Cable Franchise Renewals (File No. 031750)

OLA#: 035-03

LEGISLATIVE ANALYST REPORT

TO: Honorable Members of the Board of Supervisors

FROM: Giuliano Castellano, with Gabe Cabrera

DATE: February 24, 2003

SUBJECT: Municipal Use of Private Contractors for Cable Franchise Renewals (File No. 031750)

Summary of Requested Action

Motion (sponsored by Supervisor Sandoval) requesting the Office of the Legislative Analyst (OLA) to survey other major cities such as Berkeley and Santa Cruz to find out whether they have used outside contractors or consultants to negotiate their cable franchise agreements. Also requesting the OLA to consult with the Department of Telecommunication and Information Services (DTIS) and AccessSF on this matter.

Executive Summary

The City's current cable franchise agreement with Comcast is due to expire December 31, 2005. DTIS, the Board of Supervisor's designated negotiator, is already working on the renewal of this agreement based largely upon a community needs assessment and telephone survey. DTIS staff advised the OLA that they have the knowledge, experience and resources to successfully negotiate a new agreement with Comcast. However, they intend to use consultants (as they have in the past) for specific matters during the renewal process. For instance, they are in the process of preparing two separate Requests for Proposals (RFPs) to hire consultants for the community needs assessment and telephone survey.

During the renewal process, the City Attorney's Office will provide DTIS with legal advice regarding local and federal telecommunications law. The City Attorney's Office will itself use legal consultants to advise it on telecommunications law.

The Board of Supervisors should nevertheless urge DTIS and the City Attorney's Office to continue to seek help from consultants on technical and legal matters regarding the renewal process.

Notably, the cities of Berkeley and Santa Cruz in the recent past hired a consultant (The Buske Group) to help them establish Public, Education & Government (PEG) access management corporations, not for assistance with cable franchise renewals. However, The Buske Group and several other consultants are available to help the City with its renewal process as discussed later in this report.

Background

A franchise renewal involves numerous tasks and coordinated efforts of cable experts, City staff, elected officials, and local residents. The renewal involves an examination of the past performance of the cable service provider, an exploration of community telecommunication needs and interests and the actual negotiation process. Generally, twenty-six months are needed to negotiate renewal of cable franchise, according to DTIS staff. The following is a summary of the steps that the City needs to make in order to negotiate a renewal:

1. Prepare for the cable franchise renewal process

  • Involve municipal authorities (in this case, DTIS, the City Attorney and Telecommunications Commission);
  • Analyze local and federal law.1

2. Review of the cable operator's past performance (i.e., Comcast)

  • PEG access review;
  • Finance review;
  • Public participation through Community Coalition Partners representing community, independent media, schools, colleges businesses, interest groups and stakeholders; and
  • Analyze the quality of the service.

3. Identify new community telecommunication needs

4. Prepare for and conduct negotiations

  • Prepare the initial draft of the new franchise agreement (a proposal);
  • Negotiate;
  • Review;
  • Determination of the contract; and
  • DTIS Executive Director makes recommendation to Board of Supervisors.

5. The Board of Supervisors passes either:

  • An ordinance renewing the proposed franchise, or
  • A resolution proposing to deny the renewal of the franchise.

The Role of a Franchise Renewal Consultant

Generally speaking, a franchise renewal consultant works closely with designated City staff including (for instance) a Cable Administrator, Cable Communications Commission, City Manager and City Attorney. Our research shows that the role of a franchise consultant may vary from city to city. Small cities, without a telecommunications authority, typically hire consultants to help them in the negotiation process as whole. Larger cities, like San Francisco, may already have the knowledge, experience and resources to successfully self-manage the negotiation process and a consultant's role may therefore be limited.

Current Practice

Currently, the City has two separate cable franchise agreements: one with Comcast, the other with RCN Telecom Services.

  • Comcast is the owner of the Television Signal Corporation (TSC), which is one of the City's Cable Television Franchise Grantees. The term of the City's agreement with TSC was initially set to expire in 1985, but in 1980 the Board of Supervisors extended the term for 20 years from 1985. This agreement is due to expire December 31, 2005.

  • RCN Telecom Services, a New Jersey-based telecommunications company, is the City's other Cable Television Franchise Grantee. On July 25, 2000, the Board of Supervisors approved a 13-year cable franchise agreement with RCN. This agreement is due to expire in 2013.

Both agreements were negotiated by DTIS and the City Attorney's Office (the Board of Supervisor's designated negotiator and legal counsel respectively).

During the negotiation process, DTIS and the City Attorney's Office dealt directly with the cable companies. However, they consulted with 1) The Buske Group and Management Resources (cable franchise consultants) on technical matters and 2) Miller & Van Eaton (a private law firm) for legal assistance on telecommunications law.

DTIS and the City Attorney are already working on the renewal of the City's contract with Comcast based largely upon a community needs assessment and telephone survey. DTIS staff advised the OLA that they have the knowledge, experience and resources to negotiate a new agreement with Comcast. However, they intend to use consultants (as they have in the past) for specific matters during the renewal process. For instance, they are in the process of preparing two separate RFPs to hire consultants for the community needs assessment and telephone survey. The Appendix section of this report contains brief descriptions of consultants, which DTIS may solicit for the aforementioned assessment and survey.

Other Jurisdictions

The cities of Berkeley and Santa Cruz hired The Buske Group in the recent past to help them establish PEG access management corporations, not for assistance with cable franchise renewals. Nevertheless, the following section describes the nature of the work performed by The Buske Group on behalf of the two cities.

City of Berkeley - The Buske Group had the following mandates:

  • develop a workplan and timeline reflecting the tasks that the Board of Conveners must undertake;
  • conduct a daylong briefing workshop for the Board of Conveners;
  • attend meetings of the Board of Conveners and all committees, guiding the group and serving as an information resource to them;
  • develop draft articles of incorporation and bylaws for the Access Management Corporation that provides access services in Berkeley;
  • facilitate a process that results in the identification of the initial Board of Directors for the Berkeley Access Management Corporation;
  • prepare guidelines for the development of a five-year capital and operating plan;
  • develop an outline and summary of cable access policies and procedures;
  • develop an outline of key areas included in the access management contract between the City and Access Management Corporation; and
  • facilitate an orientation for the initial Board of Directors of the Access Management Corporation.

The City of Santa Cruz - The Buske Group provided a wide range of assistance regarding the initiation and development of PEG access including:

  • PEG access shaped on community needs and interests;
  • review the franchise agreement, ordinances, and other documents that described the obligations of the cable operator;
  • identify the equipment and facility needs for PEG access;
  • evaluate the suitability of the facilities and equipment provided by the cable operator for PEG access purposes;
  • develop and recommend a PEG access management model, to include a management entity, articles of incorporation and bylaws, training curriculum, budget, staffing, PEG access services to be provided, and equipment and facilities;
  • identify the roles of the City and County government, Cable TV Commission, and the PEG access management entity; and
  • assist the Board of Directors of the PEG access in the process of selecting its initial Executive Director.

The OLA could not obtain information about the costs of the above projects. However, The Buske Group estimates that those costs were substantially smaller than those which would be incurred during a cable franchise renewal. According to the Buske Group, it currently charges between $85,000 and $100,000 for assistance with renewals. This includes costs for focus groups, telephone surveys, analysis of the previous franchise agreement, stakeholder interviews and report writing.

Conclusion

In closing, DTIS believes that its in-house staff would be able to successfully negotiate a new cable franchise agreement between the City and Comcast utilizing consultants for the community needs assessment and telephone survey. The Board of Supervisors should nevertheless urge DTIS and the City Attorney's Office to continue to seek help from consultants on technical and legal matters regarding the renewal process.

Appendix

The Buske Group is a consulting firm in Sacramento that offers a broad range of consulting services in many areas, including:

  • Franchise renewal
  • Cable regulation and policy
  • Cable rate regulatory assistance
  • Cable company franchise compliance and performance reviews
  • Development of management plans for public, educational or government access channels and operations

The Buske Group provides consulting services to various municipalities throughout United States and particularly within California, where it has provided consulting services to more than 60 cities.

Miller & Van Eaton is a law firm located in Washington D.C with an additional office in San Francisco. It offers services in telecommunications law for public and private sector clients. Miller & Van Eaton provides counsel and legal representation on a wide range of business and regulatory matters that relate to communications industry, including cable television, broadcasting, telephony and wireless communications.

Lare & Associates LLC, located in Seattle, Washington, provided clients expertise in the following areas:

  • Telecommunications
  • Computer Networks
  • "Vendor Neutral" Consultation
  • Fiber optic and Category 5 cabling infrastructures
  • Project Management

Lare & Associates also provides integrated solutions to meet its clients' systems short and long term applications needs.

Weiss Serota Helfman Pastoriza Guedes Cole & Boniske, P.A. is a Florida-based law firm specializing in commercial litigation, land use and real estate law, employment and labor law, governmental law, and governmental relations. The firm devotes a substantial portion of its practice to the representation of governments, and persons and entities who do business with local governments. The firm serves as city attorney to numerous municipalities in South Florida and performs special counsel services to many other governmental and quasi-governmental entities. The firm also represents some of America's largest corporations, including American Airlines, Hertz Corporation, Nextel, NBC and BFI.

Fox, Smolen & Associates, located in Austin, Texas,provides clients with assistance in dealing with rapidly evolving energy and telecommunications markets. Its mission is to provide our clients with accurate and timely planning and regulatory assistance.

MuniCom, located in Portland, Oregon, provides consulting assistance to public jurisdictions and other organizations in all areas of cable and telecommunications franchising, system overbuilds, system ownership changes, franchise renewal, franchise negotiations, community ascertainment, PEG access, institutional telecommunications and franchise administration. MuniCom has worked in several franchising projects where commercial or municipal overbuilds are planned, and level playing field considerations are critical.


TeleDimensions International, Inc. (TDI) is based in Cincinnati, Ohio. Through its subsidiary, TeleDimensions, Inc., TDI specializes in providing telecommunications public policy consultation to the public sector. It assists clients in the development of telecommunications consulting and planning services designed to move organizations into the Information Age. Its telecommunications service products include both strategic and transitional planning, design, and implementation of telecommunications infrastructure management, operational and organizational systems

Rika Welsh (individual) works with The Buske Group on community needs assessment activities and focus group sessions. Ms. Welsh has over 25 years of experience and has been involved in the design, implementation and management of many PEG Access centers.

Other consulting groups, which may be solicited by DTIS for assistance during the renewal process, include: 1) Management Resources, 2) Telecommunications Management Corporation, 3) Communications Support Group, Inc. and 4) Community Media Visioning Partners. The OLA attempted but was unable to obtain any information on these groups.

1 Including, but not limited to, the 1996 Federal Telecommunications Act and Chapter II of San Francisco's Administrative Code.