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HomeMy WebLinkAboutMN-CABLECOMM-1992-05-12 City of Ithaca Cable Commission Minutes of the Meeting of May 12, 199 , Present:Commission Members Mary Euell Jim Ferwerda,Rick Gray Peter Hess,Tom Terrizzi ary y, , ACC General Manager Barbara Lukens 1.Meeting was called to order at 7:35 pm by Mary Euell 3; 2. Minutes of 3/10/92 were accepted as read 3. Chairs report a)Commission Chair Peter Hess met with Mayor Ben Nichols. Discussion included the current state of negotiations with ACC,the petition of the residents of Titus Towers for rate relief,and the regional seminar sponsored by the New York State Cable Commission(NYSCC)which was attended by Peter,Tom Terrizzi,and Rick Gray. The Mayor agreed to have the City join the National Association of Telecommunications Officers and Advisors(NATOA)on ayear's trial basis. Peter and the Mayor discussed expanding the City's use of the municipal access channel,possibly having a charactergenerator located at City Hall for producing amunicipalbulletin-board. b)Peter reported on the NYSCC regional seminar at which presentations were given on public access,franchise renewal,the federal regulatory framework,consumer protection,assessment of franchise fees,and new cable technologies. Documents from the seminar have been placed in the Commission files at City Hall. c)Correspondence from Ellen Day, of Lansing,and Barry Hayes,of Trumansburg,was reviewed. 4.There were no announcements 5.ACC report(copy attached) Barbara Lukens,General Manager of ACC,gave the report. Among items discussed: a)A contract with Ed Sargent for establishing a commercial leased-access radio station was mailed to Sargent on5/13. ?>?f b)John Fogarty,ACC attorney,has sent a letter to Chuck Guttman.City attorney, stating ACC's position regarding assessment of franchise fees. ACC will assert that the franchise fee need not be included in city gross revenues on which the fee is calculated. The commission noted that this is contrary to the position of the City and the NYSCC(more below). 6. There was no public comment 7.CAAB Report a)Jean Dorancy and Ed Sergant protested the decision of the Access Coordinator that the programs they produced,which consist of music videos supplied by record companies,are to be considered syndicated programming. Currently syndicated shows may be bumped three weeks prior to cablecast. Lauren Sefanelli, the Access Coordinator,said these shows contain alot of repeated material,and might also classify as reruns. A committee of the CAAB met to discuss these issues and recommended that classification be based on percentage of local and new material in a show. It is felt that this will be less of a concern when a second access channel opens. b)The Capital Budget plan passed unanimously by the CAAB(more later). c)The Educational Access Committee met on4i23(minutes attached). The committee elected officers and discussed the definition of educational institutions forthe purpose of determining eligibility to use the educational access channel. Discussed adding the qualification"chartered"tothe definition of an educationalinstitution. ' r 8. Old business a)Barbara reiterated the ACC position that they are unwi I tins to negotiate the funding of access related equipmentunless the negotiations include setting standards for establishing new access channels. Peter and Tom repeated the Commission's position that the franchise guarantees the City of Ithaca nine working access channels and that it is the prerogative of the City to determine when new channels need to be activated. The City will continue to pursue this matter on its own. b)The Commission questioned ACC regarding their position on franchise fee assessment and its conflict with the NYSCC Statement of Policy,Docket No.90302 which states that"franchise fees cannot be stated as a separate line item on subscriber bills as direct charges on subscribers". Barbara said ACC will contest that policy;details will be in Fogarty's letter. The commission will pursue this matterthroughtheCityAttorney's office. 9. New Business a)The Commission discussed the possibility of putting a government bulletin-board on the municipal access channel when otherprogramming is not being cablecast. This would involve placing a character generator at City Hall or some other government agency which was on the I-Net. Rick Gray suggested thatthis might appropriately be located at the county building,since the county better represents ACC's coverage area. Barbara asked whether a body was going to be set up to administer the Municipal access channel analogous to the committee that now has responsibility for the educational access channels. b)Access Capital Budget: -Jim discussed several equipment choices in the budget where he proposed options that he thought would bemore cost-effective and/or betterlong-term investments. -Barbara expressed her concern that there was no allocation in the budget for spare equipment, emergencies,test equipment,or installation of anew routing switcher. -The commission voted to recommend the capital budget proposal passed by the CAAB,with the provision that modifications may be made regarding specific equipment choices. Itis our understanding that some funds will be reserved until later in the year in the event they are needed to accommodatethe concerns Barbararaised. c)The petition of residents of Titus Towers to the Commission was presented. (A copy of the petition is in the Commission files.) The petition asks the Commission to review the rates that ACC is currently charging Titus residents,many of whom are on fixed incomes. Barbara said that if ACC could send a single monthly bill to the Ithaca Housing Authority for cable service to all units in Titus Towers,the Housing Authority would be charged a bulk rate which would be significantly lower per unit than current rates. The Housing Authority could then re-charge residents for cable service,or its cost could be included in the rent. Peter will call Janet Ernisse,Dir.of Resident Services at the Housing Authority, and advise her to contact Chris Doyle at ACC for further discussion. -Minutes submitted by Peter Hess N" • John E.Fogarty n 1E © c� OWE Associate General Co 1 203 328-0629 �iiiJJJJ MAY { 31992 �' p __ May 12, 192 American Television& Charles Guttman, Esq. Communications Corporation City Attorney A Time Warner Inc.Company City of Ithaca Corporate Headquarters 108 East Green Street 300 First Stamford Place Ithaca, New York 14850 Stamford. 06902 6732 � 2003 3 332828-0600 0 RE: City of Ithaca - Franchise Fees Dear Mr. Guttman: This will respond on behalf of American Television & Communications Corporation, d/b/a American Community Cablevision ("Cablevision") to your letter of January 22, 1992. I appreciate your patience in waiting for this response. In your letter you object that Cablevision's rate for basic service increased beyond the maximum 5% permissible without regulatory approval. Your calculation, however, as your letter explains, is based on including within the rate charged for basic service the amount attributable to the franchise fee paid to the City of Ithaca. Your position would seem to be that the franchise fees are part of the rate charged by Cablevision and therefore part of Cablevision's revenues. For the reasons set forth herein, it is Cablevision's position that monies collected from subscribers and paid as franchise fees are not revenue to Cablevision and are not part of the rate charged for Cablevision's services. Cablevision,as required by the terms of its cable television franchise agreement with the City of Ithaca, collects and remits to the City of Ithaca five percent of its "gross City revenues" (as defined in the Franchise) as a franchise fee. Cablevision lists the appropriate amount of the franchise fee on each customer's bill as a separate item distinct from the charge for the cable television services the subscriber receives. On a quarterly basis, Cablevision pays to the City the exact amount it has received in franchise fee payments from its customers. Thus, Cablevision is, in effect, acting as agent for the City of Ithaca in collecting the franchise fee from its customers and remitting it to the City. In accordance with generally accepted accounting principles, Cablevision reflects such franchise fees on its books as nonrevenue liabilities collected from the subscriber and payable to the City. Cablevision does not treat the franchise fees collected from subscribers as gross revenues of Cablevision and, thus, does not collect or pay five percent of these monies as franchise fees. Put succinctly, Cablevision does not pay a fee on the amount it collects as franchise fees. Providing entertainment and information choices The City claims that, contrary to Cablevision's practice, the amount collected by Cablevision in franchise fees should be treated as part of Cablevision's gross revenues and subject to the five percent fee. It is Cablevision's position, as detailed below, that (1) the funds it collects as franchise fees are not "gross revenues" as defined in the Franchise; (2) Cablevision's treatment of the franchise fees which it collects as nonrevenue liabilities is in accord with generally accepted accounting principles; and (3) under the provisions of the Cable Communication Policy Act of 1984 ("the Cable Act"), monies collected as franchise fees and paid to the City are not gross revenues and imposing a franchise fee on these monies would violate the franchise fee limitation set in Section 622(b) of the Cable Act. I. Monies collected as franchise fees are not gross revenues as defined in the Franchise. The Franchise at Section 1.18 defines "gross City revenues" as follows: "Gross city revenues means all revenue derived directly or indirectly by the Grantee and by Grantee's affiliates from services provided within the City via the Cable Communications System." The definition of "gross City revenues" is limited expressly to revenue derived from services provided on the cable system. Under a fair reading of the Franchise, money collected as franchise fees should not be included within this definition. A franchise fee which is simply passed through to the consumer cannot be said to derive from the services provided by a cable operator to its customers via its cable system. It is not part of the consideration paid for cable services or for the operation of the cable system by customers. That consideration is set by Cablevision and is separately indicated on the bill. Franchise fees should not qualify as revenues derived from services provided by Cablevision. II. Cablevision's practice is in accord with generally accepted accounting principles. As previously indicated, Cablevision's accounting treatment of the monies it collects as franchise fees is in accord with its view of the meaning of the Franchise. Cablevision records these monies as liabilities and does not recognize them as revenues. In so treating these monies, Cablevision is acting in accord with generally accepted accounting principles. Attached is a letter of November 9, 1989 from accountants Ernst & Young so stating. III. Under the terms of the Cable Act.monies collected as franchise fees are not "gross revenues." 2 Section 622 of the Cable Act provides, in relevant part, that: (b) For any twelve-month period, the franchise fees paid by a cable operator with respect to any cable system shall not exceed 5 percent of such cable operator's gross revenues derived in such period from the operation of the cable system. (c) A cable operator may pass through to subscribers the amount of any increase in a franchise fee, unless the franchising authority demonstrates that the rate structure specified in the franchise reflects all costs of franchise fees and so notifies the cable operator in writing. (e) Any cable operator shall pass through to subscribers the amount of any decrease in a franchise fee. (f) A cable operator may designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill. Section 622(b) allows the franchise fee to be assessed only on "gross revenues derived ... from the operation of the cable system." As argued with respect to similar language in the Franchise, money collected as franchise fees is not derived by Cablevision from the operation of the system; rather it is money collected by Cablevision on behalf of the City. Thus, the terms of the Franchise, which do not include money collected as franchise fees within gross revenues, are consistent with Federal law. Other provisions of Section 622 are consistent with the position that franchise fees are a pass-through charge assessed by the franchising authority and not part of the consideration received by the cable operator from operation of the system. Section 622(0 authorizing cable operators to separately itemize franchise fees on customer bills evidences the view implicit in the Cable Act that a franchise fee is a charge passed through to the subscriber which is in addition to and not a part of the charge a customer pays for cable services. Separate itemization is, of course, the way sales taxes are generally treated on consumer bills and Section 622(1) indicates that franchise fees are to be regarded as a similar charge. Section 622(c) and (e) further indicate that franchise fees are to be directly passed through to customers by the cable operator and are not to be treated as part of revenue received in payment for cable services. It should be noted that these provisions are relevant only in circumstances where there is regulation of the rate charged for cable services. Section 622(c) would be meaningless where the cable operator is exempt from rate regulation, since the franchise would not specify a rate 3 structure, or if it did, such language would be preempted. Similarly, the requirement in subsection (e) that mandates a pass through of any decrease in the franchise fee can only have meaning in a rate regulated environment since an unregulated operator would always be free to raise its rates. Both sections make clear the intent of the Act that the portion of the customer's bill attributable to franchise fees and the portion attributable to the charges for cable services are distinct and that the portion attributable to the franchise fee is indeed a straightforward pass through which directly rises or falls as the franchise fee increases or decreases. The use of the term "pass through" in the Act itself emphasizes that the franchise fee revenues collected from customers are the funds of the City and the cable operator's function is merely to collect these funds on the City's behalf. Subsection (c) ensures that the rate regulated cable operators can pass through any subsequent increase in the franchise fees without having to seek permission for a rate increase from the franchising authority in those limited situations where a rate regulated cable system has voluntarily chosen not to pass through its franchise fee in place on the effective date of the Cable Act. In short, in enacting a provision which allows even a rate regulated cable operator to pass through any franchise fee increases on top of the fixed rate, subsection (c) evidences Congress' intent to protect the general right to pass through the entire franchise fee by ensuing the availability of the pass through in a situation where the practice might be interpreted to conflict with local rate regulation. Similarly, the purpose of subsection (e) is to ensure that the franchise fee reductions are passed on to subscribers, rather than being absorbed by the cable operator as profit, in those limited situations where a rate regulated cable operator voluntarily had chosen not to pass through its existing franchise fee. In sum, Section 622 of the Cable Act strongly supports Cablevision's practice. The franchise fees are in addition to, distinct from, and not a part of the rate charged for cable services; the monies paid as franchise fees are not consideration for any cable service and therefore not revenue to the cable operator. To treat the portion of the subscriber's bill attributable to franchise fees as revenue on which franchise fees must be paid would not only be inconsistent with the intent of the Cable Act, it would in the case of the Ithaca franchise violate the prohibition of Section 622(a) on the payments of franchise fees in excess of five percent of gross revenues. Since the portion of the customer's payment attributable to franchise fees is not part of Cablevision's gross revenues and Cablevision already pays five percent of its gross revenues as franchise fees, payment of any percentage of the money paid as franchise fees would result in a payment in excess of five percent of gross revenues in violation of Section 622(b). 4 If, after your review of Cablevision's position, you wish to discuss this issue further we are, of course, willing to do so. Again, my thanks for your courtesy and patience. Very truly yours, John E. Fogarty C r JF:pg ithaca.fe 5 City of Ithaca Cable Commission Minutes of June 9, 1992 meeting, 7: 30pm City Hall Attending: ICC: Peter Hess, Mary Euell , Jim Ferwerda, Rick Gray ACC: Chris Doyle Public: Bill McCormick 1 . Call to order 2 . Approval of minutes of May 12, 1992 meeting. (Approved as submitted. ) 3 . Chairperson' s Report Hess asked if there had been any further developments in the discussion of providing a discounted rate to the residents of Titus Towers based on bulk service for the complex. Doyle indicated that he had talked with Janet Ernisse, building manager, about the options, but that he had not heard back from her about whether the residents were interested in proceeding with the plan. 4 . Announcements No announcements. 5 . ACC Report ( see attached) 6 . Public Comment McCormick expressed his concern that access staff have not been neutral in their responses to callers asking about program content issues . He suggested that access staff should immediately refer such callers to ACC customer service representatives so the call can be properly logged and the response can be officially identified as ACC's position on access program content. McCormick complained that off-street parking space near the access facility has been severely reduced by construction in other parts of the lot bounded by Newscenter7 , the Access facility, and ACC' s general offices. Particularly he expressed concern that there is no parking for handicapped access users. The ICC agreed to inquire with the City to determine the requirements for hadicapped parking in the vicinity of the Access facility. 7 . CAAB Report ( see attached) 8 . Old Business CAAB members asked if the fact that the Access capital spending plan was passed at the May 12, 1992 ICC meeting indicated that the dispute between ACC and the City over use of the 2% fund had been resolved. It has not. Hess proposed to keep this issue on the agenda of ICC meetings until it is resolved. 9 . New Business Rick Gray inquired about the possibility of having the new Sciencenter be a node on the I-net. Doyle suggested that Sciencenter representatives should contact ACC to pursue this . The meeting was adjourned at 8 : 45 pm. Minutes submitted by Jim Ferwerda e { . AMERICAN COMMUNITY CABLEVISION REPORT TO ITHACA CABLE COMMISSION JUNE 9, 1992 o ACC has added a Customer Service Representative during the following hours : 6-9pm Friday 12-10pm Saturday 6-10pm Sunday This person is available to answer the repair line instead of the answering service. In addition he is able to take orders for PPV movies for customers who do not have touch tone phone service. o The Monitor Channel will be going dark on June 28, 1992 . The Christian Science Church, which started the service as an adjunct to its "Christian Science Monitor", has been operating the station at a significant deficit. o ACC is sending a billstuffer newsletter in July/ August to all customers including info on access channel offset to ensure they are aware of the channel off-set on channels 53-55. o The City of Ithaca has approved a zoning variance which will allow ACC to place two satellite receive antennas at their downtown site, thus improving reliability and service.