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HomeMy WebLinkAbout1999-11-09 - AGENDA REPORTS - MEDIAONE CABLE TRSFR TO AT&T (2)CITY OF SANTA CLARITA AGENDA REPORT City Manager Item to be presented 0: Steve Stark NEW BUSINESS DATE: November 9, 1999 SUBJECT: MEDIAONE TRANSFER TO AT&T CORPORATION DEPARTMENT: Administrative Services RECOMMENDED ACTION City Council adopt Resolution, changing control of the cable franchise from MediaOne to AT&T Corporation. BACKGROUND The action before Council is to authorize a franchise transfer from MediaOne to AT&T Corporation. Legally, to do this, a City must evaluate three qualifications to approve a franchise transfer from one company to another. The three qualifications that must be met are: Legal: Is AT&T Corporation legally qualified to operate in the State of California? Economic: Is AT&T Corporation financially sound to continue cable operation in the City of Santa Clarita? Technical: Is AT&T Corporation technically qualified to continue operating the cable system in the City of Santa Clarita? A City must find that the new company meets all three qualifications before it can approve a franchise transfer. As a result of staffs review, it has been determined that AT&T has met all qualifications for the City Council to approve a franchise transfer. Staff arrived at this conclusion by reviewing the required Federal Communication Commission Form 394, furnished by both AT&T and MediaOne. In addition, just as Council directed staff the last time a franchise transfer took place, a public meeting was held on October 21, 1999. This meeting provided residents the opportunity to comment on cable services in the City by MediaOne and Time Warner Communications, even though only MediaOne is involved in the transfer. At that meeting, staff heard from residents and organizations that were interested in specific issues related to cable services in the City. Ao'opted._ ► -� -�� '� J'1 MEDIAONE TRANSFER TO AT&T CORPORATION November 9, 1999 - Page 2 Several residents voiced their concerns about customer service, pricing, and choice of programming. The cable companies had representatives at the meeting and were able to answer questions and take names to follow up on specific issues that residents were interested' in resolving. Many of the issues that were brought up were related to MediaOne's upgrade/rebuild. For the most part, many of the issues raised were similar to the updates that staff is bringing to the Council on a weekly basis. Staff believes that we have made significant progress and will continue to closely follow MediaOne's activities as they rapidly approach the end of construction. In addition, residents came to the meeting to express their desire to have AT&T continue providing funding for the public access studio. Many residents simply showed up to voice their support and thank the cable companies for their work at the public access station. Residents were assured that funding of the public access channel would continue under the franchise agreement. The agreement states that each cable company is required to provide resources to operate a public access studio. AT&T will have the same obligation as MediaOne. Staff does not expect anything to change as a result of approving the franchise transfer. One issue related to delivery of cable that was discussed at the meeting was "open access." The Council might recall that staff drafted a memo on the issue several weeks ago for your review (Attachment A). In summary, broadband access means the cable companies would have to allow any Internet service provider (ISP) access to their cable lines to provide Internet service to anyone who chooses cable as their "pipeline" to the Internet. This would be in addition to the telephone lines. In the case of Santa Clarita, there are advocates who want ISP's to have access to the broadband cable network in the City. However, the cable companies are taking the position that it is illegal for a municipal government to regulate cable networks through a franchise agreement. There are strong arguments on both sides of the broadband issue. In fact, staff has spent much time reviewing this policy with the City Attorney. However, staff has determined that it would not be in the interest of the residents of the community to pursue a broadband policy at this time. Staff came to this conclusion for two reasons. First, the law is unclear on whether a City can amend a franchise agreement during a franchise transfer. The City of Portland adopted an open access ordinance that was challenged in court by AT&T. As a result, on June 3, 1999, the United States District Court upheld the City of Portland's ordinance. However, the case is not yet binding and is currently on appeal to the United States Court of Appeals for the Ninth Circuit. Moreover, AT&T has given every indication that they are prepared to defend their position in court if other jurisdictions pursue open access policies as part of franchise transfers. MEDIAONE TRANSFER TO AT&T CORPORATION November 9, 1999 - Page 3 Second, legislation has been introduced in Congress this year that would require the Federal Communications Commission (FCC) to establish technical standards for connecting cable systems to the Internet. What this would mean is that a decision on the broadband access issue will be made within the year. Since any legal efforts that local governments may be making on this issue will be nullified by the federal law, staff believes that it would not make sense to take a strong position on broadband access at this time. Without taking a strong position, the City would still benefit from any decision that will be made in court or in Congress. This position is consistent with every city in the State of California that has a franchise agreement with MediaOne. For the above reasons, staff is recommending that the City Council approve the franchise transfer resolution, changing control from MediaOne to AT&T Corporation without adding any provisions. Staff will continue to monitor the broadband access issue in Congress and the Courts and plans on advising the Council at a future date. ALTERNATIVE ACTIONS Do not adopt resolution, changing control of franchise transfer from MediaOne to AT&T Corporation. Other action as determined by Council. FISCAL IMPACT MediaOne will reimburse the City for any expenses that we have incurred in transferring the franchise, including staff and legal cost. ATTACHMENTS Cable Franchise Transfer and Open Access Memo Resolution of Franchise Transfer SS:FO:hds w.cMeblhsfr CITY OF SANTA CLARITA Iev 0_) ZT111 WM u165_IVAVPDift- i TO: Mayor Darcy and Councilmembers FROM: George A. Caravalho, City DATE: October 22, 1999 SUBJECT: CABLE FRANCHISE TRANSFER AND OPEN ACCESS On October 21, 1999, the City held a public meeting to provide a forum for residents to comment on cable service in the City of Santa Clarita. This was held in conjunction with the review of MediaOne's cable franchise transfer to AT&T. The meeting allowed residents to ask questions of both Time Warner Communications and MediaOne. One issue related to delivery of cable that has recently been publicized in the press is "open access." This refers to a policy where any service provider has the right to access any communication system to deliver their product to the ultimate consumer. For example, Internet companies such as America Online, Earthlink, and MindSpring could access any system that allows them to deliver Internet services to a consumer's home. In the case of Santa Clarita, there are advocates who want Internet Service Providers (ISP's) to have access to the broadband cable network in the.City. . Some key businesses that have promoted the idea of "open access" for the cable network are Pacific Bell, GTE, and America Online. In addition, a group calling themselves the Open Access Alliance, made up of select Southern California businesses and organizations, has lobbied local governments to incorporate an open access provision in cable franchise transfers and renewals. Currently, there are no cities in California that have included this provision in a franchise transfer with MediaOne. This would include the two largest media markets in California, City of Los Angeles and San Francisco. On the other side of the debate, the Federal Communications Commission (FCC), AT&T, and an organization called "Hands Off the Internet" have taken the position that it is illegal for a municipal government to regulate cable networks. through a franchise agreement. They point out that under Federal law, the FCC regulates cable companies in every jurisdiction in the United States. Therefore, having a City government require a cable company to open its network to ISP's is inconsistent with Federal telecommunication policies. In addition, opponents of open access believe that specifically forcing cable companies to open their networks to ISP's is bad for consumers. They believe that Internet users will be hurt by the lack of choices available to access the Internet. In fact, in response to cable companies offering Internet access, most of the phone companies are investing millions of dollars to develop alternatives to cable technology. For example, phone companies already offer Digital Subscriber Lines CABLE FRANCHISE TRANSFER AND OPEN ACCESS October 22, 1999 Page 2 (DSL) that are just as fast as cable lines in delivering Internet into customers' homes. In the near future, it is possible that consumers will have multiple pipelines for accessing the Internet, including wireless communication. As it stands today, the debate whether municipal governments have the authority to add an open access provision to a franchise transfer has still not been determined. This legal issue may ultimately be decided in a highly publicized court case between the City of Portland, Oregon, and AT&T Corp. The City of Portland adopted an open access ordinance that was challenged in court by AT&T. As a result, on June 3, 1999, the United States District Court upheld the City of Portland's ordinance. However, the case is not yet binding and is currently on appeal to the United States Court of Appeals for the Ninth Circuit. This contentious issue is far from being resolved. In fact, many of the experts in the telecommunications field believe that this issue may end up being decided;by Congress within the next year. There is already a bill introduced in Congress that would require the FCC to establish technical standards for connecting cable systems to the Internet. CITY STAFF RECOMMENDATION Staff will be recommending that the City of Santa Clarita not add an open access provision to the upcoming franchise transfer from MediaOne to AT&T. Staff believes that based on research and advice from the City's franchise attorney,.it would be unwise for the City to add such a provision to its franchise agreement at this time. The transfer agreement will come before Council on November 9, 1999. Staff will recommend approval of the transfer agreement based on the three criteria regulating a cable transfer. JUSTIFICATION AT&T has made it clear that they are prepared to defend their position in court if necessary, as demonstrated with the City of Portland, Oregon. Moreover, AT&T has stopped the rollout of their new services and products in two communities that have pursued open access. Staff believes that AT&T will continue this policy until the law is clearly defined. Our recommendation is that the City of Santa Clarita not involve itself in a potential lawsuit over an issue that will be resolved with either the City of Portland lawsuit or Federal legislation. As an alternative, the City would simply add language in the transfer resolution that would allow the Council to revisit the issue in order to comply with any court decision or applicable Federal law. The City would then benefit without incurring any costs of litigation or staff time. Staff is convinced that this is the best approach, given the set of circumstances. This action is consistent with all cities in California at this time. GAC:FO:hds frank\=blopn