest and any
penalties, from the cash bond or letter of credit.
d. The rights reserved to the City with respect to the cash bond or
letter of credit are in addition to all other rights of the City, whether
reserved by a franchise or authorized,by law, and no action, proceeding or
exercise of a right with respect to such cash bond shall affect any other
right the City may have.
SECTION CONSTRUCTION BOND
a. Within thirty (30) days after the award or renewal of a franchise,
a Grantee shall obtain and maintain at its cost and expense, and file with
the City Clerk, a corporate surety bond in a company authorized to do
business in the State of California, and found acceptable by the City Attor-
ney, in the amount of Five Hundred Thousand Dollars ($500,000) to guarantee
the timely construction, rebuild, or reconstruction and full activation of the
CATV system and the safeguarding of damage to private property and restora-
tion of damages incurred with utilities.
The bond shall provide, but not be limited to, the following condition:
There shall be recoverable by the City, jointly and severally from the prin-
cipal and surety, any and all damages, loss or costs suffered by the City
resulting from the failure of a Grantee to satisfactorily complete construction,
rec ild, or reconstruction and fully activate the CATV system throughout the
V-15
franchise area pursuant to the terms and conditions of this ordinance and the
franchise agreement.
b. Any extension to the prescribed construction time limit must be au-
thorized by the Council. Such extension shall be authorized only when the
Council finds that such extension is necessary and appropriate due to causes
beyond the control of a Grantee.
c. The construction bond shall be terminated only after the Council
finds that a Grantee has satisfactorily completed initial construction and
activation or reconstruction of the CATV system pursuant to the terms and
conditions of this ordinance and the franchise agreememt.
d. The rights reserved to the City with respect to the construction
bond are in addition to all other rights of the City, whether reserved by
this ordinance or authorized by law, and no action, proceeding or exercise
of a right with respect to such construction bond shall affect any other
rights the City may have.
e. The construction bond shall contain the following endorsement:
It is hereby understood and agreed that this bond may not be can-
celled by the surety nor the intention not to renew be stated by
the surety until sixty (60) days after receipt by the City, by
registered mail, of written notice of such inter_t to cancel or
not to renew.
V-16
SECTION . TRANSFERS AND ASSIGNMENTS
a. A franchise shall not be sold, assigned or transferred, either in
whole or in part, or leased, sublet, or mortgaged in any manner, nor shall
title thereto, either legal or equitable or any right, interest or property
therein, pass to or vest in any person without the prior written consent of
the City.
No such consent shall be required for a transfer in trust, mortgage,
or other hypothecation as a whole or in part to secure an indebtedness, ex—
except that when such hypothecation shall exceed fifty (50X) percent of the
market value of the property used by the franchisee in conducting the busi—
ness franchise. �ueh consent shall not be withheld unreasonably.
The proposal assignee must show technical ability, financial capability,
legal qualifications and general character qualifications as determined by
the City and must agree to comply with all provisions of the franchise and
such conditions as may be prescribed by Council expressed by resolution.
City shall be deemed to have consented to a proposed transfer or assignment
in the event its refusal to consent isnot communicated in writing to Grantee
within one hundred twenty (120) days following receipt of written notice of
the proposed transfer or assignment.
b. The Grantee shall promptly notify the City of any actual or proposed
change in, or transfer of, or acquisition by any other party of, control of
the Grantee. The word "control" as used herein is not limited to major stock-
holders but includes actual working control in whatever manner exercised.
's:
V-17
Every change, transfer, or acquisition of control of the Grantee shall make
the franchise subject to cancellation unless and until the City shall have
consented thereto, which consent will not be unreasonably withheld. For the
purpose of determining whether it shall consent to such change, transfer or
acquisition of control, the City may inquire into the qualifications of the
prospective controlling party and the Grantee shall assist the City in any
such inquiry.
c. A rebuttable presumption that a transfer of control has occurred
shall arise upon the acquisition or accumulation by any person or group of
persons of 10 percent of the voting interest of the Grantee.
d. The consent or approval of the City Council to any transfer of the
franchise shall not constitute a waiver or release of the rights of the City
in and to the streets, and any transfer shall by its terms, be expressly
subordinate to the terms and conditions of a franchise.
e. In any absence of extraordinary circumstances, the City will not ap-
prove any transfer or assignment of a franchise prior to substantial comple-
tion of construction or reconstruction of proposed system.
f. The City Council reserves the right of "first refusal" to purchase a
cable system at the market value price if and when it is placed on the market
for sale.
g. In no event shall a transfer of ownership or control be approved with-
out successor in interest becoming a signatory to the franchise agreement.
V-18
SECTION SERVICE STANDARDS
a. A Grantee shall put, keep, and maintain all parts of the system in
good condition throughout the entire franchise period.
b. Upon termination of service to any subscriber, a Grantee shall
promptly remove all its facilities and equipment from the premises of such
subscriber upon subscriber's request.
C. Grantee shall render efficient service, make repairs promptly, and
Interrupt service only for good cause and for the shortest time possible.
Such interruptions, insofar as possible, shall be preceded by notice and
shall occur during periods of minimum system use.
d. Grantee shall not allow its cable or other operations to interfere
with television reception of persons not served by Grantee, nor shall the
system interfere with, obstruct or hinder in any manner, the operation of
the various utilities serving the residents of the City.
e. A Grantee shall continue, through the term of the franchise, to
maintain the technical, operational, and maintenance standards and quality of
service set forth in this ordinance and franchise agreement. Should the
City find, by resolution, that a Grantee has failed to maintain these
standards and quality of service, and should it, by resolution specifically
enumerate improvements to be mode, a Grantee shall make such improvements.
Failure to make such improvements within forty-five (45) days of such resolu-
tion will constitute a breach of condition for which the remedy of Section
is applicable. (Liquidated Damages.)
.::
V-19
SECTION . CONTINUITY OF SERVICE MANDATORY
a. It shall be the right of all subscribers to continue receiving ser-
vice insofar as their financial and other obligations to a Grantee are
honored. In the event that a Grantee elects to overbuild, rebuild, modify,
or sell the system, or the City gives notice of intent to terminate or fails
to renew a franchise, the Grantee shall act so as to ensure that all sub-
scribers receive continuous, uninterrupted service regardless of the circum-
stances.
In the event of a change of Grantee, or in the event a new operator
acquires the system, a Grantee shall cooperate with the City, new Gran-
tee or operator in maintaining continuity of service to all subscribers.
I During such period, Grantee shall be entitled to the revenues for any period
during which it operates the system, and shall be entitled to reasonable
costs for its services when it no longer operates the system.
b. In the event Grantee fails to operate the system for ninety-six (96)
consecutive hours without prior approval of the City or without just cause,
the City may, at its option, operate the system or designate an operator until
such time as Grantee restores service under conditions acceptable to the City
or a permanent operator is selected. If the City is required to fulfill this
obligation for a Grantee, the Grantee shall reimburse the City for all reason-
able costs or damages in excess of revenues from the system received by the
.City that are the result of the Grantee's failure to perform.
AWN
V-20
SECTION . PERFORMANCE EVALUATION SESSIONS
a. The City and a Grantee shall hold scheduled performance evaluation
sessions within thirty (30) days of the third, sixth, ninth, and twelfth,
fifteenth and eighteenth anniversary dates of a Grantee's award of the fran-
chise and as may be required by federal and state law.
b. Special evaluation sessions may be held at any time during the term
of a franchise at the request of the City or the Grantee.
c. All evaluation sessions shall be open to the public and announced in
a newspaper of general circulation in accordance with legal notice. Grantee
shall notify its subscribers of all evaluation sessions by announcement on at
least two (2) channels of its system between the hours of 7:00 p.m. and 9:00
p.m., for five (5) consecutive days preceding each session.
A. Topics which may be discussed at any scheduled or special evaluation
session may include, but not be limited to, service rate structures; fran-
chise fee; liquidated damages; free or discounted services; application of
new technologies; system performance;.services provided; programming offered;
customer complaints; privacy; amendments to this ordinance; judicial and FCC
rulings; line extension policies; and Grantee or City rules.
e
V-21
PROPOSED PROVISIONS TO UPDATE PRESENT CODE
Definitions
a. "Access channel" shall mean a single channel dedicated in whole or
in part for local programming which is not originated by a cable company.
b. "Basic Service" shall mean any service tier which include the re-
transmission of local television broadcast signals and Public, Educational
and Government Access Channels.
c. "Cable Services" are defined as the one-way transmission to sub-
scribers of video programming and other programming services together with
subscriber interaction, if any, which is required for the selection of such.
programming and programming services that the cable operator makes available
to all subscribers generally. Examples of cable services include: video
programming, pay-per-view, voter preference polls in the context of a video
program, teletexts, one-way transmission of any computer software, and one-
way videotex services such as news services, stock market information, etc.
Non -cable services would include: shop -at-home, bank -at-home services,
electronic mail, one-way and two-way transmission of non -video data and in-
formation not offered to all subscribers, data processing, video conferencing
and voice communication.
d. "Cablecasting" is programming carried on a cable system, exclusive
of broadcast signals, whether originated by the cable operator or any other
party.
V-22
e. "Cable System," shall mean a facility, consisting of a set of closed
transmission paths and associated signal generation, reception, and control
equipment that is designed to provide cable service which includes video
programming and which is provided to multiple subscribers within a community,
but such term does not include (A) a facility that serves only to retransmit
the television signals of one or more television broadcast stations; (B) a
facility that serves only subscribers in one or more multiple unit dwellings
under common ownership, control, or management, unless such facility or
facilities uses any public right-of-way; (C) a facility of a ccmmon carrier
which is subject, in whole or in part, to the provisions of Title II of the
Communications Act of 1934, except that such facility shall be considered a
cable system to the extent such facility is used.in the transmission of video
programming directly to subscribers; or (D) any facilities of any electric
-,f
utility used solely for operating its electric utility systems.
f. "Local Origination Prograoming" shall mean programming locally pro-
duced by the .Company.
VE
SECTION GRANT OF AUTHORITY
T
a. Successful applicants chosen by the City Council will be granted
the right and privilege to.construct, erect, operate and maintain, in, upon,
along, across, above, over and under the streets, alleys, public ways and
public places now laid out or dedicated and all extensions thereof, and addi
V-23
holes, and other cable conductors and fixtures necessary for the maintenance
and operation in the City of Lodi of a cable system, to be used for the
sale and distribution of cable services to the residents of the City.
b. Any privilege claimed under any such franchise by the Grantee in
any street or other public property shall be subordinate to any prior lawful
occupancy of the streets or other public.property.
c. Insofar as it is not inconsistent with or otherwise preempted by
Federal or State regulations, the City Council also grants the right and
priviledge to successful Grantees to provide non -cable communications ser-
vices. The City Council retains all authority, not otherwise preeempted,
to regulate non -cable communications services to the extent necessary to
assure the delivery of proposed non -cable services, if any, and that they are
in compliance with all regulatory provisions of this ordinance.
d. The construction, maintenance, and operation of Grantee's CATV
system and all property of Grantee subject to the provisions of this ordi-
nance shall be subject to all lawful police powers, rules, and regulations
of the City. The City shall have the power at any time to order and require
Grantee to remove or abate any pole, line, tower, wire, cable, guy, conduit,
electric conductor, or any other structure or facility that is dangerous to
life or property. In the event Grantee, after wr_tten notice, fails or -re-
fuses to act, the City shall have the power to remove or abate the same at
the expense of the Grantee, all without compensation or liability for damages
to Grantee.
V-24
SECTION . DURATION OF FRANCHISE; RENEWAL
a. The duration of the rights, privileges and authorizations granted
in a franchise agreement shall be not to exceed years from the
date a franchise is awarded. A franchise may be renewed by the City upon
application of the Grantee pursuant to ethe procedure established in sub-
section b of this section and in accordance with the then applicable law.
b. Renewal
(1) During the six-month period which begins with the 36th month
before the Franchise expiration, the City may on its ow:i initiative, and shall -
at the request of the Grantee commence proceedings which afford the public
appropriate notice and participation for the purpose of:
(a) Identi€ying the future cable -related community needs and
interests; and
(b) Reviewing the performance of the Grantee under the franchise
during the then current franchise term.
(2) (a) Upon completion of a proceeding under subsection (1), the
Grantee seeking renewal of a franchise may, on its own initiative or at the
request of the City, submit a proposal for renewal.
(b) Any such proposal shall contain such material as the City
may require, including proposals for an upgrade of the cable, system.
C--:3
(c) The city may estaalish a date by such *M11
be submitted.
(3) (a) Upon submittal by the G-racntet of a to the Ctty t%%r
the renewal of the franchise, the City shall provide public nottEt kit
such proposal and, during the 4 -month period which begins on the cvtat+lt+ttv�tt
of any proceedings under subsection (1), renew the franchise or, issue a
preliminary assessment that the franchise should not be renewed and, at tho
request of the Grantee or on its own initiative, commence an admtaiatro ttvv
proceeding, after providing prompt public notice of such pracooding, in
accordance with paragraph (3)(b) to consider whether --
(I) the Grantee has substantially complied with the ma-
terial terms of the existing franchise and with applicable law;
(ii) the quality of the Grantee's servieaa, inclucting signal
quality, response to consumer complaints, and billing practleop , but without
regard to the mix, quality, or level of cable services or other sorvicam
provided over the system, has been reasonable in light of community noods=
(iii) the Grantee has the financial, legal, and technical
ability to provide the services, facilities, and equipment as act forth in
the Grantee's proposal; and
(iv) the Grantee's proposal is reasonable to most tho
future cable -related community needs and interests, taking .into Account the
cost of meeting such needs and interests.
V-26
(b) In any proceeding under paragraph (3)(a), the Grantee shall
be afforded notice and the Grantee and the City, or its designee, shall be
afforded fair opportunity for full participation, including the right to
introduce evidence (including evidence related to issues raised in the pro-
ceeding under subsection (1)), to require the production of evidence, and to
question witnesses. A transcript shall be made of any such proceeding.
(c) At the completion of a proceeding under this subsection, the
City shall issue a written decision granting or denying the proposal for re-
newal based upon the record of such proceeding, and transmit a copy of such
decision to the Grantee. Such decision shall state the reasons therefor.
(4) Any denial of a proposal for renewal shall be based on one or
more adverse findings made with respect to the factors described in subpara-
graphs (i) through (iv) of subsection (3)(a), pursuant to the record of the
proceeding under subsection (3).
(5) If tbq Grantee's proposal for renewal has been denied by a
final decision of the City made pursuant to this section, or has been adverse-
ly affected by a failure of the City to act in accordance with the procedural
requirements of this section, the Grantee may appeal such final decision or
failure pursuant to the provisions of section 635 of the Federal Cable
Communications Policy Act of 1984.
V-27
franchise pursuant to this subsection at any time, and the City may, after
affording the public adequate notice and opportunity for comment, grant or
deny such proposal at any time (including after proceedings pursuant to this
section have commenced). The provisions of subsections (1) through (5) of
this section shall not apply to a decision to grant or deny a proposal under
this subsection. The denial of a renewal pursuant to this subsection shall
not affect action on a renewal proposal that is submitted in accordance with
subsections (1) through (5).
(7) The Grantee shall pay all costs incurred by the City consider-
ing and processing a proposal for renewal as described in Subsections (1),
(3)(a), (3)(c), and (6).
SECTION . REQUIRED SERVICES AND FACILITIES
a. A franchise application shall include a description of the grantee's
system design and a description of programming and services being offered, in-
cluding optional premium services, a description of facilities being proposed
for local origination programming, and facilities being offered to various
community institutions. The offer of programming and services contained with-
in a Grantee's application shall be deemed a binding offer of such Grantee for
and to the benefit of the City and the subscribers of Grantee. In the event
a program originator ceases to provide a service, or in the event the Grantee
determines that other programming or cable services may be of greater benefit
to subscribers, the Grantee may, subject to Subsections b and c, substitute
services.
V-28
b. The system, after the incorporation of such substitute services, shall
satisfy the warranty made by Grantee to subscribers and potential subscribers
in its application for a franchise. The City Council, on behalf of system
subscribers, shall have the right to review any substitution of service that
the Grantee has made and may order a change therein if it determines, after
due hearing on notice, that the warranty has been violated, or that certain
broad categories of video or other, information programs that were cu:;.mitted by
Grantee in its Proposal are not being delivered. Any such order shall issue
only after a public hearing has been scheduled and held; and written notice of
such hearing shall have been provided to the Grantee and to the Public at
least 30 days prior to such hearing. Any such order may be enforced by an
appropriate action in the Courts of California or of the United States. A
Grantee shall not, in relation to this section, be deemed to have waived any
right accorded to a franchised cable television. operator arising under the
First Amendment to the Constitution of the United States.
c. Notwithstanding subsections a and b, a Grantee may, in accordance
with the Cable Communications Policy Act of 1984, upon 30 days' advance notice
to the City, rearrange, replace, or remove a particular cable service required
by the franchise if:
(1) such service is no longer available to the Grantee; or
(2) such service is available to the Grantee only upon the payment
of a royalty required under section 801(b)(2) of title 17, United States Code,
which the Grantee can document:
V-29
(b) has not been specifically compensated for through a rate in-
crease or other adjustment.
Notwithstanding subsections a and b, a Grantee may take such actions
to rearrange a particular service from one service tier to another, or 6ther-
wise offer the service, if the rates for all of the service tiers involved in
such actions are not subject to regulation.
SECTION . ACCESS CHANNELS
a. Each cable system franchised by the City shall provide at least
one governmental access channel dedicated to the City of Lodi; one edu-
cational access channel dedicated to the public school system in Lodi;
and one public access channel to be utilized by the public in accordance
with rules and regulations established by the City Council.
b. If any governmental or educational access channel is being utilized
more than ten hours per day, five days a week between the hours of 6:00 a.m.
and 11:00 p.m. for twelve (12) consecutive weeks; or if any public access
channel is being used 80 percent of the time between 4:00 p.m. and 11:00 p.m.
for twelve (12) consecutive weeks, Grantee shall, upon receipt of wr?tten
notice from City make new channel(s) available for the same purpose(s);
provided, however, that nothing in this paragraph shall require Grantee to
construct additional access channel capacity to the cable system for the sole
r..rnnon ^R .AA4t-4nnsl nhannnl ranarity. Surh re_nuire2Re_nt may be
V-30
access channels until such time as such underutilized or unused channels are
needed for the uses to which they have been dedicated.
c. Whenever any access channel, other than the basic access channels,
required in subsection (a) for governmental, educational and public access,
is utilized less than four (4) hours per day for six days per week for a
continuous period of not less than twelve (12) consecutive weeks, the City .
may permit different or additional uses for said channel. The Grantee may
be permitted to utilize unused access channel capacity under rules and proce-
dures established by the City, however no access capacity shall be utilized
by the Grantee until all other channel capacity on the cable system has been
programmed.
d. Access channels permitted by the City for "interim" use by a cable
operator are to be restored to governmental, educational or public access use
whenever the criteria in paragraph (b) are exceeded for any one of the exist-
ing access channel uses or whenever the demand for use as demonstrated by
records of each access channel indicate that an excessive number of people
or programs are Leing turned away by lack of channel capacity available.
SECTION WAIVERS
a. Any provision of this Ordinance, may be waived, at the sole discre-
tion of the City of Lodi, by resolution of the City Council of the City of
V-31
b. Grantee may submit a request for waiver to the City Council of the
City of Lodi at any time during the franchise term. Such request for waiver
may, at the sole discretion of the City Council of the City of Lodi, be set
for public hearing and a decision shall be made within one hundred and twenty
(120) days following the submission. Procedures for modification of fran-
chise obligations shall be in compliance with Section 625 of the Cable Com-
munications Policy Act of 1984.
c. The City Council may authorize the economic, technical or legal eval-
nation of such waiver request and Grantee shall be required to reimburse the
City foz any expenditures incurred by City in connection with such evaluation.
d. This section is enacted solely for the convenience and benefit of the
Grantor and shall not be construed in such a manner as to create any right• or
entitlement for the Grantee.
APPENDIX A
Satellite Services Available to Cable Operators-- May 1985
t
BASIC SERVICES
ACTS Satellite Network
Christian, family programming
Arts and Entertainment Network
Performing arts, entertainment
BET -(Black Entertainment Network)
Black -oriented entertainment, sports, public affairs
CBN Cable Network (Christian Broadcasting Network)
Entertainment, family programming, Christian shows
CNIi (Cable News Network)
24-hour news, weather, sports, features
CNN Headline News
Newscasts, local news inserts
C -SPAN (Cable Satellite Public Affairs Network)
Live coverage of Congress, public hearings,
call -ins
Country Music Channel
Country western music video
Discovery.Music Channel.
24-hour entertainment
Don King Sports & Entertainment Network
Monthly sports, concerts, specials
ESPN
24-hour sports and sports -related programming, business news
EWTN (Eternal World Television Network)
Catholic religious, entertainment programming
Financial News Network
Live financial, business programming
Genesis Story Time
Children's storybooks
BASIC SERVICES (continued)
The Learning Channel
Adult education
Lifetime
Human interaction/information shows
MSN—The Information Channel (Modern Satellite Network)
Public service information channel
MTV (Music Television)
All—stereo video music channel
NCN (National Christian Network)
Multi—denominational religious programming
,s
NJT (National Jewish Television)
Cultural, religious and public affairs programming
The Nashville Network
Country music entertainment
Nickelodeon
Programming for children and teenagers
PTL (Praise the Lord) The Inspirational Network
Interdenominational family programming
Pacific, Cable Network
Variety programming
Prime of Life Network
Programs geared to adults 45 and older
SIN (National Spanish Television Network)
Spanish—language series, specials, news
SPN (Satellite Programming Network)
Lifestyles programs, international, educational, sports
video music, classic movies
Santa Fe Communications
Catholic, family programming service
The Silent Network
Originally produced programming for the hearing impaired
- G
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YAC' SERVICES
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Classics
BRAVO
internstional films, performing arts
Ci;iemax _
`"tore films, documentaries, original music, comedy progress
3be Disney Channel
family -ori nted entertainment
G*UVI Zion
S is #ri�angusg�e lsrogrem�¢isig -
BD9 (some box Off ice)
Movies, sports, documentaries, eatert.aimeat
3iome Sports Entaertsinment
Eegiots3 sports
mom 'Seam Sports
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:owl sporting events