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HomeMy WebLinkAboutTime Warner Cable Information 1 of 2 TIME WARNER CABLE L:VMENTOF 81999 January 4, 1999 PLA 1 ELOPMENT H. Matthys Van Cort Director of Planning and Development City of Ithaca 108 East Green Street Ithaca,NY 14850 Dear Mr. Van Cort: In a telephone call with Jean Rice of Rice Williams Associates, I have been able to determine answers to the questions that I had proposed to your office in my letter of October 7th regarding various information that you had requested from Time Warner Cable. With regard to the technical information requested for Rice Williams: 1. Attached is a binder containing a copy of the most recent FCC proof of performance conducted in August 1998. 2. Tab#1 of the proof contains a diagram of system fiber layout and test points. The first page of each of the test results (1-7) indicates the number of devices in the cascade at the test point. 3. A list of test equipment available is included in tab#1 4. Information regarding distribution amplifiers is included under tab#4. 5. Information regarding design specifications is also included in tab#4. 6. Locations and coordinates for the headends is included in tab #1. 7. Channel lineup is included in tab#2. 8. The HFC design of the system precludes an answer to this questions. All cascades in the system are limited to either 6 to 7 devices. S19 iiis[ �9at Stn-r; li/.na, A) 1 1'nU r<•i rU `_.�:v`5 9. As I indicated to you im my letter of October 7th, due to the level of detail contained in our system design prints,this is not possible. On a single sheet, none of the requested data would be readable. A complete set of system design prints is available for inspection at our Ithaca office during regular business hours. 10. Contacts for information regarding the system are: Phil Smith General Manager Time Warner Cable 519 West State Street Ithaca,NY 14850 (607)272-7875, ext 3329 Mike Ives Technical Operations Manager Time Warner Cable 519 West State Street Ithaca,NY 14850 (607)272-7875, ext 3321 Steve Miron Vice President, Operations Syracuse Division, Time Warner Cable PO Box 4733 Syracuse,NY 13221 (315)463-2288, ext 208 Fred Pappalardo Vice President, Finance Syracuse Division, Time Warner Cable PO Box 4733 Syracuse,NY 13221 (315)463-2288, ext 270 With regard to your letter requesting information on franchise fee calculation,this information is stored and produced at our Divisional office in Syracuse,New York. I forwarded your request to Mr. Fred Pappalardo, Vice President of Finance, Time Warner Cable, Syracuse Division, PO Box 4733, Syracuse,NY 13211. Mr. Pappalardo was contacted on December 16, 1998 by Mr. Paul Langley of Rice Williams Associates regarding the franchise fee audit they wish to perform as part of the franchise renewal process. We do not yet have any firm dates for the review but Rice Williams did indicate it would unlikely be before February. We have requested that Rice Williams give us at least 2-3 weeks advance notice to prepare for the audit. With regard to you request for customer complaint letters for the past two year,please find attached to this letter a binder containing letters received by this office, separated by municipality, and our response to each. You will also find copies of telephone complaints filed directly with the New York State Department of Public Service and our response. If there is anything else that I can help you with,please feel free to contact my office. Sincerely, �L Phil Smith General Manager Time Warner Cable Ithaca cc: with attachments Rice Williams Associates 209 Elden Street, Suite 200 Herndon, VA 20170 cc: w/o attachments Hon. Alan Cohen Mayor, City of Ithaca Steve Miron VP of Operations Time Warner Cable, Syracuse Division Fred Pappalardo VP of Finance Time Warner Cable, Syracuse Gary Matz Senior Council Time Warner Cable, Stamford, CT CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 � f DEPARTMENT OF PLANNING AND DEVELOPMENT PoRAO H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: 607/274-6550 Fax: 607/274-6558 To: Inter-Municipal Cable Commission Cable Franchise Negotiating Committee Ithaca Area Cable Consortium From: Pat Vaughan, Chair of the PEG Access and I-Net Task Forces Subject: Final Reports of the PEG and I-NET Task Forces Date: February 2, 1999 Members of the PEG Access Task Force and I-Net Task Force have been working since September to draw together information on these two complicated topics from a variety of sources. What is included here are final reports in summary style for these two working groups, plus the materials that support those summaries. We hope that this format will make the major points of each report easily understandable and accessible, and will also permit more extensive examination of questions for those with more particular interest in these topics. Task Force members identified stakeholders for the areas covered in these reports, and have continued to add to this stakeholder list as they became aware of others with concerns in these areas. We welcome additional comments from those who were inadvertently excluded. The work of the PEG Access Task Force was often interwoven with that of the I-Net Task Force. We have presented these as two separate reports,by two separate groups, but many of the issues raised here are very closely related. Hardware and infrastructure issues continued to bubble to the surface throughout the deliberations of both groups. The technology in this area continues to evolve at a breathtaking rate, and Task Force members find themselves in a difficult situation. We are aware that too much contract specificity in a rapidly changing technical environment is unwise,but we also realize that vague contract language can lead to serious problems in interpretation and implementation. Members of the PEG Task Force are aware of the controversial nature of some access programming, and have wrestled with solutions which will preserve First Amendment freedoms while protecting the rights of individuals who choose not to be exposed to "An Equal Opportunity Employer with a commitment to workforce diversification." �� material they deem offensive. The Task Force recognizes that responsibility for solving this problem generally falls outside the scope of the franchise contract. The PEG Task Force believes that an informed citizenry is essential to a democracy, and the continued enhancement of access to the media by government, educational institutions and the public is important in making information readily available to all citizens. We believe that such access should not be confined only to the largest population centers,but rather that provision should be made for access in many of the smaller communities which surround the city. The current franchisee has demonstrated an admirable commitment to the educational community, and both Task Forces hope that this commitment can be expanded during the term of a future franchise contract. The two school systems that are linked via the I-NET to the rest of the community rely on this connectivity as a basic operational and educational tool. We hope that in future years other school systems might gain access to this valuable asset. Members of the Task Forces have a vision of a technological future which will require our children to have basic familiarity with this kind of interconnectivity and with the techniques for using this medium effectively. The existence of the I-Net and its easy accessibility insure that our children will develop a mastery of this increasingly important subj ect. The I-Net Task Force recognizes that although this network may occasionally experience problems, its presence is extremely important to the institutions that it links. Maintaining and enhancing the I-Net was a theme that echoed throughout the group's meetings. The I- Net is truly the"tie that binds"many sectors of the community: schools, various levels of government, and not-for-profit agencies. By providing these links, the I-Net fosters inter- municipal cooperation and a more complete integration of community services. Members of the Task Forces wish to express their thanks for the assistance they received from the many people whose insightful comments made these reports possible. We also wish to thank Jeannie Lee of the Ithaca City Planning Department and Wendy Skinner of the Tompkins County Public Information Office for their invaluable help in compiling, and editing the report and in coordinating our efforts. cc: Jean Rice, of Rice, Williams Associates Jean Currie, Partnership for an Electronic Future (PEF) Electronic Future Committee Members (EFC) PEG Task Force Members I-NET Task Force Members The Final Report of the I-NET Task Force I-NET Task Force Members: Pat Vaughan, Chair; Chuck Bartosh; Judy Boggess; Jean Currie; Kevin Feeney; Cynthia Lapier; Janet Steiner; and Jeannie Lee, staff. Contributor: Dean Eckstrom. Current Status of the I-NET Users and Use: The current Institutional Network(I-NET) system, constructed by Time Warner Cable as required under the 1988 City of Ithaca Cable Franchise, is a coaxial cable network connecting the public, educational, and not-for-profit institutions in the County. The following is a list of the sites that are connected to the I-NET system: 1. Alternative Community School 2. Belle Sherman School 3. Beverly J. Martin School 4. Boynton Middle School 5. Cooperative Extensions of Tompkins County 6. Cornell University(McFadden Hall) 7. Dewitt Building 8. Dewitt Middle School 9. Fall Creek School 10. Fire Central 11. GIAC 12. Ithaca City Bus Garage 13. Ithaca City Hall 14. Ithaca City Youth Bureau 15. Ithaca City Police Headquarters 16. Ithaca City Streets and Facilities 17. Ithaca City Water& Sewer 18. Ithaca College (Roy Park Building) 19. Ithaca High School 20. Northeast School 21. Sciencenter 22. South Hill School 23. Southside Community Center 24. Tompkins County Courthouse 25. Tompkins County Library 26. TST BOCES The I-NET is heavily utilized and depended on by the above institutions for both its intra and inter-net data transmission capabilities. There are currently 8,500 users on the network and 1,700 web enabled CPUs connected to the I-NET. 02/10/99 1 System Description: The INET system is a separate coaxial cable system that runs to a different set of locations than the regular entertainment cable system, though some of the locations are common between the systems. Unlike the subscriber entertainment system which has been upgraded to a hybrid fiber coax system and had its frequency range extended, the INET is coax with the exception of the one leg up to BOCES, which has been converted to fiber. The INET is a midsplit 450 MHz system, with the path inbound to the head end covering frequencies ranging from 5.75 to 173.75 MHz(28 channels), a guard band from 174 to 216 MHz for cross over filtering, and a path outbound from the head end ranging from 216 to 450 MHz. (39 channels). Currently two channels in each direction are used to support the RF modems used by the PEFnet with translators for inbound to outbound located at the head end. Based on recent readings there are currently 6 video signals, 2 data signals, and two unknown signals on the inbound spectrum occupying 10 of the possible 28 channels. There are 4 video signals, 2 data signals and 3 unknown signals on the outbound frequency spectrum, occupying 9 channels of the possible 39 channels. Other channels may be in use for video when portable equipment is moved to various locations on the INET. The PEFnet currently uses 4 mbit/sec modems at the user sites that are owned by the individual participants in the PEFnet. The translators for the inbound to outbound paths that are in place at the headend are also owned by PEF. Operations and Management: The current I-NET operation is maintained through a cooperative approach between Time Warner and the I-NET users/PEF. Collective expertise is needed to operate a network of this topographic scale,heterogeneous technology and size. The many differing pieces of equipment and hardware and software infrastructure are owned and operated by different institutions of the PEF. The PEF, Partnership for an Electronic Future, was created in 1997 after the County urged the development of a consortium as a mechanism to share services and costs, which were being borne entirely by the County and ICSD at the time. The PEF consortium is made up of public, educational, and not-for-profit institutions. The charter members are as follows: Cayuga Medical Center, City of Ithaca, Cornell University, County of Tompkins, Ithaca City School District, Ithaca, College, Lansing Central School District, Newfield Central School, South Central Regional Library Council, and the TST BOCES. The goal of PEF is to provide connectivity, to assure quality of service at the most cost- effective price available and to share expertise and approaches to common problems faced by all members. There are many areas where collaboration and cost savings are possible, including: local communications links, Internet services, software licensing, equipment procurement, outsourcing, training, and voice telephone service. 02/10/99 2 To gain focus one must recognize that there are two worlds involved in the current I- NET. The world of data transfer and digital system and the world for radio frequency video. To the data world the I-NET appears as long cable that one plugs the ethernet into, and to the video world it appears as a pair of TV channels. Both views are in fact correct and both are needed to maintain a functioning I-NET in the current system. There is currently no fixed performance standard. It is not clear what standard would make sense. For instance, the consortium members continuously run a number of performance monitors that can detect and record any outage within a matter of seconds. Such"outages" can be merely routine data bottleneck, a problem or routine interruptions on a member's equipment, or problem upstream of the I-NET at the ISP or even much further beyond. The current franchise requires that Time Warner respond to I-NET repair calls within two hours. To further complicate the matter, some locations require continuous access to other locations in order to perform specific network operations. An outage at one site (most often due to maintenance of hosts or power failures) can cause users at one or many other sites to have the perception that the INET or some other service is down without any ability to perceive the true root problem. Examples of this include: 1) Library patrons' inability to browse,perceiving the INET/Internet is down, when the County domain name server in the Courthouse is in fact off line, 2) Many ICSD computers receive boot-up information(DHCP) from the District Office causing them to believe the network is entirely down when in fact a server at the District Office is offline. Unfortunately the list of interdependencies like this are numerous, as this is the very basis by which resource sharing over networks and among member institutions can be most effective. Maintenance is currently conducted by a combination of automated monitoring tools, network diagnostic tools, and problem escalation. The Future There are several issues in the future which will have an impact on the I-Net and its use by the educational and governmental community participants in Ithaca: • As electronic technologies become more ubiquitous and networking in general more prevalent, use by the community will only increase. There will be ever increasing traffic on the I-Net both in volume and in bandwidth. • At the same time as we must think globally, the importance having a networked local community will increase; local educational, governmental, and not-for-profit agencies will enhance services, decrease costs, and improve the skills and knowledge base of the local community. 02/10/99 3 • The amount of information in electronic form will increase dramatically- data, written material,narrative, images, video, audio. This electronic content will be one reason for the increased traffic noted above. • Multimedia will be an increasingly important form of electronic content both in education and in government. • New technologies in hardware, software, and networking will require parallel developments in the I-Net. Computers will be bigger and faster in terms of capability; institutions will increasingly use sophisticated applications and data, applications will use integrated technologies such as the multi-media noted above. • There will be increasing connectivity of multiple networks; the I-Net must have the capability to be an integral part of such a sophisticated global network. • There will be increased need for authentication and security on networks and computer systems to make sure that those who should have access will have it, and those who should not, do not. Future I-NET Needs Maintain existing infrastructure and service: At minimum, the existing I-NET infrastructure should be maintained and continue to be provided as a free service to the not-for-profit community. Due to the high volume of use the task force feels it can not afford to lose any capacity. At times, all of the currently available bandwidth is in use with the current modems/channels. As bandwidth hungry applications such as video and multimedia become more commonplace in the schools,we will rapidly outstrip our current capabilities. This can be dealt with in several ways. More Bandwidth: • We can use better modems. New designs that use more efficient encoding schemes are able to deliver up to 27 mbits/second inside a 6 MHz channel. We need the flexibility to embrace these modem improvements, including the ability to swap out the modems as well as the translators at the head end as we need to. However there is a limit to how far that can be extended. At some point we will need to use more channels to carry the required bandwidth. • We can use additional channels with existing or future single channel modems in any combination,but these require routers or multiplexers to combine the bandwidth from each of those channels. At some point there will likely be higher bandwidth modems available that don't conform to the artificial 6 MHz video channel width, instead using 10, 12, 18 MHz of bandwidth to provide 50-100 mbps of single modem bandwidth (ie 27 mb/sec times 3, six MHz channels= 81 mb). To accommodate such possible future developments, we believe we need to move the INET away from the concept of video channels towards the concept of allocated bandwidth. 02/10/99 4 • Contiguous channels. PEF needs to have specific blocks of contiguous bandwidth in both the inbound and outbound paths defined so that we may use them either in a channelized format as we do today with the Zenith'channelmiser'modems, or in a non-channelized format, if desired,with future technologies. We would recommend we request a minimum of 30 MHz contiguous bandwidth in each path, such as 11.75- 41.75 MHz inbound and 246-276 MHz outbound with no restrictions on how we utilize the bandwidth. Stability/Reliability/Staffing: In order for the I-NET to be a useful resource it must be a stable and reliable system. As we become more reliant on our computers over time, the stability and reliability will need to increase as well. Already we rely on it to conduct everyday business,network management, software installation, and system back-ups. The basic reliability of the infrastructure has not been a major issue,but there are other concerns dealing with the management and maintenance of the system. • More relevant than a target uptime is the response time associated with a failure in the system. The critical hours of operation are from about 8am-5pm. An extended downtime after and before the critical hours would not affect the users as severely. Time Warner is required under the current franchise to respond to I-NET repair calls within two hours. • Response time standards: The inherent problem associated with response time is that management is distributed between different entities. Coordination of all the separate entities involved during a failure is sometimes the largest barrier to resolving the problem. We need to establish a chain of command/protocol plan for Time Warner to follow when there are problems with the system. In the past, getting access to the headend has proven difficult and this increases the time the system is down. • A possible solution could be a staff person provided by Time Warner whose sole responsibility would be the maintenance of the I-NET. The person would work very closely with a user management group such as the PEF (Partnership for Electronic Future). A chain of command will still need to exist in case the staff person is not available. • Another possible solution is a staff person provided by the user management group such as PEF. (Time Warner could agree in the franchise document to contribute funds toward the staff person's salary.) Time Warner would have to allow this person access to all the necessary areas needed to maintain the system. Time Warner may have liability concerns with this method. • Time Warner should monitor the I-NET and keep a trouble log, which must be accessible to the system users and PEF. • Time Warner should allow the user management group, such as the PEF, the freedom to operate the system in a manner that will be efficient and effective to the user groups. See section titled "Fewer Impediments" for further detail. 02/10/99 5 Fewer Impediments: Currently an IP packet protocol is used on the links to support email, ftp,html, and various other services. It is difficult to project what may develop over the 10-year course of the next franchise period. Five years ago most people had never heard of the World Wide Web or HTML, now nearly every TV advertisement includes a URL. With that in mind, we must be careful not to be limited in the services we can provide using the bandwidth provided to INET and PEF. We must have the freedom to change protocols and services at will to provide the best service to our organizations. Certainly we expect growth in multimedia communications, including video, high resolution still pictures, and audio. Games and simulations currently in use on the net use force feedback joysticks to provide the beginnings of tactile communication. In ten years, standard coursework in our schools may involve participating in Virtual Reality scenarios with stereo video, stereo audio,tactile and possibly even olfactory information passed across the network. Another example might be to extend the current Pegasys model,where a tape is made and played four times and then archived, unavailable to be watched without scheduling the total use of a VCR and an analog video channel for its duration. If those tapes could be digitized and stored on a server,they could be called up over streaming video technologies for view on a shared channel at any time, with no human intervention required. They would be available to the local audience for a more extended period than is now possible, and they would also be available to the world via the internet. We must be careful to avoid language in the agreement that confines us to a model of bandwidth use that precludes our ability to move forward with the technology and pioneer or embrace new services. Likewise, we must have the freedom to interconnect the INET with other networks that support the community's goals. Currently we are connected to the Internet and to the Cornell backbone. In the future we may need to be connected to various other networks, such as a clump of schools in the country linked with their own wireless network, or to a countywide network of town halls on whatever infrastructure they can afford, to allow them to stream digital video in support of county meetings. We must have language that clearly affords us the ability to link to whatever networks we see fit to join. Additional I-NET Drop Sites: If members of the Ithaca Area Cable Consortium in the outlying municipalities desire an I-NET drop there should be a way to accommodate them. The following is a list of the Cable Consortium members: • Town of Ithaca • Town of Caroline • Village of Trumansburg • Village of Dryden • Village of Cayuga Heights 02/10/99 6 • Village of Freeville • Town of Groton • Town of Ulysses • Village of Lansing • Town of Lansing • City of Ithaca. ➢ From the above list the City of Ithaca and the Lansing Central School District are the only ones currently connected to the I-NET. ➢ The different municipalities should be consulted on the exact sites of the drops. (Ex. if they want their fire hall, a municipal building, and or their schools connected.) Other sites for consideration: • Cass Park Ice Rink • Chamber of Commerce • Cherry Street Industrial Park • County Airport • County Human Services Building • County Mental Health Building • County Public Health—Biggs B • County Solid Waste &Recycling Center • CSMA(Community School of Music and Art) • ICSD Bus Garage • Red Cross Building • Sewage Treatment Plant • The State Theater • Stewart Park (The above list is not prioritized. It is in alphabetical order.) We realize it may not be practical for Time Warner to extend the INET physically to all of these sites. In the cases where an I-NET drop is not possible, the regular subscriber entertainment cable system could be utilized to serve the same function. Time Warner should consider making a channel pair(one upstream, one downstream) available to carry PEF data networking on the subscriber infrastructure. With the recent upgrade and additional channels available, allocating a channel pair to carry high speed data to extend PEF throughout the county, would seem a cost effective means of supporting INET initiatives. At sites where neither of these approaches is possible, we would reserve the right to extend the network to those locations using whatever technology we choose (fiber, coax, and wireless) and to connect those extended sections back into the INET. Miscellaneous If at sometime in the future Time Warner decides to abandon the I-NET it should become part of the public infrastructure. This will eliminate the need for the user community to build a redundant system paralleling the I-NET. 02/10/99 7 The Final Report of the PEG Task Force PEG Task Force Members: Pat Vaughan, Chair; Jim Blizzard; Ben Curtis; Jean Finley; Harvey Gitlin; Robin Palmer; Wendy Skinner; Jeff Spence; Gossa Tsegaye; and Jeannie Lee, staff. Government Access: This section is based primarily on interviews with municipal officials—analyzes government access needs and potential, and recommends improvements. Expanding the capabilities of government access cable clearly serves the public, and we recommend that the negotiators gain firm commitments from Time-Warner on as many of the following issues as possible. The recommendations of this task force are prioritized,based on the following criteria: • Enhancement of economic infrastructure/economic development potential • Health and safety issues • Potential cost-savings to governments, hence taxpayers • Making government activities more open and accessible to all citizens Recommendations: Many of the issues facing governments in regard to cable access relate to improvements in the infrastructure that will permit either additional sites to come on line or will facilitate monitoring of remote equipment or sites. Additional issues include assuring adequate facilities and equipment available for government broadcasts or other uses the maintenance of equipment provided under the franchise agreement, and provisions for inclusion in upgraded technologies. It is important that all municipalities in the county, not just City and County governments,have an opportunity to benefit from technological advances or infrastructure improvements agreed to in the franchise negotiations. 1. Additions to infrastructure: Install cable extensions to "dark" areas of the City and County. The City's Planning Department has expressed strong interest in cable access for the Cherry Street Industrial Park and its proposed expansion areas, the South West Land Use Area, and to any parts of Inlet Island which do not currently have cable access. Equally important are residences in the Towns and Villages. Many rural areas of the County are not well served by Time- Warner and should be supplied with more line extensions so that more residents can receive local government programming. Add essential government sites to the I-Net. The Ithaca Fire Department would like to have broadcast capability at its training center on Pier Road, which is rapidly evolving into a regional facility. The department envisions broadcasting training sessions from Pier Road which could be received in fire stations around the County. City officials also want to make sure that all City-owned structures are connected to the I-Net. County 02/10/99 1 government must also be consulted for its list of desired I-Net connections (of top priority are the new Public Library and the Human Services Building). A provision must be made for I-Net drops in municipal buildings built or acquired in the future, and all I-Net connections must be made to the inside walls of buildings and must provide two-way, full-motion, full-screen video/audio live-origination, cable-programming connections. Municipalities outside the City must also be included in any discussions of additional I- Net connections. A recent informal survey of 18 municipal officials* indicated strong interest by many municipalities for government access cable services. Connections are needed in town and village halls, fire halls, and other locations where public business is conducted. Officials from the Town of Ithaca in particular have expressed a strong desire to have cablecasting services similar to those of the City and County. Provide capability for remote monitoring. Telemetry from remote sites is very important, as the City, County, and other public institutions, such as Bolton Point, upgrade or increase the number of remotely monitored sites, e.g. pumping stations, landfills, and water tanks. Officials planning for these remote installations also stress the need for send- and-receive capabilities for these sites. County officials have expressed strong interest, and would like to be consulted about, a data transmission system that would allow for monitoring of data generated from closed landfills,pavement temperature systems, building operations systems, and interactive traffic control information systems. City traffic planners would like to improve the monitoring and flexibility of traffic signals in the downtown area by piggybacking on the cable infrastructure in that area. Send-and- receive capability is required, and overhead installations, except in areas of Collegetown where overhead lines prevent fire department access, are acceptable. City engineers have also requested additional drops in the downtown area to handle traffic signal sensing devices. Remote monitoring services should be made available to other municipalities that request it. Local transportation planners would also like to be consulted about a need for connections to bus shelters and parking garages for security and communications purposes. 2. Improvement and expansion of government access services: High-quality broadcasts are essential to building and maintaining viewership of government access programming. Tompkins County cablecasts are of noticeably superior quality to City of Ithaca cablecasts. City cablecasts are accomplished with inadequate equipment that hampers the Time-Warner-supplied crews from doing a good job. The result is a lesser quality broadcast that reflects poorly on the government access channel as a whole. Several improvements are essential for upgrading City Hall broadcasts, including a separate control room and additional equipment. Staffing problems also need to be addressed. Towns and Villages that request government access services must be provided with adequate equipment, connections, and provisions for staffing that will assure a high standard for programming, or funding for that purpose. If technically possible, Time Warner should also supply government access programming to other cable companies serving Tompkins County residents. 02/10/99 2 Provisions must be made for maintenance and replacement of Time-Warner-supplied equipment. A clear arrangement with Time Warner for maintenance and scheduled replacement of equipment is needed. One possible solution is to contract with BOCES or another third-party provider. 3. Accommodating_growth: Planning and adequate funding for expansion of government access services needs to be built into a franchise agreement. Municipalities outside the City need to be served, with current and future technologies, according to their requests. Current users need to be able to increase both quality and quantity of programming to meet community needs. An additional government access channel is needed. Scheduling conflicts sometimes cause one live meeting broadcast to be superceded by another. The overflow can sometimes be carried by another channel,but there is no way to notify viewers of the switch. If additional meetings are to be broadcast under a new franchise agreement, one government channel will not be enough. An additional government channel is needed immediately. When HDTV technology arrives, at least one 4-part channel must be allocated to government access. Also, all government access channels should be continue to be included in the lowest-cost/most-subscribed service. Training and equipment to match new technologies must be made available in the future. Franchise language should include the possibility of municipal uses for new cable technologies, such as video return (reverse channels), and video compressing or video streaming. Municipalities should automatically be included in, or offered opportunities to piggyback on, new or upgraded technologies—including those which have not yet emerged—when it can be shown a public need will be served. BACKGROUND INFORMATION History of Government Access in the Time-Warner cable system: Programming for Time Warner's government access Channel 53 started in 1992. A Government Access Cable Commission(GACC)was established to set policy and direction for the use of the channel. The GACC, discontinued in 1995, had countywide membership and set a precedent for intermunicipal coordination of cable issues. The by- laws that it formulated are still in place and because they anticipated more intensive use of government access channels than has yet materialized, will probably serve well in the future. Channel 53 averages 30-35 hours a week of programming consisting mainly of live cablecasts and taped replays of City of Ithaca and Tompkins County meetings. Taped reports from NYS legislators, teleconferences downloaded by Cooperative Extension, and some edited magazine-style programming are also broadcast. City of Ithaca meetings (Common Council plus three committee meetings a month) are cablecast using equipment and staff supplied by Time-Warner. County meetings are cablecast with equipment supplied by Time-Warner and the County, but staff is paid for by the County, through a contract of around $24,000 annually with Cooperative 02/10/99 3 Extension. The County maintains a control room/editing suite in the County Courthouse from which it originates live cablecasts, operates a video bulletin board, and operates all playback of taped programs for the channel. The bulk of the equipment used by the County is on loan from Time-Warner, but other costs, for equipment repair or purchase, for example, are paid for by the County. Educational Access: Higher Education: Ithaca College is, and will probably continue to be, the leading education cablecaster in the area. IC's video communications program has a strong partnership with the Time- Warner system that it wants to maintain and expand. More video drops and more connectivity between buildings at the campus and the Time-Warner hub would enhance the IC program and would also add more venues for community programming. In addition to IC, the other colleges in the area need opportunities for access. In particular, TC-3 —which offers career-oriented video education—is very interested in tapping into services that could be provided by Time-Warner. BOCES: BOCES programs in Continuing and Adult Education, Special Ed, vocational training and other programs could greatly enhanced by the addition of Time-Warner supplied resources. Public Schools: Ithaca High School has a thriving video program that trains both students and adults through classes, professional development workshops, and summer media camps. Trained individuals often go on to produce useful educational and community programming. Video equipment has also been placed by Time-Warner at the Alternatives Community School and Boynton Middle School. The schools have a list of needs that includes regular maintenance of existing equipment, equipment upgrades, ability to relocate underutilized equipment, live cablecasting for Board of Education meetings, and new sets of equipment and video drops for all public schools that request it and will use it. Cooperative Extension: Cooperative Extension, already on the I-Net, is a major potential producer for relevant, locally-oriented, and useful educational programming. Extension needs adequate video production equipment and technical support by Time-Warner. Interconnectivity: The task force recommends that all major educational institutions in the County have one or multiple connections to Time-Warner's hub, and they should also have connections to each other through an expansion and upgrade of the I-Net or other means. 02/10/99 4 More channels: One educational channel is inadequate to handle increasing programming. At least one additional educational channel is needed. Public Access: Main Studio Needs Enlargement. Redesim The small size and proportion of the main access studio severely limit the types of programming that can be produced. The long,narrow shape cannot accommodate desired community programming such as dance performances, choral concerts, drama, live theater, telethons,public meetings, etc. Access Center Must Be Centrally Located: The studio site must: be located in downtown near the Time Warner physical plant hub, have ample off-street parking,be on the city bus lines, and handicapped accessible. More Equipment is Needed: The Task Force recommends that production equipment donated by Time Warner include full equipment for two large and one small studios, several automated studios, and at least two easy-to-use portable studios. With minimal expense and training, the automated studios will make access available to many more individuals and organizations. Equipment Must Be Maintained, and Replaced When Outdated: All donated or loaned equipment must be maintained by Time Warner. Timely maintenance, replacement, and technology updates (such as digital replacing analog) for all access studio equipment during the course of the franchise must be assured. Studio Hours and Staffing Need to Be Increased: The current 60 hours of operation(3-11:30 pm, seven days a week) do not allow maximum use of access facilities or encourage daytime use by not-for-profits. To serve a broader population, studio hours and staffing should be significantly increased. Additional Video Drops Are Needed: Video drops are needed at key locations around the City as well as in the surrounding municipalities so that portable studios can be used by not-for—profits and the public. Free. Public Internet Access Needs to Be Increased: Time Warner should continue to provide free high-speed Internet access services to the Tompkins County Library, all town libraries and other locations in sufficient number as requested by the institutions. The Task Force also recommends a franchise-specified number of high-speed Internet terminals at the main access studio. Access to Free Speech Radio is Needed: The task force recommends that Time Warner provide public access FM radio capabilities at the main access studio(s) and selected libraries or community centers. 02/10/99 5 Regional Access is Needed: Time Warner facilities in other counties should be permitted to cablecast videos produced at the local access studio, and this Time Warner facility will permit the cablecast of videos from other Time Warner service areas as well as videos from areas of New York State served by other cable providers in all cases either as physical tapes or as a digitized signal. Viewer Programming_Options Are Needed: The Task Force recommends the following policies to accommodate both free speech rights and informed customer-viewing choices: 1) Instituting some countywide community-controlled channels. Producers must agree to abide by standards determined by a countywide community advisory board. 2)Time Warner Cable should be required to provide to any customer, free of charge, up- to-date timed, channel-blocking filters. 3) Time Warner should cablecast and also post on the Internet up-to-date schedules with program descriptions. 4) Instituting some single-community controlled channels—which would be cablecast only to specific municipalities and available only to customers living in that community. 5) Maintain separate County-wide free speech channels. 6) Requiring that Time Warner cablecast appropriate electronic v-chip ratings if supplied by the producer/provider at the time of program submission. Additional Recommendations: 1)A Chamber-of-Commerce controlled leased access commercial channel for local business information; 2)Both non-profit public access and commercial leased access pay- for-view for use by local performing arts entities and for local not-for-profit telethons; 3) A sub-basic tier for the cost of the converter box to bring the P.E.G. access channels and other public goods to all connected residences within the county. Accommodation is Needed for a"Friends of Access" Organization: The task force recommends a continuation of Time Warner facility management,but is advancing the idea of creating a separate entity called Friends of Access to raise funds for and manage desirable access initiatives, including those which represent or seem to represent a conflict of interest for Time Warner. Channel Allocation: Provision is to be made for the transition to High Definition Television(HDTV). The following is a Task Force-recommended list of the baseline needs: • 1 Channel for Community • 2 Channels for Education • 2 Channels for Government • 1 Channel for Free Speech • 1 Channel for Chamber of Commerce long term lease • 1 Channel for local pay-per-view • 1 Channel for Channel 7, leased access/local origination 02/10/99 6 Appendix Government Access: The "Government Access" section was submitted by Patricia Vaughan, Ithaca Common Council Wendy Skinner, Tompkins County Public Information Coordinator Jim Blizzard, Tompkins County TV Coordinator * Eighteen municipal officials in ten towns and villages responded to a telephone survey by the Tompkins County Public Information Coordinator. Questions asked were: • Do you see a community need for government access? • What kinds of programming do you think would be of most value(choices suggested were: regular meetings, special meetings or hearings, informational programs, shoots at community events)? • Would additional services, such as a community bulletin board or call-in capability, be useful? • Should programming be cablecast to a zoned(geographically limited) or countywide audience, or should it be optional depending on the programming? • Are line extensions needed to make government access more effective? SUMMARY: Of the eighteen respondents, fifteen thought government access would be of benefit to their municipality, and that it is a very important and needed service. Two did not see a need and felt their communities would not be interested. One found the question problematic since her town is not served by Time-Warner. Six respondents felt that every municipal Board meeting should be cablecast. Nine thought it would be adequate to cablecast special meetings or hearings only(up to six per year). Most respondents were in favor of additional programming or services, such as informational panel shows, a community bulletin board, and shoots at community events. Some felt call-in capability would be useful for certain types of meetings or programs. Some also felt providing equal time for candidates for local office was a good idea. Three respondents felt limiting cablecasts to a zoned audience is important; most others felt that having the option to zone would be useful. In all but the most densely populated municipalities, respondents reported that the need for more line extensions is very important and is seen to go hand-in-hand with government access. NOTE: The overarching assumption in the survey was that T-W would provide the services at no additional cost to subscribers. 02/10/99 7 4 C � TIME WARNER '"I FEB 2 51999 CABLE DEPARTMENS Of PLANNING 8,0 D February 23, 1999 Mr. H. Matthys Van Court Director of Planning and Development City of Ithaca 108 East Green Street Ithaca,NY 14850-5690 Dear Mr. Van Court: I am writing in response to your letter of January 25, 1999 in which you inquired about the status of the financial information requested by your consultants, Rice, Williams Associates. The information requested by Rice, Williams as identified in the letter dated August 14, 1998 will be made available for review and inspection at our offices in Ithaca or preferably at our Division office in Syracuse where this information is kept in the ordinary course of business. Lastly, I note that Rice, Williams has requested information for the past three (3) years. The Franchise Agreement,however,limits the audit of franchise fee payments to a period of one (1)year from the date the franchise fees have been paid. Specifically, Section 20.5 of the Franchise Agreement provides as follows: ...All amounts paid shall be subject to audit and recomputation, by an independent auditor chosen by the City, which shall be bzsedon-a fiscal year-and-shall-ocxursn no event later_than one-(I)-year-after ihe-fees-aretendered_with res}Lt.to-each_fiscal year... (Emphasis added.) Accordingly, we will make available the information requested by Rice, Williams for calendar year 1998 which we believe is consistent with Section 20.5 above. 59 H'.,t."tnic Itharn, N1 1-4 .)0 1"1 h'o-1.-' _t.-�-,i Mr. H. Matthys Van Court February 23, 1999 Page 2 Please contact me at your convenience in order that we might schedule a date and location where the relevant information will be made available for inspection and audit. Very truly yours, Phil Smith General Manager Time Warner Cable Ithaca cc: Jean Rice Rice, Williams Associates 601 Pennsylvania Ave,NW Suite 601 Washington, DC 20004 Hon. Alan Cohen Mayor, City of Ithaca Steve Miron VP of Operations Time Warner Cable, Syracuse Division Fred Pappalardo VP of Finance Time Warner Cable, Syracuse f i♦ I&V RICE, WILLIAMS ASSOCIATES March 8, 1999 Ms. Jeannie Lee Economic Development Planner City of Ithaca 108 East Green Street Ithaca NY 14850 Dear Jeannie: Enclosed please find fifteen (15) copies of the Community Needs Assessment Report for distribution to the Ithaca Area Cable Consortium members. The survey went extremely well as you will see. A total of seventy-four respondents completed the survey. Some of the significant findings are as follows: ■ Twenty organizations that participated in the survey currently show video programming to residents of the Consortium area through a variety of means including cable television and group meetings. ■ The programming currently produced is on a wide variety of topics, such as news, professional education, children's education and information, and government programming. ■ In addition to the twenty organizations currently providing video programming, twenty-seven additional organizations reported a need to develop local video programming. ■ Forty-six organizations have or are currently providing community announcements on the "community bulletin board." ■ The announcements placed on the community bulletin board are on a wide range of current events and topics, such as community services, and meeting schedules. ■ A host of organizations reported a need to use a cable bulletin board in the future. ■ Thirty-one respondents were interested in using an interactive bulletin board. ■ When queried about meeting organizational goals and outreach, forty-seven respondents reported their attainment of goals could be improved by obtaining, producing, and distributing programming over the cable access channels. 601 Pennsylvania Avenue,NW 209 Elden Street Suite 900 Suite 200 Washington,DC 20004 Herndon,VA 20170 Phone:(202)737-2400 Phone:(703)467-9833 E-mail:rwatelcom@erols.com Fax:(703)467-9849 Ms. Jeannie Lee March 8, 1999 Page 2 ■ Thirty-five of the organizations indicated a need to have access to video production equipment that could be used to produce access programming. These organizations also indicated what categories of production equipment they required. ■ Thirty-seven organizations stated a need for video production assistance in editing, program planning and other production tasks. ■ A variety of time slots for using a production studio were put forward by respondents. ■ Twenty-two respondents desired to use a small automated studio and several reported space in their facility to have such a studio. ■ Interest was expressed in an institutional network. An institutional network plan to meet these needs could include: (1) the existing separate coaxial cable I-net; (2) I-net scrambled closed-circuit channels on the subscriber network which will be programmed only for institutions and descrambled at appropriate locations; (3) a new fiber optic I-net; (4) high-speed Internet access; or (5) a combination of the above. ■ Organizations and institutions indicated a high level of interest in expanded use of public, educational, and government access channels to provide community programming to the public. To support expanded programming, responding organizations indicated needs for production equipment, production assistance, and related studio requirements. Needs were expressed by respondents for a wide array of institutional network services. ■ The level of interest in public, educational, and government access expressed by community organizations, institutions, and government departments indicated the following community needs: ■ The need for additional access channels, as production increases in the future. ■ The need for additional production assistance. ■ The need for additional studio, portable, post-production, playback equipment and facilities for all three types of access. Ms. Jeannie Lee March 8, 1999 Page 3 ■ The need for selected program origination points to be designated to facilitate cablecasting from selected locations. ■ The need for a high-speed, high-capacity institutional network to selected institutions for data transmission, in-service training, interactive video, and other services. If you or other Consortium members have any questions or comments, please do not hesitate to call. Sincerely, Don C. Williams, Ph.D. Partner DCW/jms Enclosures cc: Mr. H. Matthys Van Cort, Director of Planning& Development Mr. Ben Curtis, Tompkins County Intermunicipal Cable Commission REQUEST FOR CABLE FRANCHISE RENEWAL PROPOSAL FOR THE ITHACA AREA CABLE CONSORTIUM DRAFT March 17, 1999 2y.`� RDE PtANNIOPd N r TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. Minimum Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Subscriber Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consumer Compatibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Consumer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Interconnection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Government Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Educational Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 BOCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Public Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Cooperative Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Future PEG Access Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 PEG Access Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Current Video Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Institutions Needing to Provide Local Programming . . . . . . . . . . . . . . . . 16 Public Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Main Studio Needs Enlargement, Redesign . . . . . . . . . . . . . . . . . . . . . . 21 Access Center Must Be Centrally Located . . . . . . . . . . . . . . . . . . . . . . . 21 More Equipment is Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Equipment Must Be Maintained, and Replaced When Outdated . . . . . . . . . 22 Studio Hours and Staffing Need to Be Increased . . . . . . . . . . . . . . . . . . . 22 Additional Video Drops Are Needed . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Internet Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Future Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Institutional Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Current Coaxial Network Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 System Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Operations and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 The Future: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Potential Institutional Network Users . . . . . . . . . . . . . . . . . . . . . 31 Coaxial I-net Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Findings and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Fiber Optic I-Net Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Upstream I-Net Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Emergency Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Regulation of the Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Franchise Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 1 Pilot and Experimental Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Franchise Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 II. Evaluation Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section I Ownership, Experience and Financial Resources . . . . . . . . . . . . . . . . . . . . . 50 A. Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 B. Ownership Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 C. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 D. Financial Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section II Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 A. Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 B. Pro Forma Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section III Construction and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 A. Service Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 B. Construction Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section IV System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 A. Channel Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 B. System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Section V Channel Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 A. Access Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 B. Radio Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 C. Summary of Channels by Tier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section VI Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 A. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section VII Local Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 A. PEG Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 B. Educational Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 C. Municipal Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Section VIII Institutional Network Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 A. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 B. Institutional and Subscriber Drops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 C. Institutional Network Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Section IX Equal Employment Opportunity and Equal Business Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 A. EEO and EBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 2 r Section X Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 A. Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 B. Consumer Complaint and Repair Procedures . . . . . . . . . . . . . . . . . . . . . . 108 C. Billing Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Section XI Innovative Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 A. Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Section XII Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 A. Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 3 INTRODUCTION In preparation for the cable television renewal process, the City of Ithaca, Town of Ithaca, Town of Caroline, Town of Groton, Town of Lansing, Town of Ulysses, Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, and the Village of Freeville, New York, (The Ithaca Area Cable Consortium) conducted in-depth analyses of the future cable-related needs and interests of Ithaca. As part of the needs assessment process, the Consortium retained Rice, Williams Associates (RWA), a consultant firm, to conduct a consumer market survey, a community needs analysis, and a technical evaluation. (See attached reports.) The Consortium also convened public hearings on the renewal of Time Warner's franchise. (Summary of minutes is attached and copy of audiotape of proceeds is available upon request.)The Consortium established two Task Forces: one on public education and government access (PEG Access Task Force) and one on institutional network (I-Net/Technical Task Force). The Task Forces submitted reports on current and future community needs. (Copies are attached.) The Tompkins County Intermunicipal Cable Commission,and numerous Consortium officials and staff participated in the cable franchise renewal needs assessment process. Based on the needs assessment, the Consortium has established minimum standards for cable service in Ithaca which are contained in this Request for Renewal Proposal (RFRP) document. In accordance with the provisions of the Cable Communications Policy Act of 1984, the Cable Television Consumer Protection and Competition Act of 1992, and the Telecommunications Act of 1996, this Request for Renewal Proposal is being issued to the current cable operator in Ithaca, Time Warner Cable. 1 C T The deadline for submitting , (_) copies of Time Warner's renewal proposal to the Consortium which responds to and has the information required by the Consortium's Request for Renewal Proposal is _, 1999. Any questions regarding the RFRP and the proposal response should be directed to Mr. Thys Van Cort, Planning & Development Director, City of Ithaca, 108 East Green Street, Ithaca, NY 14850, (607) 274-6550. 2 I. Minimum Requirements The Consortium franchising authorities have established a number of minimum requirements and specific priorities related to the cable communications franchise. The application by Time Warner Cable (Time Warner), for franchise renewal must meet each of the minimum requirements and reflect a commitment to the priorities outlined below and provide all information requested herein. Time Warner is encouraged to present proposals in the areas encouraged by the Consortium. In this Request for Renewal Proposal, the terms "Applicant" and "Company" are used to refer to Time Warner and the term "Franchisee" is utilized when referring to requirements that will be included in any new franchise. Subscriber Network The Consortium requires the Company to provide a cable network offering continuous, high quality service to residential subscribers. The Consortium places a high priority on plans to meet the current and future cable-related needs local residents. Time Warner has upgraded the cable television system to 750 MHz. Information on the upgrade is required herein. The Consortium makes the following subscriber network requirements: ■ That cable service be provided to: all residential dwelling units within the City of Ithaca; to all residential units with a minimum of fifteen(15) homes per cable mile within the boundaries of other Consortium communities; to all residential dwelling units of other Consortium communities with a density lower than fifteen(15)based on a line extension formula; to a lower density as the term of the contract progresses. [Note: Do any other communities have the demographics to require service to all?] ■ That the Consortium seeks commercial service line extension formula for the delivery of service to commercial areas which will expand the number of 3 r = commercial establishments that can receive cable for normal cost of installation and at cost. [Note:Any issue with multiple dwelling units?] The Consortium requires the Franchisee to have the cable system's equipment, facilities and services kept state of the art throughout the term of the Franchise. The Consortium finds the following state of the art clause acceptable: "In the event the Company, its parent company, management firm or affiliates have installed state-of-the-art improvements in services, equipment, or facilities in at least percent (_) of its other cable systems of similar size owned by the Company, its parent company, management firm, or affiliates, which increases channel capacity, provides improvements in technological performance, provides for interactive services, provides for digital programming and/or other substantial improvements available, then Company shall make said improvements available to the Consortium subscribers within one (1) year. Or in the event that Company or other Franchisees within the have a greater channel capacity, have improvements in technological performance, provides for digital programming and/or other substantial improvements, then Company shall install said improvements within one (1) year, unless for reasons beyond the control of the Company the improvements cannot be installed within one (1) year. The Consortium franchising authorities may hold hearings on state of the art technology every third year of the franchise. Such hearing shall afford Company an opportunity to make a presentation on the state of the art and whether the conditions specified herein indicate that a state of the art change is needed. The franchising authority may require Company to implement state of the art changes which meet the threshold specified herein. [Note: Requirement to be discussed.] 4 The Company's time table for providing digital video services should be provided. The Consortium also requires the following facilities: ■ Backup power supplies throughout the network ■ BTSC stereo pass-through for all broadcast and satellite stereo channels ■ Replacement of subscriber drops which do not meet specified tests or grounding requirements ■ Parental control devices and video and audio scrambling of primarily adult programming. The Company is encouraged to utilize status monitoring throughout the system. House drops are required to conform to code requirements, industry accepted practices, and be able to pass 750 MHz. Proper grounding is of prime importance as a safety issue. The Consortium requires that service technicians check the service drop grounding whenever making a service call for proper grounding capability or that the Company institute a subscriber drop audit program. For drop installations, the service technicians program should include replacing drop splices whenever they are encountered, mounting ground blocks on the house, review of route of the drop from the block to the point of entrance into the house, check for acute bend in ground wire and sufficient service loops, conducting technical tests, and using weatherproofing material in wall penetrations where none exists. Compliance with maximum ground conductor length, as well as corrosion with the grounds when they are located within pedestals should also be reviewed. All drops which are found to have insufficient grounding should be brought up to Time Warner Cable's subscriber drop standard. Drop installations should also be checked for visual aesthetics and whether cable attachment to the dwelling was missing or loose. The Company should provide a plan for logging such service technician checks so that the within a two year period, the 5 Company can certify to Consortium communities that all drops in their boundaries conform to the Access channels should be available for simultaneous programming throughout the Consortium unless otherwise specified by an individual municipality. [Note: To be discussed.] The technical inspection performed by RWA found that the off-air channels for Syracuse should be improved and that the Company has plans to transport these signals over a fiber optic link. The Consortium requires that the Company use its best efforts to construct the link in an expedient manner. A proposal for the timing of the interconnect is requested. In addition, please provide a plan for investigating with Channel 57 the electrical interference problems they are having. During RWA's technical inspection, clearance violations were found between the cable plant and the utilities should be addressed and eliminated to bring the entire plant up to NEC and BellCore standards. In some places the cables actually touch one another. The Consortium requires that the Company conduct a system-wide audit of the aerial cable plant to identify any code violations and rectify them. It should be noted that many of the violations encountered appeared to be caused by other cable owners. Some subscribers indicate picture quality problems with Channel 8. Please provide a plan to improve the picture quality of Channel 8. [Note: Is this still a problem?] Consumer Compatibility The Consortium requires the Company to prepare a plan describing how the system will meet FCC consumer compatibility regulations, be consumer friendly and compatible with cable- 6 ready television sets, stereo television, VCRs, remote control devices and other consumer products. The Company is required to indicate how high definition television and digital compression, when available, will be integrated into the system. The Consortium seeks a plan describing how the Company will keep the Consortium informed about developments in HDTV and other technological developments. Consumer Services The Consortium seeks a high level of consumer service. Outages were indicated to be a problem. Please provide the Company's rebate policy and a plan to reduce outages. Results of the Consumer Market Survey found that 22% of those requesting repair service during the past year made requests for more than two repair visits. Please provide a plan for minimizing the number of repeat repair calls. Only 41% of those requiring a repair call in the Consumer Market Survey reported that the repair service was scheduled within 24-hours or less. Please provide a plan for increasing the percentage of subscribers receiving a service call within 24-hours of a request. Some subscribers indicate interest in programmable remote controls. Please indicate the Company's plans or offerings in this area. The Company is requested to provide a plan to decrease the amount of time subscribers have to wait for installation of cable service 7 1 -f The Consortium requires the Company to provide a plan for decreasing the percent of r. nFaT, n>'+nhHe of time subscribers are put on hold. The franchise will contain late charge standards. The Company is requested to provide information on current late charge practices. The Consortium requires the Company to provide a plan for promptly responding to citizen complaints forwarded by franchising authorities and providing a written summation of the action taken to the relevant franchise authority representative. [Note:Are there any other consumer complaints that should be highlighted here?] Interconnection The Consortium requires interconnect to all Consortium institutional network locations (See Institutional Network section) and to interconnect the access channel(s)as requested by each franchising authority. The Company is required to provide interconnection to the access channels for institutions transmitting access programming on the institutional network. The Consortium seeks interconnection of the Consortium's access channels with surrounding jurisdictions on a full-time basis if agreed to by respective franchising authorities. The Company should provide a plan for such interconnection. Such a plan should specify channel capacity, technology (e.g., coax, fiber, microwave), estimated cost and cost sharing proposals, and time frame for activation, and any economic viability issues to be considered. [Note: To be discussed.] 8 Programming The Consortium seeks a diverse package of high quality cable services. The Company should specify which services it intends to provide as part of its basic cable service tier, other tiers of service, and pay offerings. Subscribers also indicated interest in programmable remote controls and additional channels offered on an a la carte basis. The Consortium has received a strong appeal from the community for two Spanish language channels (See attached request). The Consortium strongly encourages the Company to provide two full-time channels for this broad category of programming. At the public hearing input was received that individuals would like to have the following channels on the network: SCOLA; Canadian channel; French channel; BET Jazz; movie channels; public broadcast stations, WCNY Syracuse and Binghamton; Weather Channels; C-SPAN 2; History Channel; NASA; Descriptive Video Services for the blind; additional NPR and PRI radio programs. The Consortium encourages the Company to provide a universal access channel service tier which would be available to all subscribers solely for the cost of installation. [Note: To be discussed.] 9 Access Tn ro"or�-t—r-1 tc naP�Sti� xx «1� —1-v7 �Fx?TnP1 �ax�Plnnr+'+P..t f—rar the tTr ref the prior franchise and based on the Consortium's assessment of community needs finds that it will continue to flourish and to grow and that additional resources are needed. Government Access The PEG Access Task Force report summarizes the history of government access and resource needs as follows. "Programming for Time Warner's government access Channel 53 started in 1992. A Government Access Cable Commission (GACC) was established to set policy and direction for the use of the channel. The GACC, discontinued in 1995, had County-wide membership and set a precedent for intermunicipal coordination of cable issues. The bylaws that it formulated are still in place and because they anticipated more intensive use of government access channels than has yet materialized, will probably serve well in the future. Channel 53 averages 30-35 hours a week of programming consisting mainly of live cablecasts and taped replays of City of Ithaca and Tompkins County meetings. Taped reports from NYS legislators, teleconferences downloaded by Cooperative Extension, and some edited magazine-style programming are also broadcast. City of Ithaca meetings (Common Council plus three committee meetings a month) are cablecast using equipment and staff supplied by Time Warner. 10 A County meetings are cablecast with equipment supplied by Time Warner and the County, but staff is paid for by the County, through a contract of around $24,000 annually with Cooperative Extension. The County maintains a control room/editing suite in the County Courthouse from which it originates live cablecasts, operates a video bulletin board, and operates all playback of taped programs for the channel. The bulk of the equipment used by the County is on loan from Time Warner, but other costs, for equipment repair or purchase, for example, are paid for by the County." "High-quality broadcasts are essential to building and maintaining viewership of government access programming. Tompkins County cablecasts are of noticeably superior quality to City of Ithaca cablecasts. City cablecasts are accomplished with inadequate equipment that hampers the Time Warner-supplied crews from doing a good job. The result is a lesser quality broadcast that reflects poorly on the government access channel as a whole. Several improvements are essential for upgrading City Hall broadcasts, including a separate control room and additional equipment. Staffing problems also need to be addressed. Towns and Villages that request government access services must be provided with adequate equipment, connections, and provisions for staffing that will assure a high standard for programming, or funding for that purpose. If technically possible, Time Warner should also supply government access programming to other cable companies serving Tompkins County residents." 11 t Educational Access The PEG Access Task Force report summarizes the use of access and the need for new resources by educational institutions as follows. "Ithaca College is, and will probably continue to be, the leading education cablecaster in the area. IC's video communications program has a strong partnership with the Time Warner system that it wants to maintain and expand. More video drops and more connectivity between buildings at the campus and the Time Warner hub would enhance the IC program and would also add more venues for community programming. In addition to IC, the other colleges in the area need opportunities for access. In particular, TC-3 —which offers career-oriented video education—is very interested in tapping into services that could be provided by Time Wamer. BOCES: BOCES programs in Continuing and Adult Education, Special Ed, vocational training and other programs could greatly enhanced by the addition of Time Warner supplied resources. Public Schools: Ithaca High School has a thriving video program that trains both students and adults through classes, professional development workshops, and summer 12 media camps. Trained individuals often go on to produce useful educational and community programming. Video equipment has also been placed by Time Warner at the Alternatives Community School and Boynton Middle School. The schools have a list of needs that includes regular maintenance of existing equipment, equipment upgrades, ability to relocate underutilized equipment, live cablecasting for Board of Education meetings, and new sets of equipment and video drops for all public schools that request it and will use it. [Note:Are there public schools which don't have free drops?] Cooperative Extension: Cooperative Extension, already on the I-net, is a major potential producer for relevant, locally-oriented, and useful educational programming. Extension needs adequate video production equipment and technical support by Time Warner." Public Access Public Access has been used extensively [Note: Summary of public access use needed.] PEG Access Programming Following is a summary of PEG access use indicated by respondents to the Communty Needs Assessment summary. 13 t > 771 CURRENT VIDEO PROGRAMMING TYPE OF FORM OF FREQUENCY OF ORGANIZATION PROGRAMMING PRESENTATION* PRESENTATION Government Public Health Tapes from NYS DOH Local access Occasionally Administrator, Tompkins channel Co. Public Health Dept. Deputy Co. Administrator, Board meetings; Local access Daily Tompkins Co. Criminal Bulletin board channel Justice Services Acting Director, Tompkins Public meetings Local access Weekly County Info. Tech. Svcs. channel Commissioner of Workshops; public Local access Occasionally Planning, Tompkins hearings channels County Dept. of Planning City Clerk, City of Ithaca City Council & Government 2 or 3 times per Standing Committee access channel month meeting on rotation basis Economic Development City Common Council; Government Weekly Planner, City of Ithaca City Planning & access channel Economic Development Committee; events; fund raisers Educational Executive Director, County government Government & Weekly Cornell Cooperative meetings public access Extension Association of Tompkins County Principal, Boynton Middle Varies Local access Daily School channel; publicity Superintendent, Education Classrooms Occasionally Trumansburg Central School 14 M CURRENT VIDEO PROGRAMMING TYPE OF FORM OF FREQUENCY OF ORGANIZATION PROGRAMMING PRESENTATION'S PRESENTATION High School Principal, Video conferencing Compressed video Daily Trumansburg Central ISDN line School District/Dickerson High School Director, Instructional Satellite downlink for Local access Occasionally Support Svcs., teleconferences; plays channel Tompkins-Seneca-Tioga B.O.C.E.S. Executive Director, The Opportunities for Weekly Learning Web youths and mentors .. ....... ..... . ... . . ..... ..... . . ... . . . . ...... ...... . .. . . ....... ... ... . .... .... ... . .. . . .... . .. .......... ......... ..... .. .. . ... .. .. .. ......... . .. .. ..Educational (Cont'd) Principal, Ithaca High "Lake Street News," Local cable access Weekly School 30-120 minutes of channel news, features, performance, lectures, etc. Dir of Info. & Instr. TV programs created Group meetings; Occasionally Technologies, Ithaca City by students educational access School District channel Principal, DeWitt Middle Videos of student/ Local access Occasionally School school events by channel students and staff Civic Organizations/Other Coordinator, Amnesty Amnesty International - Local access 3 times a week International USA, Group Ithaca channel #73 Program Director, Finger Current event show on Local access 4 times a year Lakes Independence Agency channel Center 15 Y CURRENT VIDEO PROGRAMMING TYPE OF FORM OF FREQUENCY OF ORGANIZATION PROGRAMMING PRESENTATION* PRESENTATION Dir. of Membership & Public forums Group meeting; Occasionally Public Relations, local access Tompkins Co. Chamber of channel Commerce American Red Cross Panel discussion & Unsure Occasionally videos from National Organization Vice Chair-Voter Svcs., Political candidate Group meetings; 2 or 3 times per League of Women Voters forum public TV; local year of Ithaca cable access channel CiviC Or anizations/Other (Cont'd)' Better Housing for Tape of first-time home Shown to first- Occasionally Tompkins County ownership time homeowner Institutions and organizations that reported, in response to the community needs assessment survey, that the attainment of their goals and outreach could be improved by programming provided or produced for and carried over cable access channels are as follows. INSTITUTIONS NEEDING TO PROVIDE LOCAL PROGRAMMING ORGANIZATION Government Chief, Lansing Fire Department Commissioner of Public Works, Tompkins County Public Works Dept. 16 -ti s INSTITUTIONS NEEDING T. TROVIDE X.00AL PROGRAMMING ORGANIZATION Public Health Administrator, Tompkins Co. Public Health Dept. Supervisor, Town of Ithaca Deputy Co. Administrator, Tompkins Co. Criminal Justice Services The Honorable Mr. Phillip R. Rumsey, Supreme Court Justice of Tompkins Co. Planning Director, Tompkins County Economic Opportunity Corporation Library Director, Tompkins CountyPublic Library . ......................................................................................................................................... ... . ......_ _.. __._...._..... .... ...... .. .. . ....__.... .. .... _.. ........... ......................................................................................................................................... Asst. Superintendent of DPW, City of Ithaca, Water& Sewer Division Superintendent of Highways, Village of Lansing Supervisor, Town of Ulysses Codes Officer, Village of Lansing Acting Director, Tompkins County Info. Tech. Svcs. Clerk/Treasurer, Village of Lansing Chair, Planning Board, Village of Lansing Commissioner of Planning, Tompkins County Dept. of Planning County Administrator, Tompkins Co. Administrator's Office Chief, Slaterville Springs Volunteer Fire Com an , Inc. City Clerk City of Ithaca 17 INSTITUTIONS NEEDING TO PROVIDE LOCAL PROGRAMMING ORGANIZATION Chair, Planning Board, Village of Dryden Building Commissioner, City of Ithaca, Building Dept. Asst. Superintendent of Public Works, City of Ithaca, Streets & Facilities Div. Mayor, Village of Cayuga Heights Superintendent of Highways, Town of Ithaca Commissioner, Tom kips Co. Mental Health Dept. Educational;.. Executive Director, Cornell Cooperative Extension Association of Tompkins County Principal, Boynton Middle School Superintendent, Trumansburg Central School Director, CRESP, Cornell University High School Principal, Trumansburg Central School District/Dickerson High School Director, Instructional Support Svcs., Tom kips-Seneca-Tio a B.O.C.E.S. Executive Director, Community School of Music and Art Director, Media Services, Cornell University Principal, Ithaca High School Dir. of Info. & Instr. Technologies, Ithaca City School District Principal, DeWitt Middle School Civic Or anizations/Other CEO YMCA of Ithaca & Tompkins Co. 18 INSTITUTIONS NEEDING TO PROVIDE LOCAL PROGRAMNIING ORGANIZATION Coordinator, Amnesty International USA, Group #73 Director, Women's Community Building Executive Director, Finger Lakes Library System Dir. of Membership & Public Relations,Tompkins Co. Chamber of Commerce Director, Paleontological Research Institute Executive Director, Hospicare of Tompkins County Gadabout Transportation, Inc., Ithaca/Tompkins Transit Center American Red Cross Development Associate, Family and Children's Services of Ithaca Vice Chair-Voter Svcs., League of Women Voters of Ithaca Resource Developer, Day Care & Child Development Council of Tompkins County Better Housing for Tompkins County Access Requirements The Consortium places a high priority on the continued development of access. The following describes the minimum requirements for access. ■ The Franchisee shall allocate the following channels for access: 19 0 No less than nine(9)access channels for government, education, and public access with the Consortium franchising authorities designating the type of access to be provided on each channel • No less than six (6) audio channels for cable radio • Capability for an access channel to provide pay per view programming, with the Company to scramble and address the recipients. ■ The access channels shall be placed on the basic tier of service and available to all subscribers upon the request of Consortium franchising authorities, including those in multi-family dwelling units (unless otherwise agreed to by the Company and Consortium franchising authorities). The Consortium expects to request the activation of an additional government access channel within (_) months. [Note: Time frame for activation to be discussed.] ■ The Franchisee shall permit the educational and government access channels to be utilized for closed circuit programming. Such institutional programming will be scrambled by the Company and viewable at selected public sector sites. The Franchisee shall provide converters to free drop sites for the reception of the closed-circuit programming. [Note: To be discussed] ■ At such time as the Franchisee expands the system channel capacity through digital or other means, up to three percent (3%) of the channel capacity or equal HDTV capacity shall be reserved for future access use. [Note: To be discussed.] Equipment and facilities are an integral component of access operations. Following is a description of the Consortium's access equipment and facilities requirements. The Consortium requires the following professional quality equipment and facilities for government access: Government Access Equipment Requirements: ■ City of Ithaca ■ Town of Ithaca ■ Town of Caroline ■ Town of Groton ■ Town of Lansing ■ Town of Ulysses ■ Village of Lansing 20 •� Y ■ Village of Trumansburg ■ Village of Dryden ■ Village of Cayuga Heights ■ Village of Freeville. [Note: To be discussed.] Educational Access Equipment: ■ BOCES [Note: To be discussed.] ■ Ithaca College[Note: To be discussed.] ■ Public Schools [Note: To be discussed.] ■ Cooperative Extension [Note: To be discussed.] Public Access Equipment Requirements: The Consortium adopts the following findings of the PEG Access Task Force for public access facilities and equipment. "Main Studio Needs Enlargement, Redesign The small size and proportion of the main access studio severely limit the types of programming that can be produced. The long, narrow shape cannot accommodate desired community programming such as dance performances, choral concerts, drama, live theater, telethons, public meetings, etc. Access Center Must Be Centrally Located: The studio site must: be located in downtown near the Time Warner physical plant hub, have ample off-street parking, be on the city bus lines, and handicapped accessible. 21 More Equipment is Needed: The Task Force recommends that production equipment donated by Time Warner include full equipment for two large and one small studios, several automated studios, and at least two easy-to-use portable studios. With minimal expense and training, the automated studios will make access available to many more individuals and organizations. Equipment Must Be Maintained, and Replaced When Outdated: All donated or loaned equipment must be maintained by Time Warner. Timely maintenance, replacement, and technology updates (such as digital replacing analog) for all access studio equipment during the course of the franchise must be assured. Studio Hours and Staffing Need to Be Increased: The current 60 hours of operation (3-11:30 p.m., seven days a week) do not allow maximum use of access facilities or encourage daytime use by not-for- profits. To serve a broader population, studio hours and staffing should be significantly increased. Additional Video Drops Are Needed: Video drops are needed at key locations around the City as well as in the surrounding municipalities so that portable studios can be used by not-for-profits and the public." 22 The Consortium encourages the Company to address capabilities it could offer for consumer choice regarding access channels as discussed in the Task Force report. " Task Force recommends the following policies to accommodate both free speech rights and informed customer-viewing choices: 1) Instituting some County-wide community-controlled channels. Producers must agree to abide by standards determined by a County-wide community advisory board. 2) Time Warner Cable should be required to provide to any customer, free of charge, up to-date timed, channel-blocking filters. 3) Time Warner should cablecast and also post on the Internet up-to- date schedules with program descriptions. 4) Instituting some single-community controlled channels-which would be cablecast only to specific municipalities and available only to customers living in that community. 5) Maintain separate County-wide free speech channels. 6) Requiring that Time Warner cablecast appropriate electronic v-chip ratings if supplied by the producer/provider at the time of program submission." Future PEG Equipment Requirements The PEG Access Task Force indicates that new technologies should be integrated into equipment replacement and improvement plans. "Training and equipment to match new technologies must be made available in the future. Franchise language should include the possibility of municipal uses for new cable technologies, such as video return(reverse channels), and video compressing or video streaming. Municipalities should automatically be included in, or offered opportunities to piggyback on, new or upgraded technologies-including those which have not yet emerged—when it can be shown a public need will be served." 23 • A The Consortium requires sufficient funding for PEG access equipment and facilities to utilize new technologies for production as they become available. The Consortium requires the Company to maintain and replace all public, educational, and government access equipment and to provide all necessary headend equipment for public, educational, and government access. The equipment shall be replaced based upon wear and tear and the normal useful life of each type of equipment. Replacement purchases shall take into account new technological improvements The Company is required to provide access origination capability via fiber optics from sites currently capable of cablecasting (e.g. Ithaca City Hall) to the following sites [Note: To be discussed.] The following sites are required to be provided with free drops, free converters, and free non-premium service: ■ All Public Schools ■ Institutions of Higher Education ■ Public Libraries ■ All buildings of Consortium governments ■ Additional sites at Ithaca College. Such drops shall be capable of supporting multiple reception points. The Company is encouraged to provide multiple drops to educational buildings and government buildings and provide a proposal for internally wiring government buildings and school buildings. Just as the Company is expected to commit substantial resources to operate, maintain and promote use and viewership of basic and premium entertainment services, so the Company is expected to commit resources adequate to operate, maintain and promote use and viewership of channels devoted to access. The Consortium therefore encourages the Company to agree to: 24 w ■ Continue to provide public access staff and services with cost of living adjustments and periodic salary raises ■ Continue to provide production services for City of Ithaca meetings ■ Providing services for programming by other Consortium government ■ Providing training for school personnel ■ Providing publicity services for public, educational, and government access (e.g. bill stuffers, ad avails for PSA's, bi-annual promotional mailer to subscribers). The Consortium will place great emphasis on meeting government, educational, and public access needs. Institutional Network The Community Needs Assessment survey found the following needs for an institutional network. PQTENTrAL IN5TITUTIQNAL.NETWORK USERS ORGANIZATION LINKS To SERVICE'S Government Chief, Lansing Fire Department Central Station LDT; IVT All Stations VS Commissioner of Public Works, Airport (Brown Rd); LDT Tompkins County Public Works Dept. Highway Div. (Bostwick Rd); SW Recycling Center Commons Rd. Public Health Administrator, All County buildings LDT; VT; IVT; I Tompkins Co. Public Health Dept. and educational facilities 25 POTENTIAL INSTITUTIONAL NETWORK USERS ORGANIZATION LINKS TO SERVICE* * IVT = Interactive Video Transmission;IST = In-Service Training; LDT = Local Da Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections Government (Cont'd) Su ervisor, Town of Ithaca Deputy Co. Administrator, Tompkins Public safety sites; IST; IVT; LAN; LDT; Co. Criminal Justice Services courts VT; I The Honorable Mr. Phillip R. Ithaca City; All Rumsey, Supreme Court Justice of Tompkins County Tompkins Co. Municipal Building Library Director, Tompkins County Main library & Internet access Public Library reading centers Supervisor, Town of Ulysses Town Hall IST Justice; Public Works I Codes Officer, Village of Lansing Village Officer IST; IVT Hwy. Building LDT Other Municipalities I Acting Director, Tompkins County County agencies LDT; I; IVT; VT Info. Tech. Svcs. Chair, Planning Board, Village of Wastewater plant; VS; IVT; I; VT; VS; Dryden fire stations; CFR LAN Bldg. City Clerk, City of Ithaca City Hall & other IST; I; LAN; VS; LDT sites Engineering Department, Department Traffic signalization; LDT of Public Works parking lots VS Mayor, Village of Freeville County Building; LDT Universities; IVT; LAN Town of Dryden to Village of Dryden & I Dryden Schools I 26 A POTENTIAL INSTITurioNAL NETWORK USERS ORGANIZATION LINKS To SERVICE'S —:71 * IVT = Interactive Video Transmission;IST = In-Service Training; LDT = Local Dat Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections __. __......__. . __ .__ __. . ... _. Government (Cont'd Mayor, Village of Cayuga Heights Schools 7IVT 27 POTENTIAL INSM U I IONAL'NETWORK USERS ORGANIZATION LINKS TO SERVICE* Asst. Superintendent of DPW, City of Water Facilities: Ithaca, Water & Sewer Division 525 Third St. IST; VT 510 First St. LDT; I 202 Water St. VS City Hall IVT Educational Program Director, Finger Lakes Various IST; IVT; I; LDT; VT; Independence Center LAN High School Principal, Lansing High LCSD; other IST; VT; LDT; I; IVT School schools; BOCES High School Principal, Trumansburg Local school district IST; LDT; IVT; I Central School District/Dickerson High School Director, Instructional Support Svcs., Local schools LDT; I; IVT; LAN Tom kips-Seneca-Tio a B.O.C.E.S. Superintendent of Highways, Town of Current sites plus LDT; I Ithaca Cherry Street Ind. VS; IVT Park; State Theatre Director, Media Services, Cornell Students/employees IVT; LDT University Connect to the satellite uplink of Media & Technology Svcs. of Cornell Dir. of Info. & Instr. Technologies, All 19 School sites IST; LDT; IVT; I; LAN Ithaca City School District * IVT = Interactive Video Transmission; IST = In-Service Training; LDT = Local Dat Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections Educational (Cont'd) Elementary Principal, Trumansburg Library; designated IVT; LAN; I Elementary School classroom 28 POTENTIAL INSTITUTIONALNETWORK USERS ORGANIZATION LINKS TO SERVICE* Civic Or anizations/Other Director, Women's Community Various LDT; VS; IVT; VT; I Building Development Associate, Family and Cayuga & Seneca LDT; LAN; I Children's Services of Ithaca Street locations * IVT = Interactive Video Transmission; IST = In-Service Training; LDT = Local Dat Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections The Consortium requires the Company to provide an institutional network. In certain instances, the Consortium will review institutional network options. In general, the Consortium requires: ■ Existing Coaxial Cable Network. The continued use of the existing coaxial cable institutional network with: increased capacity available for use on the network; a reliable inventory of amplifiers and passives; response time requirements; testing requirements; operational protocols; standards for replacement of the coaxial cable network with fiber optics at the end of the useful life of the coaxial cable plant; or a determination by the Consortium that the coaxial cable plant does not provide reliable service ■ Fiber Optic Extensions. A fiber optic connection to identified locations in the Town of Ithaca, Town of Caroline, Town of Groton, Town of Lansing, Town of Ulysses, Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, and the Village of Freeville. The Consortium will also review any Company proposals to provide dedicated capacity through the cable modem service ■ Upstream Bandwidth. The Consortium requires 6 MHz of upstream institutional network capacity throughout the subscriber network ■ Closed-circuit. Closed-circuit programming ability for sites not on the institutional network. 29 ■ Internet. The Consortium strongly encourages the Company to provide Internet service to educational, library, and governmental sites. Current Coaxial Network Background The Consortium requires that all institutional network(I-net)capacity will be provided free of charge to users of the system. The current coaxial cable fiber network connects the following locations: 1. Alternative Community School 2. Belle Sherman School 3. Beverly J. Martin School 4. Boynton Middle School 5. Cooperative Extensions of Tompkins County 6. Cornell University (McFadden Hall) 7. Dewitt Building 8. Dewitt Middle School 9. Fall Creek School 10. Fire Central 11. GIAC 12. Ithaca City Bus Garage 13. Ithaca City Hall 14. Ithaca City Youth Bureau 15. Ithaca City Police Headquarters 16. Ithaca City Streets and Facilities 17. Ithaca City Water & Sewer 18. Ithaca College (Roy Park Building) 19. Ithaca High School 20. Northeast School 21. Science Center 22. South Hill School 23. Southside Community Center 24. Tompkins County Courthouse 25. Tompkins County Library 26. TST BOCES. 30 The I-Net/Technical Task Force provides the following description of the existing institutional networks use, operations and needs for the future. "System Description: The I-net system is a separate coaxial cable system that runs to a different set of locations than the regular entertainment cable system, though some of the locations are common between the systems. Unlike the subscriber entertainment system which has been upgraded to a hybrid fiber coax system and had its frequency range extended, the I-net is coax with the exception of the one leg up to BOCES, which has been converted to fiber. The I-net is a midsplit 450 MHz system, with the path inbound to the headend covering frequencies ranging from 5.75 to 173.75 MHz (28 channels), a guard band from 174 to 216 MHz for cross over filtering, and a path outbound from the headend ranging from 216 to 450 MHz. (39 channels). Currently two channels in each direction are used to support the RF modems used by the PEFnet with translators for inbound to outbound located at the headend. Based on recent readings there are currently 6 video signals, 2 data signals, and two unknown signals on the inbound spectrum occupying 10 of the possible 28 channels. There are 4 video signals, 2 data signals and 3 unknown signals on the outbound frequency spectrum, occupying 9 channels of the possible 39 channels. Other channels may be in use for video when portable equipment is moved to various locations on the I-net. 31 The PEFnet currently uses 4 mbit/sec modems at the user sites that are owned by the individual participants in the PEFnet. The translators for the inbound to outbound paths that are in place at the headend are also owned by PEF. Operations and Management: The current I-net operation is maintained through a cooperative approach between Time Warner and the I-net users/PEF. Collective expertise is needed to operate a network of this topographic scale, heterogeneous technology and size. The many differing pieces of equipment and hardware and software infrastructure are owned and operated by different institutions of the PEF. The PEF, Partnership for an Electronic Future, was created in 1997 after the County urged the development of a Consortium as a mechanism to share services and costs, which were being borne entirely by the County and ICSD at the time. The PEF Consortium is made up of public, educational, and not-for-profit institutions. The charter members are as follows: Cayuga Medical Center, City of Ithaca, Cornell University, Tompkins County, Ithaca City School District, Ithaca, College, Lansing Central School District, Newfield Central School, South Central Regional Library Council, and the TST BOCES. The goal of PEF is to provide connectivity, to assure quality of service at the most cost-effective price available and to share expertise and approaches to common problems faced by all members. There are many areas where collaboration and cost savings are possible, including: 32 f local communications links, Internet services, software licensing, equipment procurement, outsourcing, training, and voice telephone service. To gain focus one must recognize that there are two worlds involved in the current I-net. The world of data transfer and digital system and the world for radio frequency video. To the data world the I-net appears as long cable that one plugs the Ethernet into, and to the video world it appears as a pair of TV channels. Both views are in fact correct and both are needed to maintain a functioning I-net in the current system. There is currently no fixed performance standard. It is not clear what standard would make sense. For instance, the Consortium members continuously run a number of performance monitors that can detect and record any outage within a matter of seconds. Such "outages" can be merely routine data bottleneck, a problem or routine interruptions on a member's equipment, or problem upstream of the I-net at the ISP or even much further beyond. The current franchise requires that Time Warner respond to I-net repair calls within two hours. To further complicate the matter, some locations require continuous access to other locations in order to perform specific network operations. An outage at one site (most often due to maintenance of hosts or power failures)can cause users at one or many other sites to have the perception that the I-net or some other service is down without any ability to perceive the true root problem. Examples of this include: 1)Library patrons' inability to browse,perceiving the I-net/Internet is down, when the County domain name server in the Courthouse is in fact off-line, 33 2) Many ICSD computers receive boot-up information (DHCP) from the District Office causing them to believe the network is entirely down when in fact a server at the District Office is off-line. Unfortunately the list of interdependencies like this are numerous, as this is the very basis by which resource sharing over networks and among member institutions can be most effective. Maintenance is currently conducted by a combination of automated monitoring tools, network diagnostic tools, and problem escalation. The Future: There are several issues in the future which will have an impact on the I-net and its use by the educational and governmental community participants in Ithaca: ■ As electronic technologies become more ubiquitous and networking in general more prevalent,use by the community will only increase. There will be ever increasing traffic on the I-net both in volume and in bandwidth. ■ At the same time as we must think globally, the importance having a networked local community will increase; local educational, governmental, and not-for-profit agencies will enhance services, decrease costs, and improve the skills and knowledge base of the local community. ■ The amount of information in electronic form will increase dramatically - data, written material, narrative, images, video, audio. This electronic content will be one reason for the increased traffic noted above. ■ Multimedia will be an increasingly important form of electronic content both in education and in government. ■ New technologies in hardware, software, and networking will require parallel developments in the I-net. Computers will be bigger and faster in terms of capability; institutions will increasingly use 34 sophisticated applications and data, applications will use integrated technologies such as the multi-media noted above. ■ There will be increasing connectivity of multiple networks; the I-net must have the capability to be an integral part of such a sophisticated global network. ■ There will be increased need for authentication and security on networks and computer systems to make sure that those who should have access will have it, and those who should not, do not." Based on the experience of I-net users, the existing use of the I-net, and the Task Force report, the Consortium requires the following for the institutional network for current applications and the future." Coaxial I-net Requirements The Consortium requires the continued operation of the current coaxial institutional network. The Company is required to provide the following capacity at a minimum: 30 MHz contiguous bandwidth in each path, such as 11.75-41.75 MHz inbound and 246-276 MHz outbound with no restrictions on how the bandwidth is utilized. The Company is encouraged to provide additional capacity on the existing institutional network for users. The Consortium requires the institutional network to be maintained by the Company and to improve reliability and stability. The Consortium requires the Company to respond to requests for repairs from subscribers within two hours between the hours of 8:00 a.m. and 5:00 p.m. and within four hours thereafter. The Task Force proposed the following solutions to on-going technical response to I-net problems. 35 "A possible solution could be a staff person provided by Time Warner whose sole responsibility would be the maintenance of the I-net. The person would work very closely with a user management group such as the PEF(Partnership for Electronic Future). A chain of command will still need to exist in case the staff person is not available." "Another possible solution is a staff person provided by the user management group such as PER (Time Warner could agree in the franchise document to contribute funds toward the staff person's salary.) Time Warner would have to allow this person access to all the necessary areas needed to maintain the system. Time Warner may have liability concerns with this method." A protocol plan is required to be prepared by the Company to follow when there are problems on the system. This plan should indicate how to alleviate past problems with access to the headend. The Franchisee will be required to keep a trouble call and response log and to have the log available to I-net users and their organizational representatives. The Consortium requires that the I-net be allowed to connect with any service of use, any protocol selected by individual user of the I-net for public, educational, and governmental purposes. The Task Force addressed this issue as follows. "Currently an IP packet protocol is used on the links to support email, ftp, html, and various other services. It is difficult to project what may develop over the 10-year course of the next franchise period. Five years ago most people had never heard of the World Wide Web or HTML, now nearly every TV advertisement includes a URL. 36 With that in mind, we must be careful not to be limited in the services we can provide using the bandwidth provided to I-net and PEF. We must have the freedom to change protocols and services at will to provide the best service to our organizations. Certainly we expect growth in multimedia communications, including video, high resolution still pictures, and audio. Games and simulations currently in use on the net use force feedback joysticks to provide the beginnings of tactile communication. In ten years, standard course work in our schools may involve participating in Virtual Reality scenarios with stereo video, stereo audio, tactile and possibly even olfactory information passed across the network. Another example might be to extend the current Pegasys model, where a tape is made and played four times and then archived, unavailable to be watched without scheduling the total use of a VCR and an analog video channel for its duration. If those tapes could be digitized and stored on a server, they could be called up over streaming video technologies for view on a shared channel at any time, with no human intervention required. They would be available to the local audience for a more extended period than is now possible, and they would also be available to the world via the Internet. We must be careful to avoid language in the agreement that confines us to a model of bandwidth use that precludes our ability to move forward with the technology and pioneer or embrace new services. Likewise, we must have the freedom to interconnect the I-net with other networks that support the community's goals. Currently we are connected to the 37 Internet and to the Cornell backbone. In the future we may need to be connected to various other networks, such as a clump of schools in the country linked with their own wireless network, or to a County-wide network of Town Halls on whatever infrastructure they can afford, to allow them to stream digital video in support of county meetings. We must have language that clearly affords us the ability to link to whatever networks we see fit to join." The actives and passives utilized in the institutional network were installed in 1989. The models used in the I-net may currently not be produced nor supported by the original or any other manufacturer. An ample supply of spare parts should help prevent a situation where the I-net would not be operational for a long period of time due to the failure of a device which must be shipped-out for repair. A typical number of spare units needed to support continual operation of an outdoor communications network is to have 10% to 15% of the total amount of each unit used in the network. This number makes the assumption that the equipment can be repaired in a timely manner at a supporting service center, either at the manufacturer's location or a location recommended by the manufacturer. If repair cannot be supported by an off-site company, spare levels are recommended to be closer to 50%of installed base. The Company is required to stockpile sufficient units of each device to cover any failures which might occur during the franchise term. If the system operator cannot guarantee a supply of spare units and a reliable transmission path, a migration plan will need to be created for the transfer of current and future operations to a new, most likely, fiber cable-based type network. The migration plan should include 38 performance parameters which must be met and failure to meet these criteria would trigger the construction and implementation of the new network. The Consortium is willing to use the existing institutional network for its useful life or until the stability/reliability/staffing of the network does not provide a reliable transmission path. The Company should provide a plan for determining when the useful life of the network is over (including the number of years it is expected) or stability/reliability or staffing of the network would not provide a reliable transmission path as determined by the Consortium franchising authorities. At such time, the Consortium will require the Company to upgrade the coaxial cable I-net to a fiber optic network providing 6 fibers to each site from a designated public headend site (the location of which will be one of the sites on the existing network). The Company is required to provide the actual cost of rebuilding the cable network in fiber optics. Depending on the cost, the Consortium may require earlier construction of the fiber optic institutional network. During the technical analysis, it was found that: ■ The I-net amplifiers and outside plant have not been checked in some time. No one at the cable company nor the I-net users met with could remember when the system was checked for proper alignment. ■ The system should be checked on at least a yearly basis. Fiber Optic I-Net Extensions The Consortium requires the institutional network to be extended by four fibers to each of the following locations: [Note: Sites in each community to be listed.] ■ City of Ithaca Fire Training Center on Pier Road (For this site, also include the cost to extend the coaxial network.) ■ New Public library in the City of Ithaca ■ Town of Ithaca 39 ■ Town of Caroline ■ Village of Trumansburg ■ Village of Dryden ■ Village of Cayuga Heights ■ Village of Freeville ■ Town of Groton ■ Town of Ulysses ■ Village of Lansing ■ Town of Lansing ■ County Human Services Building. (See attached map of municipal building and public schools within the Consortium communities). The Company is required to provide a detail cost breakdown of the cost for each site. As an alternative for the Consortium to review, the Company is required to indicate how much bandwidth on the subscriber network would be provided for those sites outside of the City (this could be provided on the 6 MHz upstream capacity described below) and a coaxial cable connection to the existing I-net for the sites within the City of Ithaca. Please provide and costs associated with this alternative. [Note: To be discussed.] In addition, the Consortium believes that community needs would be served by extending the I-net to the following sites (priority two) sites dependent on cost. ■ Cass Park Ice Rink ■ Chamber of Commerce ■ Cherry Street Industrial Park ■ County Airport ■ County Mental Health Building ■ County Public Health - Biggs B ■ County Solid Water & Recycling Center ■ CSMA (Community School of Music and Art) ■ ICSD Bus Garage ■ Red Cross Building ■ Sewage Treatment Plant ■ The State Theater 40 ■ Stewart Park ■ First Unitarian Church ■ Temple Beth - E1 ■ Women's Community Building ■ Eco village. The Company is required to provide the cost to all potential fiber optic I-net sites with a site-by-site breakdown. Upstream I-Net requirements The Consortium requires 6 MHz of upstream capacity for the institutional network. The PEG Access Task force indicted the following uses for this capacity. "Provide capability for remote monitoring. Telemetry from remote sites is very important, as the City, County, and other public institutions, such as Bolton Point, upgrade or increase the number of remotely monitored sites, e.g. pumping stations, landfills, and water tanks. Officials planning for these remote installations also stress the need for send-and-receive capabilities for these sites. County officials have expressed strong interest, and would like to be consulted about, a data transmission system that would allow for monitoring of data generated from closed landfills, pavement temperature systems, building operations systems, and interactive traffic control information systems. City traffic planners would like to improve the monitoring and flexibility of traffic signals in the downtown area by piggybacking on the cable infrastructure in that area. Send-and-receive capability is required, and overhead installations, except in areas of Collegetown where overhead lines prevent fire department access, are acceptable. City engineers have also requested additional drops in the downtown area to handle traffic signal 41 S sensing devices. Remote monitoring services should be made available to other municipalities that request it. Local transportation planners would also like to be consulted about a need for connections to bus shelters and parking garages for security and communications purposes." [Note: To be discussed.] In addition, the Consortium requires the Company to provide fiber optic extension for the actual cost of construction by site. Internet The Consortium encourages the Company to continue to provide services and to expand such service to all public buildings. [Note: To be discussed.] Closed-Circuit Equipment The Consortium requires the Company to provide closed circuit equipment, including end user equipment and pilot projects for Consortium applications. The closed circuit institutional access channels provide a means to transmit training and information programs to buildings of public institutions, libraries and schools. To support this activity and non-closed circuit access, the Consortium requires: ■ The provision of the equipment necessary to provide closed circuit programs ■ Free drops and converters to schools, libraries, buildings of public institutions. (The converters at these locations shall be capable of receiving the closed circuit programs.) 42 ■ Free closed circuit service to schools, libraries, and buildings of public institutions ■ A significant number of converters which can be used in the home by students, teachers, and government employees taking telecourses. Emergency Management The Consortium places a high priority on supporting emergency management needs and requires the Company to meet relevant FCC standards. The Franchisee will be required to keep emergency management informed of new features and capabilities as they become available and keep emergency updated on relevant FCC rules and regulations. The Consortium municipalities require the Company to provide for local messages of a touch-tone or similar equipment. Regulation of the Franchise The Consortium will be updating the model cable franchise to use as a basis for negotiation. The Consortium is preparing a draft amendments to the City of Ithaca Cable Communications Ordinance and will seek the Company's comments upon the draft document. On any provisions which the Company would like to comment, the Company will be instructed to note the suggested language on the document or on a corresponding page. The Consortium will require, among other items: performance bonds; consumer protection provisions; state-of-the-art implementation provision;annual performance audits;annual technical audits to assess compliance with safety codes, technical requirements and reliability; EEO provisions; and requirements for a updated and integrated 911 database, if telephone service is contemplated to be allowed to be 43 offered. The Consortium reserves the right to specify the type of organization to operate access equipment and facilities. Franchise Fee The Consortium will require a franchise fee of five percent (5%) or the maximum allowable by law of total gross annual revenues, both subscriber and nonsubscriber revenue, to be paid on a monthly basis. The Consortium will require the Company to provide an annual independent audited statement of gross revenues in Ithaca. Pilot and Experimental Projects The Consortium considers development of the telecommunications infrastructure as one of the keys to overall educational and economic development. The Consortium encourages Time Warner to develop its joint venture with AT&T and any other unique pilot and/or experimental projects in the Consortium area which build upon the Consortium communities existing resources. Franchise Term The Consortium will extend the business terms of the current Ithaca franchise for five years with specific modifications and extension to the Consortium communities. If the Consortium's franchising authorities believe the Company's proposal meets community needs, the Consortium will consider a longer term. Indicate the term, in years, which applicant seeks for this franchise. 44 II. Evaluation Criteria The Consortium will conduct a complete and thorough analysis of the proposal. Qualitative and quantitative considerations will be important factors in the Consortium's overall evaluation. A strong commitment to serving all residents of the City and meeting line extension requirements of the other Consortium Communities, to providing high quality customer service, to the continuation of a state of the art cable system, and to meeting the Consortium's access and institutional requirements will serve as major considerations. The key factors described below represent guidelines for the evaluation of the proposal. These guidelines will serve as a basis to analyze the relative merits of the proposal. The specified criteria are not listed in order of priority. 1. Benefits to the Consortium and its Citizens. • Provision of service to all residents in the City and meeting the line extension standards for the other Consortium communities. • Provision of high quality equipment, facilities and services for public, educational, and government access. • Provision of the institutional network: existing coaxial cable network; fiber optic extensions; 6 Mhz upstream; Internet; and closed circuit. • Commitment to consumer services. • Provision of Spanish programming. • Commitment to pay five percent(5%) franchise fee or maximum allowable by law on total gross revenues. • Commitment to emergency management. • Best quality service for consumer. 45 1 2. Access. • Commitment to provide access channels. • Demonstrated commitment to provide initial access equipment and facilities. • Demonstrated commitment to provide maintenance and replacement of access equipment. • Commitment to provide access services. • Commitment to interconnection. • Commitment to provide program origination sites. 3. Institutional Network. • Acceptability of I-net plan. • Quantity of I-net capacity on the coaxial cable and design of the fiber optic network. • Acceptability of replacement plan for coaxial I-net and construction timetable for fiber based I-net. • Quality of reliability and response standards and operating protocol. • Commitment to closed circuit and Internet for the public sector. 4. Financial. • Demonstrated financial resources and capability. • Feasibility and viability of financial projections and underlying assumptions. 46 K 5. Technical and Operations. • Acceptability of state of the art plans. • Acceptability of ongoing maintenance and testing plans. • Acceptability of plan to certify drops. • Acceptability of plans to improve picture quality of specified stations. • Acceptability of providing continuous, uninterrupted service during the rebuild to all Consortium subscribers. • Commitment to provide required facilities. • Reasonableness of consumer service plans. • Commitment to parental control and soft porn scrambling. • Reasonableness of operations policies. • Reasonableness plans to improve in identified consumer areas. • Reasonableness of plan to reduce busy signals. 6. Compliance with Minimum Requirements of the Consortium. 7. Pilot and Experimental Project Development. 8. Meeting the present and future cable communications needs of the community. 9. General Qualifications. • General reputation of applicant, as indicated by character qualifications and fitness of the applicant and its officers. • Ownership structure of the applicant. • Stability of franchises currently held by applicant and satisfaction of Consortium officials and subscribers. • Legal qualifications. 47 • # • Prior performance in meeting contractual promises. • Prior performance in Consortium areas • Compliance with FCC regulations. • Compliance with Consortium ordinances and or franchises. 48 T Section I Ownership, Experience and Financial Resources Part Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Ownership Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Financial Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D 49 A. Applicant 1. Ap licant Name Address 2. Principal to whom inquiries should be made: Name Title: Address: Telephone: 3. Representation: This application is submitted in response to the invitation issued by the Ithaca Area Cable Consortium, New York by the undersigned who has been duly authorized to make the representations within on behalf of the applicant. Applicant recognizes that all representations are truthful and that failure to adhere to any such representation may result in revocation of any franchise that may be granted, in consequence of this application. Consent is hereby given to the Consortium and its representatives to make inquiry into the applicant's legal, character, technical, financial and other qualifications by contacting any persons or organizations named herein as references, or by any other appropriate means. Name Applicant's Signature Official Position Date AFFIX CORPORATE SEAL 50 B. Ownership Information 1. Please provide a family tree for Time Warner Cable. 2. List all officers and directors (whether or not they own stock) and stockholders who own one percent (1% ) or more of the voting stock of the corporation. If an ownership interest exists, record this to the nearest whole percent based on the total number of outstanding shares of voting stock in the corporation, exclusive of treasury stock. Where stock is held by a stockholder in a street name, this fact should be noted, but no further information concerning such stockholder need be furnished. 3. If any of the persons, corporations, or other business entities named in the family tree is a stockholder owning five percent(5%)or more of the voting stock of any communications entity (e.g. broadcast television station, other cable systems, manufacturers, common carriers, newspapers, programming service) described below, or is an officer, director, partner, or individual owner of such an entity, fill in the appropriate information. If the interest is a fiduciary one, e.g., trustee, please note. Record ownership interests to the nearest whole percent (based on the total number of outstanding shares of voting stock, exclusive of treasury stock, in the case of corporations). Name of individual/ Name of entity having Communications Nature of % Voting ownership interest entity Location Interest Interest 51 4. Please describe Time Warner's joint venture with AT&T and how it will affect the cable system serving the Consortium area. Also please provide related public documents. 5. For Time Warner, list the outstanding indebtedness as of the date of this application: Name of Creditor % of total holding Amount outstanding indebtedness in $ indebtedness Terms A. Bonds B. Loans C. Notes D. Mortgages E. Other (Specify) 6. If any ownership interest in the applicant, including but not limited to, shares of stock or partnership interests has been or is expected to be sold or otherwise distributed, attach copies of all documents relating to such sale or distribution, including but not limited to stockholder agreements, restrictions on transfer of ownership interests and any provisions for re-acquisition of any ownership interest by the applicant or its affiliates. If any agreement provides for re-acquisition of ownership interests, estimate the amount which will be paid for such re-acquisition. If any agreements, formal or informal, have been or will be entered into whereby the consideration used to acquire an ownership interest in the applicant is supplied, directly or indirectly, by the applicant or its affiliates, such agreements shall be disclosed. Please provide the Consortium with copies of such agreements. 52 7. Please answer the following character qualification questions. (a) Has the applicant (including parent corporation if applicable) or any principal' or officer ever been convicted in a criminal proceeding (felonies) in which any of the following offenses were charged? Yes No Fraud Embezzlement Tax evasion Bribery Extortion Jury tampering Obstruction of justice (or other misconduct affecting public or judicial officers' performance of their official duties) False/misleading advertising _ Perjury _ Anti-trust violations (state and federal) Violations of FCC regulations Discrimination in hiring or promotion practices Conspiracy to commit any of the foregoing offenses Violation of Securities Law Any other felony ' For purposes of this form, "principal" means any officer or director of the applicant and any person, firm, corporation, partnership, joint venture or other entity, who or which owns or controls, directly or indirectly, any of the voting stock (or any equivalent voting interest of a partnership of joint venture) of the applicant. 53 If"yes," attach separate statement providing specifics such as date, court, sentence or fine, etc. (b) Has the applicant or any principal ever been a party to a civil proceeding in which it was held liable for any of the following or is now a party to the proceeding? Yes No Unfair or anticompetitive business practices Anti-trust violations (state and federal) including instances in which consent decrees were entered into Violations of securities laws (state and federal) False/misleading advertising _ Violations of FCC regulations _ Discrimination in hiring or promotion practices _ If "yes," attach statement providing specifies. (c) Has applicant or any principal ever had a business license (defined to include FCC licenses, alcoholic beverage and restaurant licenses, etc.) revoked, suspended or the renewal thereof denied or is a party to a proceeding that may result in same? Yes_ No_ If "yes," attach statement providing specifics. 54 r , C. Experience 1. Please list all cable systems renewed or rebuilt in the last four years in which applicant or any principal owns three percent or more of equity interest. Location of system Date of most recent franchise award and expiration date Plant miles of system: a) Aerial b) Underground Amount committed for: a) Local origination equipment b) Public, educational and government access equipment C) Annual local origination operating budget d) Annual public, educational and government access operating budget e) Institutional network Miles of rebuilt plant Channel Capacity Percent of fiber in rebuild Households per fiber node Franchisee of system and percentage of system ownership held 55 � f Number of subscribers Pay units sold Basic subscribers Homes passed by cable Current subscriber rates: a) Basic (Tier 1) b) Expanded Basic (Tier 2) Hours of local programming per week a) Local origination b) Public, education and government access channels Name and address and telephone number of local government officials responsible for cable operations 2. Please list all franchises held in New York and indicate the number of subscribers, date of franchise award, and name, address and telephone number of local government official responsible for cable operations. 56 r rt D. Financial Commitment 1. Please provide a narrative description of all sources of funds flowing into the cable system serving the Consortium for future capital investments and to cover any operating deficits. Please indicate what funds are specifically earmarked for the Consortium area cable system. 2. Documentation: For each person or entity who has agreed to furnish funds, property, credit, loans, assurances and other things of value, submit assurances from the entity or persons providing funding. 3. The Consortium reserves the right to require additional information or assurances with respect to any person or entity who has agreed to furnish funds, property, credit, loans, assurances or other things of value. 57 Section H Financial Experience and Projections Part Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Pro Forma Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 58 A. Financial Experience and Projections Directions 1. When preparing the ten (10) year financial projections, the applicant is required to use 1999 prices and assume an annual inflation rate of three percent (3%) thereafter. The ten (10)year projection period requested is for evaluation purposes only and in no way reflects the term of any franchise which may be granted. The financial projections should be prepared for the system serving the Consortium only. 2. For comparison purposes, the applicant is required to include the latest fiscal year's experience in the proforma. 3. All capital expenditures and the date of rebuild should be reflected on proforma financial statements. 4. The applicant is required to specify the assumptions used to develop the proforma financial statements by referring to the explanatory notes following the financial statement forms and completing in detail the information requested. Please enumerate any other significant assumptions that would assist in understanding how the proforma were developed. 5. Please note that the proforma formats which follow contain the information that is required. However, if the applicant desires the Consortium to consider a different ordering or format, the applicant can send in a copy of the revised format to the Consortium for review to see if it is acceptable to the Consortium. 6. The applicant's forecasted financial statements and related schedules and working papers must be prepared in accordance with the principles set forth in the American Institute of Certified Public Accountants (AICPA). All data provided should be regarding the system serving the Consortium, only. 59 TEN-YEAR PROJECTIONS 60 f FISCAL YEAR YEAR— Previous Fiscal Year 1 2 3 4 5 6 7 8 9 10 LOCAL CHARACTERISTICS Homes Passed(1) Aerial Miles Constructed Underground Miles Constructed Aerial Miles Rebuilt Underground Miles Rebuilt Year-End Basic Subscribers(2) Average Basic Subscribers(2) Additional Outlets Sold Number of Pay Units Sold FM Subs Remote Units Rented Pay-Pec-View Units Sold Other Services (specify) SUBSCRIBER REVENUE Basic Tier A La Carte Channels Additional Outlets Converter Rental (3) Remote Control Units Pay Service Revenue FM Service Pay-Per-View Installation Other Services NON-SUBSCRIBER REVENUE Advertising Channel Leasing Facilities and Equipment Rental Other Non-Subscriber Revenue TOTAL REVENUE 61 FISCAL YEAR YEAR— Previous Fiscal Year 1 2 3 4 5 6 7 8 9 10 OPERATING EXPENSES Plant: Plant Salaries&Benefits (4) Plant Maintenance&Repair Converter Maintenance(5) Pole&Site Rental(6) System Power(7) Vehicle Expense(8) Other Plant(specify) Programming and Origination: Satellite Fees(9) Pay Service Fees Copyright Fee(10) Community Programming Salaries(11) Studio Supplies&Expenses General, Selling&Administration: Salaries&Benefits(G&A) Salaries&Benefits(Marketing) Advertising&Promotion Bad Debt Expense Billing&Mailing Rent, Heat&Lights Telephone&Office Expense Insurance Professional Services(specify) Allocation of Corp. Overhead(12) Services Purchased from Parent(specify) State&Local Taxes Franchise Fee Other G, S&A Expense TOTAL OPERATING EXPENSES CAPITAL EXPENDITURES Land Buildings Tower and Antennas Earth Stations&Foundations Headend Equipment Distribution(13) Coaxial Aerial (including pole make ready) Underground Fiber Optics Aerial(including pole make ready) Underground Subscriber Drops(14) Converters(15) Local Origination Equipment Vehicles(16) Tools/Spares Office Furniture&Equipment Other(specify) TOTAL CAPITAL EXPENDITURES 62 FISCAL YEAR YEAR— Previous Fiscal Year 1 2 3 4 5 6 7 8 9 10 PROFIT AND LOSS STATEMENT Total Revenue Direct Operating Expenses Operating Income(Loss) Depreciation/Amortization(17) Interest Expense (18) Federal/State Income Taxes Net Income (Loss) SOURCES OF FUNDS Net Income + Depreciation Advances from Parent Other Sources(specify) Total Sources USES OF FUNDS Additions to Operating Assets Additions to Other Assets Payments to Parent Company Total Uses Net Increase(Decrease) in Cash BALANCE SHEET Cash Accounts Receivable Allowance for Doubtful Accounts Other Total Current Assets Gross Property, Plant&Equipment Less: Accumulated Depreciation Net P, P&E Intangible Assets Other(specify) Total Assets Total Current Liabilities Due to Affiliated Companies Equity (specify) Total Liabilities and Equity Commitments and Contingent Liabilities(19) 64 B. Pro Forma Assumptions 1. What is the source of the estimate for the projected annual growth in the number of homes passed? 2. Indicate the current and projected number of employees for Year 1-15 in each of the following areas: ■ Plant ■ Community Programming ■ General & Administration ■ Marketing (full-time equivalent) 3. What is the assumption behind converter maintenance expense projections? 4. Assumed charge for pole rental per pole per year? 5. Assumed system power expense per plant mile? 6. Average annual expense per vehicle? Assumed number of vehicles? 7. Assumed satellite fees per subscriber per year? 8. Projected copyright fees are based on how many "distant signal equivalents" and are what percent of basic and second set revenue? 65 9. If separate funding is provided for local origination, public access, educational access, and/or governmental access, provide individual breakdowns for salaries and benefits, studio supplies and expenses, and other. 10. Management fee is assumed at what percent of total revenue? What services, if any, will be purchased from the parent Company that are not covered by the management fee? Explain. 11. What is the projected cost per aerial mile upgrade? What is the projected cost per underground mile upgrade? What was the overall cost of the system upgrade by Municipality in the Consortium? 12. What is the average projected cost per subscriber drop? 13. What is the average projected cost per converter? Explain the assumptions behind the converter replacement schedule. 14. What is the anticipated number and type of vehicles (cars, light trucks, bucket trucks, etc.) that will be purchased and the estimated cost for each type of vehicle? 66 r s 15. Specify the estimated useful lives for the various asset categories listed below. Use the straight-line method of depreciation. ■ Buildings ■ Tower and Antennas ■ Earth Stations &Foundations ■ Headend Equipment ■ Distribution System ■ Subscriber Drops ■ Converters ■ Local Origination Equipment ■ Vehicles ■ Tools/Spares ■ Office Furniture & Equipment ■ Other (specify) 16. Assumed rate of interest? Amount of debt on which interest is computed? 17. Please state whether the applicant has any other commitments and/or contingent liabilities. If yes, explain. 18. Indicate how expenses and revenues generated on a system-wide basis have been allocated to the Consortium system. 19. The net present value of expected annual cash flows generated from this project over the ten year period will be calculated. Please provide the following: ■ An estimate of the net investment to date. Describe fully the basis for the estimate. ■ An estimate of cost of capital? Describe fully the basis for the estimate. ■ Discount rate used. 67 Section III Construction and Service Part Service Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Construction Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 68 A. Service Area 1. If any areas are not currently served within the corporate boundaries of the Consortium communities, please provide a map targeting these areas and explanations for the exclusion of these areas must be provided. (a) For those areas not served, specify the sequence and timetable for completing the construction of those portions of the system. (b) For areas not served, please indicate the number of homes per mile. 2. Please indicate if the system upgrade to 750 MHz is complete throughout the system. If not, please indicate when construction will be completed. 3. Will the Company provide cable service to all dwelling units in the City of Ithaca? 4. Will the Company provide service to all dwelling units in the Town of Ithaca, Town of Caroline, Town of Groton, Town of Lansing, Town of Ulysses, Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, and the Village of Freeville with a minimum density of fifteen dwelling units per mile? 5. Please describe the line extension formula that the Company will abide by for areas with less than fifteen dwelling units per mile. (a) Provide describe the line extension formula that the Company will abide by for areas with less than fifteen dwelling units. (b) Please describe how the minimum density requirements will decline during the term of the franchise. 6. List the location of Company offices, facilities and payment stations. 69 B. Construction Practices 1. Describe, in detail, the safety practices which the Company will use to protect the public during ongoing operations. 2. Indicate how subcontractors are used and how supervision of subcontractors will be handled. 3. Provide a description of the practices the Company will use for undertaking construction on private property and procedures for dealing with complaints by property owners. 4. Provide a description of the methods and practices for minimizing service interruptions and property damage the Company will use. S. List construction codes and licensing requirements which will be followed. 6. Attach a copy of the construction practices manual being followed by construction crews for construction in the future. 7. For the upgrade, in areas where the existing cable was used, did the Company test all cable to ensure that it meets manufacturers standards? 70 T 8. Will the Company have house drops checked for grounding during normal service calls and have any drops not meeting specification been replaced? 9. When will the Company certify to Consortium communities that all house drops within their boundaries are in compliance with the requirements specified in the Introduction and pass 750 MHz? 10. Provide a plan that the technical staff will follow prior to entering a subscribers home (e.g., I.D. badges, proper authorization). 11. Indicate how long temporary underground drops will be left above ground. 12. What steps will the Company take to ensure that homeowners and builders have the proper technical specifications available for internal wiring. 71 Section IV System Design Part ChannelCapacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A SystemDesign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 72 A. Channel CapacitX 1. What are the number of downstream channels? MHz Channels 2. What are the number of activated upstream channels? MHz Channels 3. What capacity has been reserved for future applications? MHz Channels 4. Describe in detail how fiber optics is being utilized in the system. Indicate what the ratio of fiber optics to coaxial cable and the amount of fiber that has been deployed to headends, hubs, and nodes. 5. When will the fiber optic link be completed that will improve the cable systems' reception of off-air channels from Syracuse? 6. Please provide the Company's plans to investigate a remedy to electrical interference on Channel 57. 7. Will the Company keep the cable system equipment, facilities, and services state-of-the-art throughout the franchise term as specified in the Introduction? 73 8. When will digital video services be provided? Please describe what digital tiers will be deployed. 74 x ; B. System Design 1. Provide the following system mileage figures by Consortium community. Consortium Community Aerial Miles Under ound Miles City of Ithaca: ■ Cable Distribution Plant ■ Fiber Optic Plant Town of Ithaca: ■ Cable Distribution Plant ■ Fiber Optic Plant Town of Caroline: ■ Cable Distribution Plant ■ Fiber Optic Plant Village of Lansing: ■ Cable Distribution Plant ■ Fiber Optic Plant Village of Trumansburg: :—Fiber Cable Distribution Plant O tic Plant Village of Dryden: ■ Cable Distribution Plant ■ Fiber Optic Plant Village of Cayuga Heights: ■ Cable Distribution Plant ■ Fiber Optic Plant Village of Freeville: ■ Cable Distribution Plant ■ Fiber Optic Plant Town of Groton: ■ Cable Distribution Plant ■ Fiber Optic Plant 75 1. Consortium C2niinunity Aerial Miles -T-Underground Miles' Town of Ulysses: ■ Cable Distribution Plant ■ Fiber Optic Plant 2. Describe the technical standards that the system will comply with for fiber optics and coaxial plant. 3. Describe in detail the preventive maintenance program the Company will follow which will ensure the maintenance,upkeep and signal quality of the rebuilt system. Include Company plans for assuring proper installation and periodic testing. 4. Describe plans for converter replacement, new converters, and the features converters that will be offered (e.g. programmable remote). 5. Describe the emergency alert system that will be provided, how the Company will keep the Consortium communities informed of changes, and how the Consortium franchising authorities will provide local emergency message (e.g. touch-tone telephone with access number). 6. Will BTSC stereo be provided for all broadcast and satellite programming services that offer it? 7. What is the longest amplifier cascade? Number of amplifiers: 76 Number of miles: 77 a � 8. State the number of homes served from each fiber node. 9. Describe, in detail, plans for radio frequency non-interference including compliance with all applicable FCC technical rules. 10. Delcribe how the cable system will provide antenna switches to subscribers. 11. Describe the equipment that will be utilized to scramble the audio and video of pay channels and services and whether the Company will provide such scrambling. 12. The applicant should establish mechanisms to provide access to the system by disabled and elderly users and viewers. In the case of hearing-impaired subscribers,this should include, at a minimum, equipment which facilitates the reception of basic cable service by such subscribers, as well as TDD equipment. Describe the mechanisms to be used by the applicant to provide access by disabled and elderly users and viewers, as well as how and when the applicant expects to implement those mechanisms. 13. Describe the parental control features that will be offered. 14. Describe the remote status monitoring equipment that is employed. 15. Indicate how the Company will keep the Consortium informed about HDTV and other technological developments and factors the Company will consider prior to offering these new technologies. Indicate how HDTV signals will be provided on the system. 78 z 16. Describe the applicants plan for minimizing outages. 17. Please describe how institutions transmitting access programming on the institutional network will be interconnected with the access channels on the subscriber network. 18. Will all access channels be available throughout the Consortium area if requested by the individual franchising authorities? 19. Please provide a plan to conduct a system-wide audit of the aerial plant and bring the plant into compliance with the NEC and BellCore standards. 20. Please provide a plan for improving the picture quality of Channel 8. 79 J Section V Channel Allocation Part Access Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Radio Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Summary of Channels by Tier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 80 A. Access Channels 1. Describe the number of channels that will be set aside for the following: Number of Channels Leased Access Video PEG Access Channels* Audio PEG Access Channels Local Origination 2. Please indicate if the channel designation for existing access channels will remain the same when digital tiers are introduced on the system. If there will be any changes, will the Company use all commercially reasonable efforts to maintain the access channels in the same position? If an access channel is to be changed, what assistance will the Company provide for informing viewers and assisting with logo and stationary changes? * Indicate if there is any restriction on which channel can be designated for pay-per-view access. 81 i B. Radio Services 1. Describe what broadcast and digital audio services are and will be offered and how this is or will be technically implemented. 82 r C. Summary of Channels b, Tie 1. Provide a listing of cable channels and corresponding services that will be provided by tier of service. 2. Describe any additional service features. 3. What Spanish language channels will be provided? 83 � 1 Section VI Rates Part Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 84 A. Rates 1. Please provide a complete listing of current system rates, including any charges that are assessed to subscribers (e.g. late fees). 2. Describe additional rates for leased channels. 3. Describe any and all special rates or discounts (e.g., senior citizen and disabled discounts, private school rates.) 4. Describe if all rates will be provided on a non-discriminatory basis, except for any discounts as described in 2. above. 5. Describe the Company policy (existing or future) for lost or willfully damaged convertors and other equipment. 6. Will subscribers be able to purchase converters, remote controls and other consumer electronic equipment from the Company and/or other vendors? Please describe. 7. Will disconnection be provided free of charge? 85 Section VII Local Programming Part PEGAccess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 86 A. PEG ACCESS 1. Describe the new equipment and studio facilities that will be provided by the Company for public, educational, and government access programming. Provide an overall budget for such equipment and facilities. State manufacturers, model numbers, and costs. In responding to this question, please refer to the minimum requirements for access specified in the Introduction. Studio: Editing: Character Generation: Lighting: Portable Equipment: Mobile Multi-camera Production Van: Master Control/Playback: Audio Equipment: Description of Facilities: Other: Total Cost: 87 2. Identify and describe the additional studio site and whether the space will be built, leased or purchased. 3. How does the applicant propose to maintain the PEG access equipment and facilities? Indicate the annual maintenance budget. 4. What technical support services does the applicant propose for PEG access users? 5. Indicate the level of funding that will be committed for the initial equipment and replacement of equipment for PEG access programming for each year of the projected ten years. 6. Indicate the level of funding for staff support that will be committed for PEG access services for each year of the projected ten years. 7. List additional publicity support and services the Company would provide for PEG access. 8. Describe the current locations that PEG access programming can originate from and how and when the required origination sites would be available to cablecast. Indicate if the Company proposes any additional public access origination sites. Also, indicate wether origination sites will be provided via fiber optics or coaxial cable. 9. Describe which services the Company will provide to assist in the development and production of PEG access programming. 88 10. Please provide a plan to meet PEG Access Task Force concerns regarding viewers choices regarding access programming as specified in the Introduction. 11. What hours of operation will the studios be open? Please see the studio hours respondents to the community needs assessment survey indicated would be times their organization could utilize the studio. 12. Indicate the assistance the Company will provide in scrambling signals and switching for closed circuit educational programming to be provided to schools. 13. State the number of converters capable of receiving the above-mentioned closed circuit programming which will be provided. 14. Describe the educational programming services to be provided. Also, discuss any specialized services that may be provided for I-net distribution (e.g., SCOLA, NASA SELECT). 15. Describe wether the company will continue production of City of Ithaca meetings(common council plus three committee meetings. 16. Will the Company provide production services to other members of the Consortium. 17. - Please indicate regarding access proposals whether the Company will provide at its own expense, if all or a portion is already in the rate base, if all or portion will be passed through to subscribers as an additional fee. 90 B. Institutional and Subscriber Drops 1. Please provide a list of the type of buildings the Company will provide free drops and service at no cost. How long will new drops to such buildings be? Indicate what tiers of service will be provided free of charge. Indicated which type of building will receive multiple drops. 2. Please provide the Company's proposal regarding providing internal wiring of educational and government buildings and any additional connectivity for the Ithaca College campus.. 93 C. Institutional Network Design 1. Please provide the amount of activities and passives the Company will stock pile to ensure the continued operation the existing coaxial cable plant. 2. Please indicate if the Company will conduct annual tests of the existing coaxial cable I-net? 3. Will the Company provide 6 MHz upstream throughout the cable system for institutional network purposes? 4. What inventory of passives and amplifiers will the Company maintain for the coaxial cable institutional network? 5. Why does the Company believe the useful like of the existing coaxial network will end? 6. What standard does the Company propose for the Consortium to use, making a determination of whether the stability/reliability or staffing of the institutional network would provide a reliable transmission. 7. Please provide the response time and test procedure proposal the Company will provide. 94 v 8. Will the Company replace the coaxial cable network with fiber optics as specified in the Introduction? 9. Please provide a detailed breakdown of costs for: the existing coaxial I-net to be replace by fiber; the required extension sites; priority two sites.(Breakdown should be provided by site.) 10. Will the Company provide free Internet service to schools, libraries and government buildings capable of 100 simultaneous users or other capability? a. For each of these locations, how many free cable modems will be provided? 11. Requirements for the institutional network are included in the introduction to the RFRP. Describe the design and capacity of the proposed institutional network. Submit maps that provide an overview of the following information. See the Introduction for a listing of identified institutional network sites. a. The proposed routing of the fiber backbone network. b. Individual fiber drops to public institutions (e.g. schools, government buildings). C. Program feeds from public, educational, and government access locations to the subscriber network. 12. Provide information on the fiber optic construction institutional network plant. 13. Provide a technical description on the interface equipment that will be supplied to support digital transmission on the fiber optic networks. a. Manufacturer and model (if selected) b. Bandwidth of the optic transmitter equipment C. Emitter wavelength d. Applications to be supported (example) (1) Point-to-point/multiplex (9.6 Kbps to 1.54 Mbps link) t (2) Local area network bridges (FDDI, Token Ring, Ethernet, etc.) 95 .r (3) Telemetry (alarms, monitor, control) Also, provide description of the equipment which will be supplied to support the video transmission on the fiber optic network. 14. Description of the I-net control center. a. What equipment will be provided to support switching of video signals? b. What test equipment will be available to monitor and diagnose problems with the video and data transmission networks? C. What technical staffing will be provided to support the day-to-day operation of the institutional network? 15. Does the Company agree to have the public sector use of the upstream/downstream institutional capacity coordinated and managed by the Consortium? 16. What equipment will be provided to enable a connected institution to use the network for various purposes (e.g., monitors, internal wiring, modems, modulators, etc.)? 17. Will all transmission capability be provided for free, noncommercial use for the Consortium government and educational and public institutions? If not, please explain. 18. Provide a construction timetable for the institutional network extension and any rebuild of the coaxial network. 19. Describe how switching between the locations on the institutional network, providing access programming, and the access channels on the subscriber network will be handled. 96 20. Describe any institutional network services that the Company will offer. 21. Describe the applicant's plans to maintain the coaxial cable and fiber optic institutional network and over the term of the franchise. 22. Indicate how calls for service or repairs on the fiber optic institutional network will be handled and the response time. Indicate the reliability standards that will be met by the Company. 23. Please indicate regarding I-net proposals whether the Company will provide at its own expense, if all or a portion is already in the rate base, if all or portion will be passed through to subscribers as an additional fee. 97 Section IX Equal Employment Opportunity and Equal Business Opportunity Part EEOand EBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 98 A. EEO and EBO 1. Describe in detail your equal employment opportunity policy. Include job classifications, duties, and salary ranges for positions at the supervisory, management, and professional levels and identify the total number of each job classification and the number of minorities and women currently in each job classification. 2. Have any complaints of discrimination in employment practices been lodged against the applicant? If so, please specify the complaints and resolutions. 3. Identify any training programs that are or will be made available to employees. 99 2. Identify and describe the additional studio site and whether the space will be built, leased or purchased. 3. How does the applicant propose to maintain the PEG access equipment and facilities? Indicate the annual maintenance budget. 4. What technical support services does the applicant propose for PEG access users? 5. Indicate the level of funding that will be committed for the initial equipment and replacement of equipment for PEG access programming for each year of the projected ten years. 6. Indicate the level of funding for staff support that will be committed for PEG access services for each year of the projected ten years. 7. List additional publicity support and services the Company would provide for PEG access. 8. Describe the current locations that PEG access programming can originate from and how and when the required origination sites would be available to cablecast. Indicate if the Company proposes any additional public access origination sites. Also, indicate wether origination sites will be provided via fiber optics or coaxial cable. 9. Describe which services the Company will provide to assist in the development and production of PEG access programming. 88 Section X Consumer Part Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Consumer Complaints and Repair Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Billing Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 101 A. Privacy 1. Provide the applicant's privacy policy and clearly delineate between "voluntary information" and "voluntary uses," "essential information," and "essential uses". "Essential information" is that information which Company must collect in order to provide service (e.g., billing information). "Voluntary information" is all other information which the operator may seek to collect. "Essential uses" refers to those uses of essential information which are required in order to provide service (e.g., billing uses). "Voluntary uses" are all other uses of information collected, whether that information be considered "essential" or "voluntary". The cable system policy is expected to at least guarantee the subscriber that no voluntary information will be collected without prior consent; and no voluntary use will be made of information collected without prior consent. Thus, by agreeing to receive service after they fully read and understand the pricing document provided by the Company, a subscriber will be deemed to have given prior consent that "essential information" may be collected for "essential uses". In addition, the applicant's privacy policy should include: a. if billing for particular services will require the operator or a third party to monitor the programs of channel viewers, the fact must be clearly explained and the services requiring such monitoring specified; and b. the conditions under which third parties may be permitted to collect information using the cable system. 2. Identify all present and projected uses of the cable communications system where questions of subscriber privacy can be expected to arise, and describe in detail the policies and procedures designed to protect subscriber privacy. 3. Describe in detail what measures will be taken on an ongoing basis to protect subscriber privacy and to inform subscribers as to how subscriber information is to be collected, retained, used and disseminated. 4. Describe the remedies for breach of subscriber privacy which the applicant will make available to subscribers. Detail procedures or privacy complaint resolution. 102 � w B. Consumer Complaint and Repair Procedures 1. Describe in detail your policy for handling consumer complaints, inquiries and repair requests. Describe how this policy is or will be implemented including the role of the Consortium. Indicate the number of days in which complaints will be resolved. 2. Describe how you will notify subscribers on an ongoing basis of your complaint, service and maintenance procedures, providing a sample of such notification. 3. Provide a copy of the system's consumer handbook or information packet and indicate how often it is provided to the subscribers. 4. Hours of office(s) operation will be: Monday - Fridays: a.m. to p.m. Saturdays: a.m. to p.m. Sundays & Holidays: a.m. to p.m. 5. How soon after a trouble call is received will a service employee be required to correct the problem either by telephone contact with subscriber or by a visit to the premises, or by a doorknob hanger if no one is home? Within 24 hours: ( ) Same Day: ( ) Close of next business day: ( ) Within five hours: ( ) Other: ( ) 103 6. Provide the percent of service calls that are corrected on one or more service calls. One Visit % Three Visits % Two Visits % Four or More Visits % 7. Please provide your plan for how the number of multiple repair service calls for the same subscribers will be reduced and what percentage will be met. 8. What will be the Company's policy for missed appointments? 9. List the addresses of the Company's offices and payment stations. 10. Where will telephone calls be received? 11. How will trouble calls be received outside normal business hours and how will technicians be informed? 12. How soon will individual trouble calls outside normal hours be given to a repair or service person? 13. Describe how subscribers will be notified of routine maintenance and when such maintenance will be scheduled. 14. Describe when technicians will respond to system outages and when subscribers will receive rebates. 104 15. Indicate the proposed number of active phone lines by which customers may reach office personnel. Also, indicate: (a) the percent of all customer service calls that will be answered within one minute; (b) the percent of all customer service calls that will be answered within two minutes; (c) the percent of calls that will be lost; (d) the percent receiving a busy signal; (e) the amount of time customers are placed on hold; (f) how information will be provided to the Consortium to monitor these standards. 16. Indicate the percent of repair calls that will be answered satisfactorily within a 24-hour period on an annual basis and what steps will be taken if this level of service is not obtained. 17. Indicate if appointments are scheduled with subscribers on a two-hour or other basis. 18. Describe in detail how the system will be compatible with consumer electronics. 19. Describe what the Company's policy regarding subscriber requests for underground drops will be in areas served aerially. 105 jW 20. What type of equipment will be provided to subscribers or franchise areas that do not wish to receive specific access channels? 21. Indicate if the Company meets the FCC customer service standards and provide relevant quarterly management data for the last year. 22. Please provide the Company's plan for minimizing the number of repeat repair calls. 23. Please provide the Company's plan for increasing the percent of subscribers receiving a service call within twenty-four hours of a request. 24. Please provide the Company's plan for decreasing the amount of time subscribers wait for installation of cable service. 25. Please provide the Company's plan for decreasing the amount of time subscribers are put on hold and decreasing the percent of time subscribers receive a busy signal. 26. Please provide the Company's plan for promptly responding to citizen complaints forwarded by Consortium communities and for providing a written description of the Company's response to the effected Consortium communities. 106 � K 27. Will the Company comply with the NCTA customer service guidelines? 107 NP C. Billing Practices 1. Describe in detail the Company's billing, payment and collection procedures and policies (e.g., form and type of billing, system outages). Indicate the number of days in which complaints will be resolved. Also attach a sample billing form. Indicate if the subscriber will not be required to pay the disputed portion of the bill until the complaint procedures have been followed. 2. Describe the Company's policy for handling billing complaints and describe how this policy is or will be implemented. 3. Provide the name of the collection agency being utilized by the Company and guidelines used for the collection of past due accounts. 4. Describe the Company's policy regarding late fees, the amount of the late fee, and what the direct costs are to the Company for late fee collection. 108 i •f Section XI Innovative Projects Part Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 109 A. Description 1. Briefly describe any pilot, experimental, or innovative project(s) that the applicant and/or the parent and ATT or other joint venture partner intends to develop in the Consortium. Examples of such project(s) may include, but are not limited to, services to be provided for education, business or institutional services, and joint ventures with private entities, local public or educational institutions. Indicate whether the project(s) currently is operational, being developed, or is a proposed new project and the projected timetable(s). 2. Provide related contracts with third party entities. 3. Please provide a timetable for implementation. 4. Describe any joint ventures, contracts, or relationships with other telecommunications entities to conduct innovative projects in the Consortium area. 110 Section XII Term of Franchise Part Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 111 i A. Term of Franchise 1. The Consortium will extend the business terms of the current Ithaca franchise for five years with specific modifications for Consortium communities, but if the Consortium's franchising authorities believe the Company's proposal meets community needs, the Consortium will consider a longer term. Indicate the term, in years, which applicant seeks for this franchise. 112 V RICE,WILLIAMS ASSOCIATES March 19, 1999 Ms. Jeannie Lee Economic Development Planner City of Ithaca 108 East Green Street Ithaca NY 14850 Dear Jeannie: Enclosed for review is the draft Request for Renewal Proposal(RFRP). The RFRP reflects the areas discussed during the last teleconference. In addition to overall review of the document, those reviewing the document should check to be sure there are no omissions and whether there are questions which could be deleted. Items I have identified to be discus' cd are in italics. Changes to the document can be discussed during the upcoming teleconference. Talk to you soon Sincere] / Jean Rice Partner JRljms Enclosure cc: Mr. H. Matthys Van Cort, Director of Planning & Development Mir. Ben Curtis, Tompkins County Intermunicipal Cable Commission 601 Pmnsylvwia Avenue,NW 209 Elden Sneer Suire 900 Suire 200 Washingron,DC 20004 Herndon,VA 20170 Phonc:(202)737-2400 Phone,(703)467.9833 r --:I. — F=(703)467-9949 EO*d _ 1 ' TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. Minimum Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SubscriberNetwork . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consumer Compatibility . . . . . ... . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 6 Consumer Services . . . . . . . . . . . . . . . . . . I . . . . . . . . . . . . . . . . . . . . . . . . 7 Interconnection . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 8 Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Government Access . . . . . . . . . . . . . . . . . . . 10 Educational Access . . . I . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . 12 BOCES . . . . . . . . . . . . . . . 12 Public Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Cooperative Extension . . . . . . . . . . . . . . . 13 PublicAccess . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . 13 PEG Access Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Current Video Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Institutions Needing to Provide Local Prog�m_m' ng . . . . . . . . . . . . . . . . 16 AccessRequirements . . . . . . . . . . . . . . . . . . . . . . . . .: . . . . . . . . . . . . . . . . 19 Main Studio Needs Enlargement, Redesign . . . . . . . . . . . . . . . . . . . . . . 21 Access Center Must Be Centrally Located . . . . . . . . . . . . . . . . . . . . . . . 21 More Equipment is Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Equipment Must Be Maintained, and Replaced When Outdated . . . . . . . . . 22 Studio Hours and Staffing Need to Be Increased . . . . . . . . . . . . . . . . . . . 22 Additional Video Drops Are Needed . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Future PEG Equipment Requirements . . . . . . . . . . . . . . . . . . . . . . . 23 Institutional Network . . . . . . . . . . . . . . . 25 Potential Institutional Network Users . . . . . . . . . . . . . . . . . . . . . 25 Current Coaxial Network Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 System Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Operations and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Coaxial I-net Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Fiber Optic I-Net Extensions . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Internet . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Emergency Management . . . . . *.. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 43 Regulation of the Franchise . . . . . . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . 43 Franchise Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Pilot and Experimental Projects . . . : . . . . . . . . . . . . . . . . 44 Franchise Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 i 20'd bT'17T f;r_G.T-;777_vuii Section I Ownership, Experience and Financial Resources . . . . ... . . . . . . . . . . . . . . . 49 A. Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . 50 B. Ownership Information . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 C. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 D. Financial Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section II Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 A. Financial Experience and Projections . . . . . . . : . . . . . . . . . . . . . . . . . . . . 59 B. Pro Forma Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section III Construction and Service . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . 68 A. Service Area . . . . . . . . . . . . . .. . . . . . . . . . . . . . ... . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 69 B. Construction Practices . . . . . . . . . I . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 70 Section N System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 A. Channel Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 B. System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Sections V Channel Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 A. Access Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 B. Radio Services . . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . . . . . . . 82 C. Summary of Channels by Tier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section VI Rates . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 A. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section VII Local Programming . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 A. PEG Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section VIII Institutional Network Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 A. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 B. Institutional and Subscn'ber Drops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 C. Institutional Network Design . . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . 94 Section IX Equal Employment Opportunity and Equal Business Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 A. EEO and EEO . . . . . . . . . ,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Section X Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. Privacy . . . . . . . . . . . . . . 102 B. Consumer Complaint and Repair Procedures . . . . . . . . . . . . . . . . . . . . . . 103 ii ! , , I all ii bo'd 17 T VT 6661-ZZ-�fdW SO'd 1ti101 s i Section XI Innovative Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 A. Description . . . . . . . . . . . . . . . . . . . . . . . . . 110 Section XII Term of Franchise . . . . . . . . . . . . . . . . . . . . . . 111 A. Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 i 3 SZ:bt 6662-Zz-8dW CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 s DEPARTMENT OF PLANNING AND DEVELOPMENT APoRATEO H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: 607/274-6550 Fax: 607/274-6558 TO: Cable Negotiating Committee Members FROM: Jeannie S. Lees Economic Development Planner DATE: March 22, 1999 SUBJECT: Meeting Notice for March 26, 1999 The next meeting of the cable negotiating committee will be held on Friday,March 26, 1999 from 10:00am— 12:00pm in City Hall in the third floor conference room. Jean Rice, of Rice, Williams Associates, will be joining us via telephone. The following reports have been included for your review: • Draft RFP • Technical Evaluation of Time Warner Cable System • Community Needs Assessment(organization survey) • Assessment of Community Needs of Cable Subscribers (consumer survey) The main agenda item for the meeting will be to review and comment on the draft RFP. Thank you. Agenda: 1. Review and Comment on the draft RFP. 2. Discuss next steps and schedule. 3. Schedule next meeting date. An Equal Opportunity Employer with a commitment to workforce diversification." �� RICE, WILLIAMS ASSOCIATES March 29, 1999 Mr. Ben Curtis Codes Officer Village oil Lansing 2405 North Triphammer Road Ithaca,NY 14850 Dear Ben, As we discussed (luring the teleconference, to finalize the RFRP, we will need from each community their final list tit'I-net sites. 'Che City of Ithaca's list is complete.These sites may include the municipal goN ernnient building, tire or police stations and school or other sites. Please call the other Consortium members Ior the final sites and, ifyou need it,the addresses.As we also discussed, you were going to have the I-net map we have been working from redone to indicate the final list. In addition,please review the plan to request small scale production studios in four regionally dispersed locations for go\ernment and educational access production with each community for their input. Sincerely, Jean Rice JR/j ms cc: Mr. H. Matthys Van Cort ✓ Ms. Jeannie Lee 601 Pennsylvania Avenue,NW 209 Elden Street Suite 900 Suite 200 Vashington,DC 20004 Herndon,VA 20170 Phone:(202)737-2400 Phone:(703)467-9833 I.auail:rwatelcon0crols.com Fax:(703)467-9849 RICE, WILLIAMS ASSOCIATES r;.. April 9, 1999 APR Mr. Thys Van Cort ENT Planning & Development Director City of Ithaca 108 East Green Street Ithaca NY 14850 Dear Thys: As you may know,on March 29th,the FCC adopted a Report and Order. This Order reforms a number of parts of the Cable Television Consumer Protection and Competition Act of 1992. In addition, there are clarifications regarding the sunsetting of rate regulation on the cable service programming service tier("CPST"). We have enclosed the Report and Order. CPST rate regulation sunset as of March 31st, 1999. This means that for the cable programming service tier,local franchising authorities will no longer be able to send rate complaints to the FCC for review and regulation. The Commission will, of course, continue to process complaints regarding rates for services provided prior to March 31 st, 1999. This Report and Order also clarifies statutory requirements regarding the determination of effective competition. This most recent Order provides that in effective competition cases, resolution for determinations of effective competition will occur under the FCC's special relief procedures. In addition, the Order clarifies conditions for reconsideration of local franchising authority certification to regulate rates. The Commission, in the Order, determined that it is unable to maintain an operator's small operator status once it no longer meets the strict eligibility requirements put forward in the Cable Act. Uniform rate requirements are also dealt with. As you know, the statute provides for limited exception to uniform rate requirement for bulk discounts to multiple dwelling units. The new Order concludes that a bulk discount is a volume discount to all residents of the MDU and that the operator can offer discounts directly to the residents, that is to say, negotiations about the rate with the MDU owner or manager is not required. 601 Pennsylvania Avenue,NW 209 Elden Street Suite 900 Suite 200 Washington,DC 20004 Herndon,VA 20170 Phone:(202)737-2400 Phone:(703)467-9833 E-mail:rwatelcom@erols.com Fax:(703)467-9849 Mr. Thys Van Cort April 9, 1999 Page 2 The most significant information provided by this Report and Order concerns technical standards. The 1996 Act retained the requirement that the FCC establish minimum technical standards for the operation of the system and signal quality. In addition, the Act specified that no state or franchising authority could prohibit, condition, or restrict the cable system's use of any type of subscriber equipment or any transmission technology. During the past three years, a number of multiple system operators have argued to local franchising authorities that the local franchising authority may not enforce FCC technical standards. This new Order concludes that local franchising authorities have oversight and may enforce the FCC's technical standards. Unfortunately, this Order also finds that the definition of transmission technology should include, as an example, an operator's use of digital or analog transmissions or its use of coaxial cable, fiber optic cable, or microwave facilities. By so defining these things as parts of transmission technology, this Order concludes that the local franchising authority may not prohibit, condition, or restrict the above mentioned technologies. Undoubtedly, there will be arguments as to the franchise authorities role in obtaining particular types of new technologies in the future as part of their ongoing franchise and right-of-way management. The Commission does not override franchise provisions in effect prior to the issuance of the Report and Order. The Order does reaffirm local franchising authorities rights to require institutional networks and, during renewal, system upgrades (e.g. capacity). Should you have any questions, please feel free to call Jean Rice or myself at your convenience. Should any additional information develop, in particular, information concerning the restrictions on franchising authorities role in technology deployment, we will forward it to you. Sincerely, D 6 CA v�-- Don C. Williams, Ph.D. Partner Enclosure Federal Communications Commission FCC 99 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) Implementation of Cable Act Reform Provisions ) CS Docket No. 96-85 of the Telecommunications Act of 1996 ) REPORT AND ORDER Adopted: March 25, 1999 Released: March 29, 1999 By the Commission: Commissioners Furchtgott-Roth and Powell approving in part, dissenting in part and issuing separate statements; Commissioner Tristani issuing a separate statement. Table of Contents Paragraph I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. Effective Competition . . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 III. CPST Rate Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 IV. Small Cable Opermcors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 V. Definition of"Affiliate" In The Context of Cable-Telco Buy Outs . . . . . . . . . . . . . . . 90 VI. Uniform Rate Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 VII. Technical Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 VIII. Prior Year Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 IX. Advanced Telecommunications Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 X. Cable Operator Refusal To Carry Certain Programming . . . . . . . . . . . . . . . . . . . . 150 XI. Subscriber Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 XII. Market Entry Analysis . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 168 XIII. Final Regulatory Flexibility Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 XIV. Paperwork Reduction Act Of 1995 Analysis . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . 193 XV. Ordering Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 APPENDIX A APPENDIX B f j y s Federal Communications Commission FCC 99-5- 1. INTRODUCTION 1. This Report and Order adopts final rules regulating cable television sen-ice and cable system operators pursuant to Sections 301 and 302 of the Telecommunications Act of 1996 ("1996 Act").' The 1996 Act amended or deleted numerous provisions of Title VI of the Communications Act of 1934. as amended, ("Communications Act"),= and added new provisions affecting cable television. Man\ of these changes consisted of clear, self-effectuating revisions to pre-existing federal statuton provisions. To the extent these self-effectuating statutory changes required amendments to our rules. we implemented them in the order section of the Order and Notice of Proposed Rulemaking in this docket.' 2. Regulations to implement other provisions of the 1996 Act required notice and comment to be fully and finally implemented.' We initiated that process in the Notice portion of the previous item. Many of the statutory provisions that required implementing rules and were the subject of the Notice were effective upon enactment of the 1996 Act on February 8, 1996. The public interest thus necessitated that we adopt interim rules effectuating these provisions pending the adoption of final rules pursuant to the Notice.' We now adopt final rules and eliminate the interim rules.' II. EFFECTIVE COMPETITION A. Background 3. The Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), amended Section 623 of the Communications Act by establishing a pervasive scheme of rate regulation for cable operators not subject to effective competition.' Amended Section 623 requires the Commission to ensure that rates are reasonable and that subscribers are protected from rates for the basic service tier ("BST") and cable programming service tier(s) ("CPST")that exceed the rates that would be charged if the cable system were subject to effective competition." A regulated cable operator must offer a BST that includes, at a minimum, all of the local broadcast channels carried on the cable system and 'Telecommunications Act of 1996, Pub. L. No. 104-104 §§ 301, 302, 110 Stat. 56. 114-124 approved Feb. 8, 1996. 247 U.S.C. §§ 151-614. '11 FCC Rcd 5937, 5938(1996). Hereinafter, we refer to the two portions of the previous item as the Interim Order and the Notice. 'Id. 'Id 'We are retaining the definition of"affiliate" in the context of effective competition from a local exchange carrier as an interim rule. See para. 25 infra. 'Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385 § 3(a), 106 Stat. 1460, 1464-71 (1992) ("1992 Cable Act § 3(a)"), 47 U.S.C. § 543. '47 U.S.C. § 543(ax2), (b), (c). 2 , Federal Communications Commission FCC 99-5- any public, educational, and government access ("PEG") channel required under the terms of a franchise agreement with the local franchising authority ("LFA").' A CPST is any tier of programming offered b,. a cable operator, other than the BST and programming provided on a per channel or per program basis."' Cable systems subject to effective competition are not subject to rate regulation.'' including the uniform rate requirement.` The 1996 Act provides that all CPST rate regulation will end for services provided after March 31, 1999." Regulation of BST and associated equipment rates will remain in effect for systems not subject to effective competition. Rates for programming provided on a per channel or per program basis are not regulated. 4. Section 623(1) as amended by the 1992 Cable Act provides three tests for determining_ effective competition." A cable system is exempt from rate regulation if any of the following three tests is met: (A) fewer than 30 percent of the households in the franchise area subscribe to the cable service of a cable system; (B) the franchise area is- (i) served by at least two unaffiliated multichannel video programming distributors each of which offers comparable video programming to at least 50 percent of the households in the franchise area; and (ii) the number of households subscribing to programming services offered by multichannel video programming distributors other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area; or (C) a multichannel video programming distributor operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area." 947 U.S.C. § 543(b)(7). 1047 U.S.C. § 543(1)(2). 1147 U.S.C. § 543(a)(2). "A cable operator not subject to effective competition must maintain a rate structure that is uniform throughout its franchise area but may offer bulk discounts to multiple dwelling units. 47 U.S.C. § 543(d):47 C.F.R. § 76.984. "47 U.S.C. § 543(cx4). 1447 U.S.C. § 543(Ix 1)(A)-(C). "Id. The test in paragraph A is referred to as the "loN penetration test"; the test in paragraph B, as the "competing provider test";the test in paragraph C. as the "municipal provider test." These tests were implemented in the Commission's rules at 47 C.F.R. § 76.905(bX I W 3) 3 Federal Communications Commission FCC 99-5- 5. The 1996 Act adds a fourth test to Section 623(1).'" Under the ne%%- test. a cable operator will be subject to effective competition if comparable video programming is offered to subscribers %%ithin the cable operator's franchise area by, or over the facilities of. a local exchange carrier ("LEC") or its affiliate.' Section 623(l)(1)(D)'a ("LEC test") provides that effective competition exists when: (D) a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area. but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. 6. Because the new effective competition test became effective upon enactment of the 1996 Act, we amended our rules to incorporate the statutory language of the test, and adopted interim rules relating to certain definitions and procedures needed to properly implement the provision." We sought comment on proposed final rules. Our Notice specifically requested comment as to whether effective competition can be found under the LEC test if the LEC or its affiliate makes its service available only to a de minimis portion of the franchise area or whether the service must be offered to some larger portion of the franchise area.'-' Commenters were asked to consider what level of competition provided by a LEC or its affiliate is sufficient to have a restraining effect on cable rates. The Notice sought comment as to whether the definition of"comparable" programming suggested for the LEC test in the Conference Report should be adopted and, if so. how it should be implemented. Because that definition differs from the definition of comparable programming in our rules,=' the Notice sought comment as to whether we should adopt a uniform definition applicable in all cases.== The Notice sought comment as to whether satellite master antenna television("SMATV")service constitutes direct-to-home ("DTH")satellite service, as that 161996 Act § 301(b)(3), 110 Stat. 115. 47 U.S.C. § 543(I)(1)(D): see 47 C.F.R. § 76.905(b)(4). " 47 U.S.C. § 153(26) defines a LEC as: any person that is engaged in the provision of telephone exchange service or exchange access. Such term does not include a person insofar as such person is engaged in the provision of a commercial mobile service under section 332(c). except to the extent that the Commission Reds that such service should be included in the definition of such term. "47 U.S.C. § 543(Ix 1)(D). "Interim Order, 11 FCC Red at 593845; 47 C.F.R. §§ 76.905(b)(4), 76.1401. '-"Notice, 11 FCC Rcd at 5962-63. 21See 47 C.F.R. § 76.905(g). 22Notice, 11 FCC Rcd at 5961-62. 4 Federal Communications Commission FCC Q9 term is used in the new effective competition test.=' The Notice solicited comment as to %%hen a multichannel video programming distributor ("MVPD") should be deemed an "affiliate" of a LEC for purposes of this test. Finally, the Notice solicited comment on the standards for showing whether a competing MPVD is offering service in the franchise area. B. Discussion 1. Offers services in the franchise area 7. To satisfy the new test for effective competition, a cable operator must show that a LEC or LEC-affiliated MVPD or an MVPD using the facilities of a LEC or its affiliate=' "offers" comparable video programming services in the franchise area of an unaffiliated cable operator. The Conference Report provided that, "[f]or purposes of Section 623(l)(1)(D) of the Communications Act. 'offer' has the same meaning given that term in the Commission's rules as in effect on the date of enactment of [the 1996 Act].j2' According to Section 76.905(e) of the Commissions rules in effect when the 1996 Act was enacted: Service of a multichannel video programming distributor will be deemed offered: (1) When the multichannel video programming distributor is physically able to deliver service to potential subscribers, with the addition of no or only minimal additional investment by the distributor, in order for an individual subscriber to receive service; and (2) When no regulatory, technical or other impediments to households taking service exist, and potential subscribers in the franchise area are reasonably aware that they may purchase the services of the multichannel video programming distributor.' We adopted this definition of offer in the Interim Order.2" We further provided that, in the interim, a cable operator attempting to prove effective competition will have to show that the competitor r. physically able to offer service to subscribers"in the franchise area." Where the competitor's service area does not follow the borders of the local cable franchise area, we directed the operator to provide information about the extent of the overlap between its franchise area and the actual or planned service area of the competitor. We sought comment on whether we should follow these standards for purposes 23/d. at 5962. 24 For the purpose of this discussion, the term "LEC" includes a LEC affiliate or an MVPD using the facilities of a LEC or its affiliate. 2'H.R. Rep. No. 458, 104th Cong., 2d Sess. 170 (1996) ("Conference Report"). 2647 C.F.R. § 76.905(e). ='Interim Order, 11 FCC Rcd at 5941; Notice, 1 I FCC Rcd at 5962. 5 rr Federal Communications Commission FCC 99-5- of the permanent rule.'' We also sought comment about how widely available a LEC's service should be in the franchise area to constitute effective competition and whether we should consider potential as well as actual pass rates in making the determination. 8. Commencers have divergent views about the extent to which a competing video programming service must be offered in the franchise area to satisfy the LEC test. Some commenters. primarily cable interests, argue from the "plain language" of the LEC test that the test is met when service is available to as few as two potential subscribers.=' Others argue that consumers must have realistic or competitive choices before effective competition can be'found.-" To assure this choice. some advocate setting a threshold for effective competition on the basis of the percent of households in the franchise area to which the'LEC can offer service or the percent of households in the franchise area subscribing to the LEC service, much like the thresholds in the competing provider test.3' No commenters other than those referencing the competing provider test offer insight into determining the level of LEC competition that would be sufficient to restrain cable rates, although the Massachusetts Cable Commission opines that the LEC's potential pass rate could be an important consideration.32 TCI argues that the 1996 Cable Act does not require consideration of whether the level of competition is sufficient to restrain rates." 9. We reject the argument advocated by cable interests that any service offering in the franchise area, no matter how minimal, should be sufficient for a finding of effective competition. As the New Jersey Ratepayer Advocate points out, so lenient a test "could have the unfortunate result of allowing a dominant cable company to raise rates, unabated by regulation or genuine competition, whenever a LEC delivers video signals to just one home in the franchise area.'"' The New Jersey State Board of Public :'Notice, 11 FCC Rcd at 5962-63. ='Fleischman and Walsh ("Fleischman") Comments at 9. Cablevision Systems Corporation ("Cablevision") Comments at 9; Cox Communications, Inc. ("Cox") Comments at 8-9; see Comcast Cable Communications, Inc. ("Comcast")Comments at 4(state—places no minimum netration or pass rate;SMATV competition is sufficient); Commonwealth of Massachusetts Cable Television Commission ("Massachusetts Cable Commission")Comments at 3 (subscriber interest generated by LEC service even on a limited basis may threaten operator's market share and restrain cable rates). �ONew York City Department of Information Technology and Telecommunications("New York City")Comments at 6-7: New Jersey Division of the Ratepayer Advocate ("New Jersey Ratepayer Advocate") at 6. z "OpTel, Inc. ("OpTel")Comments at 3;New York City Comments at 8: New Jersey Ratepayer Advocate at 4; City of Indianapolis ("Indianapolis") Comments at 2; City and County of Denver ("Denver") Comments at 4. 32Massachusetts Cable Commission at 4(while not advocating standards, if Commission adopts any standards, it should consider the potential pass rate). See New York City Comments at 8 (commenting that a cable operator's response to a LEC competitor may depend upon potential as well as actual competition and advocating, therefore, that the LEC competitor meet the 50% offering test but not meet any penetration standards); see also OpTel Comments at 3 (Commission should use a relative measure of service availability and subscriber access, such as service to at least 15% of households served by incumbent cable operator). "Tele-Communications, Inc. ("TCI") Comments at 5. "'New Jersey Ratepayer Advocate Comments at 5. 6 Federal Communications Commission FCC 94 Utilities adds that deregulation of a cable operator's rates in an entire franchise area because of competition in a small portion of the franchise area "can lead to absurd results.".5 For example, a LEC's service area could encompass one franchise area but overlap only a small corner of an adjoining franchise area where no subscribers are served by the incumbent operator, or a cable operator's rates could be prematurely deregulated in a franchise area. allowing it to subsidize subscribers where it faces competition by charging higher rates to subscribers in the rest of the franchise area. The Cite and Count\ of Denver point out that, "taken to its extreme. . . . effective competition could be claimed in a franchise area served by a LEC-based MVPD that actually represented no competition at all.'"' This is not what we believe Congress intended. The thrust of the 1996 Act is Congress' expectation that LECs wIII be robust competitors of cable operators because of their financial and technical ability and, as Cablevision points out,' their ubiquitous presence in the market.38 "[C]ompetition is the best regulator of the marketplace. Until that competition exists, monopoly providers of services must not be able to exploit their monopole power to the consumer's disadvantage. Timing is everything. Telecommunications services should be deregulated after, not before, markets become competitive.r39 10. When written, the definition of"offer" presumed the widespread availability of competing service. Under the competitive provider test, at least 50% of the households in the franchise area must have access to competing service. Although we agree with commenters who argue that the LEC test is f different from the competitive provider test,'' nothing in the statute or legislative history suggests that, when incorporating the word "offer" into the LEC test, Congress intended that "offer" should lose its context of the widespread availability of the competing service. To the contrary, the expectation was that the LEC presence would be ubiquitous, and the intent repeatedly expressed in the floor debates was that "the people will get a choice in how they get their services."" There is no choice where there is no "New Jersey State Board of Public Utilities ("New Jersey Board") Comments at 3-5. "City and County of Denver Comments at 5. "Cablevision Comments at 9. ''.See 141 Cong. Rec. S8243 (daily ed.June 13, 1995)(statement of Sen. Pressler: "Loomin(v large on the fringes of the [video programming services] market are the telephone companies. The telephone companies pose a very highly credible competitive threat because of their specific identities, the technology they are capable of deploying, the technological evolution their networks are undergoing for reasons apart from video distribution, and, last but by no means least,their financial strength and staying power.") But see New York City Reply Comments at 7: "Great financial resources and marketing experience will not create effective competition if the LEC does not intend to service a substantial portion of the cable franchise area." '9142 Cong. Rec. S688 (daily ed. Feb. 1, 1996) (statement of Sen. Hollings explaining the thrust of the 1996 Act). "Once Congress amended the Communications Act to allow LECs to provide cable service in their local exchange areas,effective competition from a LEC could be evaluated under the competitive provider test. The LEC test provides an alternative way to evaluate competition from a LEC. "142 Cong. Rec.S699(daily ed. Feb. 1, 1996)(statement of Sen. Lott). See, e.g., 142 Cong. Rec. H 1149(daily ed. Feb. 1, 1996) (statement of Cong. Fields) (looking for head-to-head competition from cable and telephone competitors); 142 Cong. Rec. H1156 (daily ed. Feb. 1, 1996) (statement of Cong. Dingell: "No longer will 7 Federal Communications Commission FCC 99-5- service. We conclude, therefore, that to support a finding of effective competition under the LEC test. the LEC's service must substantially overlap the incumbent cable operator's service in the franchise area.': Because the definition of"offer" does not include any requirement that consumers actuall% purchase the service, only that the service be available, we reject arguments that we should adopt penetration standards. 11. In the Notice we sought comment on whether a LEC's potential service area as well as the area where it actually offers service should be considered in determining effective competition under the LEC test." The definition of"offer" incorporated into the LEC test requires that LEC service he both technically and actually available to households," and does not provide for consideration of service planned for the future. However, in resolving individual cases under the LEC test in the interim. the Cable Services Bureau has found that a LEC's presence can have a competitive impact on a cable operator before the LEC finishes installing its plant or rolling out its service." We see no reason from the record before us not to continue applying the LEC test in this way when the likelihood of impending competition throughout a substantial part of the incumbent cable operator's service area is established,the competitive service is commercially available, and potential subscribers in the franchise area served by the incumbent are reasonably aware that the service is either actualiv available to them or will be available within a reasonable time.46 Views such as those expressed by Senator Hollings support this position. In his Additional Views appended to S. Rep. No. 23, Senator Hollings explained that "the bill changes the definition of 'effective competition' in the 1992 Act to allow cable rates to be deregulated as soon as a consumers have just one company to choose from for the provision of local telephone or cable television service."). ''See FCC Local State Government Advisory Committee: Advisory Committee Recommendation Number 13 ("LSGAC Recommendation 13"). Recommendation 13(C). Resolution on Effective Competition, filed in CS Docket No. 96-85 (Nov. 20, 1998). recommending that the Commission "[d]efine the term 'offer' in a manner that acknowledges that the geographic area in which services are actually available is critical to whether effective competition actually exists." "Notice, i I FCC Rcd at 5962-63. 1'Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, 8 FCC Rcd 5631, 5656 (1993) ("Rate Order") "See Time Warner Entertainment-Advance/Ne%,housc• Partnership and Paragon Communications (North and South Pinellas Counties, FL), 12 FCC Rcd 3143 (Cab. Ser% Bur 1997) (effective competition found where LEC competitor completed 15% of service area and its franchise required completion throughout franchise area within three years; incumbent cable operator had lost subscribers and planned programming upgrades). see also Comcast Cablevision of the South, 13 FCC Rcd 1676 (Cab. Sen Bur 1997) (effective competition found where franchises authorize LEC service throughout franchise areas, LEC competitors began by using facilities constructed for video dialtone service through parts of the franchise areas. and incumbent cable operator had responded competitively in anticipation of the LEC competition.) 1bSee Massachusetts Cable Commission Comments at s C")A) LEC's potential pass rate may ultimately turn out to be a more meaningful measure of a LEC's competitive impact on a cable franchise than its actual pass rate at any given point in time. Such a standard would allow a [cable) operator the flexibility of'looking ahead' to adjust its marketing,programming and rating strategies in advance of competition of a more substantive nature.");accord,New York City Department of information Technology and Telecommunications Comments at 8; OpTel Comments at 8 Federal Communications Commission FCC 99-5- telephone company begins to offer competing cable service in a franchise area. Once consumers ha\e a choice among cable offerors. the need for regulation diminishes.i4 While we disagree \\ith commenters who argue that this and similar statements require cable rate deregulation on the basis of a mere tit! nrinimis LEC presence in the franchise area." we find in such statements and their broader context"' a reflection of Congress' intent that the Commission have the discretion to consider the likelihood and extent of impending competition when considering whether effective competition exists under the LEC test. Congress sought to restrain cable rates and stimulate quality cable services. Once the LECs corttpetitlVe presence is sufficient to achieve these goals, even if the LECs buildout or roll out is not complete. the intent of the effective competition test has been met. 12. On the other hand, service offered only on a test basis. MMDS coverage limited h\. sib=nal strength or terrain factors, or service only to a specialized or niche market or to a geographically limited market within the franchise area does not satisfy the test." Nor is the test satisfied if the LEC does not have firm plans to build or market so as to offer service that substantially overlaps the incumbent cable operator's service in the franchise area, or the public is not reasonably aware of any such plans. To find effective competition when the LEC does not intend widespread service invites the problem that concerned Congress when it adopted the uniform rate requirement as part of the 1992 Cable Act: namely, a cable operator's ability to charge low rates in parts of the franchise area where it faces competition and charge higher unregulated rates in those parts of the franchise area where it does not face competition and has no reason to expect competitive repercussions from such pricing behavior." We do not believe that "S. Rep. No. 23, 104th Cong., 1 st Sess. 152 1995 (additional Views of Sen. Hollings at 152)(emphasis added). Sen. Hollings' statement was repeated in the debate on S. 652, 141 Cong. Rec. S7896 (daily ed. June 7, 1995) (statement of Sen. Hollings). "Commenters relied heavily on statements made during the debate on the 1995 version of the Senate bill. During the floor debate on the Conference Report on the 1996 Act.Senator Kerry stated his view that the Conference Report is substantially better than the bill considered by the Senate the previous summer because the Senate bill, like the House bill, "deregulated cable monopolies before there was effective competition." 142 Coni_. Rec. S699-70 (daily ed. Feb. 1, 1996) (statement of Sen. Kerry). "'For example. Senator Hollings prefaced his additional views with the explanation that, "The basic thrust of the bill is clear: competition is the best regulator of the marketplace. but until that competition exists, monopoly providers of services must not be able to exploit their monopoly power to the consumer's disadvantage." S. Rep. No. 23, 104th Cong., 1st Sess. 149 (additional views of Sen. Hollings). `0In Reply Comments at 4, New York City expressed concern about a LEC proposal to offer a programming package tailored to the needs of the City's financial community. The service, including more than 12 channels of both broadcast and nonbroadcast services, will be transmitted to desktop personal computers, but only within the city's financial district. "[O]nly an extremely small group would have any use for the service. While the programming will be invaluable to stock market analysts, it will not be made available to the overwhelming majority of residential subscribers in the franchise area." "S.Rep. No. 92, 102d Cong., Ist Sess. 76 (1992). 9 Federal Communications Commission FCC 99-5- Congress intended for us to apple the LEC test so broadly that the protections Congress intended through the rate regulation system are lost to consumers without the prospect of competition." 13. • A cable operator seeking to show effective competition from a LEC bears'the burden of rebutting the presumption to the contrary that Congress left intact." Because competitive service can be provided "by any means (other than direct-to-home satellite services)." the showing %%ill necessarily \-an somewhat, depending on the means employed. Basically, however, the incumbent cable operator must show that the LEC is technically and actually able to provide service that substantially overlaps the incumbent cable operator's service in the franchise area. If the LEC has not completed its buildout or roll out, the incumbent cable operator must establish that the LEC intends to do so within a reasonable period of time, that the LEC does not face regulatory, technical or other impediments to households taking service, that the LEC is marketing its service so that potential customers are reasonably aware that they will be able to purchase the service, that the LEC has begun actual commercial service, the extent of that service, the ease with which service can be expanded, and the estimated date for completion of the construction or rollout in the franchise area. If the LEC has not shown its intention to offer service that substantially overlaps the incumbent cable operator's service in the franchise area, we will entertain petitions for waiver showing that the extent of the LEC's presence is sufficient to have a direct impact on the cable operator's services throughout its service area. and particularly on the price. The presence of other competing MVPDs in the franchise area may be relevant in this regard. 14. Where the competition is from a wire or cable distribution system, the incumbent cable operator must show what commitments the LEC has made to serve that area, including the status of construction and the estimated completion date. If the LEC is franchised, a showing of the coverage and construction obligations in the franchise should be sufficient. If the LEC plans an open video system,the showing must establish the LEC's intent regarding the proposed area. Any contractual commitments for construction or service would be relevant as would any public representations the LEC has made to local officials and consumers,for example,through marketing and publicity regarding its plans. Documentation of actual commercial service must also be provided. 15. Where the competition is from an MMDS or wireless cable system, the incumbent cable operator must establish that a viewable signal can be received in an area that substantially overlaps the incumbent's service area by showing: (a) the franchise area lies within the MMDS interference-free contour. (b) the signal strength is adequate throughout the area; and (c) there are no terrain or other obstacles to line of sight service."' Because an MMDS operator is under no obligation to market its service throughout its service area and may target service to specific areas, the incumbent cable operator must show that the MMDS or wireless cable operator can and will provide service to an area that "When Congress clarified that the uniform rate requirement does not apply in competitive markets, it did not eliminate the requirement in markets not facing effective competition. It allowed operators to respond competitively to competition in MDUs, but it did not otherwise exempt operators from the uniform rate requirement when competition was present only in MDUs. We see no reason why limited LEC service should have a different impact on cable rate regulation than other competitive services that are limited to MDUs. "47 C.F.R. § 76.906. "Isolated, limited pockets of poor reception will not defeat a showing of effective competition. 10 Federal Communications Commission FCC 99 substantially overlaps the area served by the incumbent within the franchise area." This sho%%inks can be satisfied by showing that the MMDS operator has customers throughout the area and that the ser'ice is being marketed to the public at large. If service is being implemented on a rollin_ basis rather than offered throughout the service area, the incumbent cable operator should show that consumers in an area that substantially overlaps the incumbent's service area are reasonably aware the proposed senice will be available to them." Any public representations the LEC has made, for example through an% marketing_ and publicity alerting consumers to the LEC's plans for the competitive service, would be relevant. Documentation of actual commercial service must also be provided. 2. "Comparable" Video Programming 16. Section 623(1)provides that the competitor must offer"comparable"programming services before effective competition can be found to exist in the franchise area under either the LEC or the competing provider test. In the process of implementing provisions of the 1992 Cable Act. including: the competing provider test, the Commission adopted a definition of comparable programming. That definition involves the offering of at least twelve channels of programming, including at least one channel of nonbroadcast programming service." In the present proceeding, the Commission proposed and adopted on an interim basis a different definition for purposes of the LEC effective competition test, which required that the competing provider's service consist at least in part in the distribution of broadcast station signals. This proposal was based on language in the legislative history of the 1996 Telecommunications Act purporting to follow the Commission's definition but referring to the competitor's service as comparable if it "includes access to at least 12 channels of programming, at least some of which are "The City of Los Angeles.National League of Cities,and National Association of Telecommunications Officers and Advisors("Los Angeles. League of Cities,and NATOA")r-ports, for example, that a LEC affiliate there'offers MMDS in a limited area, but for the vast majority of Los Angeles cable subscribers. cable remains the only source of multichannel video programming." Los Angeles, Lea- , of Cities, and NATOA Reply Comments at 3. "The Cable Services Bureau has denied petitions seeking, a determination of effective competition where the LEC's intentions to offer service throughout the area were not clear and consumers in the area were not shown to be reasonably aware of the availability of the wireless service. Service was being rolled out on a low key.controlled basis and marketing was limited to very specific demographics. See, e.g., Paragon Communications d1biu Time Warner Communications and KBL Cable Svstems of the Southwest (Gardena. CA, et al.), 13 FCC Rcd 8675 (Cab. Serv. Bur. 1998),petition for reconsideration pending; Charter Communications Entertainment 11. L.P. and Lung Beach Acquisition Corp. (La Canada, CA,et al.), 13 FCC Rcd 8506(Cab. Serv. Bur. 1998),application for review pending. "Rate Order, 8 FCC Rcd at 5666-67. In order to offer comparable programming within the meaning, of this provision, a competing multichannel video programming distributor must offer at least 12 channels of video programming, including at least one channel of nonbroadcast service programming. In passing the 1992 Cable Act, Congress explicitly rejected the standard previously used by the Commission when it redefined effective competition to cable'systems in terms of over-the-air broadcast signal competition. The Commission had required that a competitor provide at least six broadcast signals in order to be considered comparable. Id. at 5667 n.128. In the Rate Order, the Commission concluded that a competitor carrying only broadcast signals should not be deemed to be offering programming comparable to that of an incumbent cable operator. 11 Federal Communications Commission FCC 99-5• A television broadcasting signals.i58 The Commission also proposed that a single definition be used t*L)r comparable programming as that term is used in various of the effective competition tests and souk=ht comment as to whether the definition should be the interim one adopted for the LEC test. 17. Some parties responding to the request for comment on this issue support a definition requiring the inclusion of some broadcast signals.S9 Some. however, also argue that satellite delivered superstitions should be treated as television broadcast signals if the interim definition is adopted.' Others point to ambiguity in the Conference Report as to what Congress intended and advocate applying_ the existing definition in Section 76.905(g)," which requires the inclusion of at least one channel of nonbroadcast service programming.`'' Comcast is concerned that adopting the interim definition as a single definition would preclude consideration of DBS as a source of effective competition to cable systems under the competitive provider test, in spite of Commission findings to the contrary.` Tile Massachusetts Cable Commission suggests that comparable programming services should be defined as 12 channels of programming, without regard to the breakdown between broadcast and nonbroadcast channels,contending that the Commission cannot at this time determine what specific channel lineups LEC affiliated entities will use to compete with cable.` Other commenters suggest that programming should not be deemed comparable unless it includes both broadcast and non-broadcast programming," while still others argue that comparable video programming services must include some PEG channels.` 18. Having considered all of the comments and the complexities of adopting alternative definitions of"comparable" for separate portions of the effective competition test, we now believe that "Interim Order, I I FCC Rcd at 5942: see Conference Report at 170. Confusion was introduced because the Conference Report language differs from Section 76.905(;), but the language was followed by a citation to Section 76.905(8) that was introduced by the signal "See," a signal generally understood to mean support for a point rather than a distinction. "S. . Cable Telecommunications Association ("CATA") Comments at 2. Independent Cable and Telecommunications Association ("ICTA")Comments at 2,New York City Comments at 12-13: State of New York Department of Public Service ("State of New York")Comments at 5-6: US WEST, Inc. ("US WEST') Comments at 5-6. BellSouth Corporation ("BellSouth") Comments at 2. hOSee National Cable Television Association ("NCTA") Comments at 3; Fleischman Comments at 5; CATA Comments at 2; Comcast Comments at 10. "'Cole, Ravwid & Braverman ("Cole Raywid") Comments at 5. Comcast Comments at 1-2: Cox Comments at 4. 6247 C.F.R. § 76.905(g). 63Comcast Comments at 9 & n.25. "Massachusetts Cable Commission Comments at 5. 6313enver Comments at 3; Small Cable Business Association ("SCBA") Comments at 32-33; NCTA Reply Comments at 8-9. 'See Indianapolis Comments at I: Los Angeles Reply Comments at 7, LSGAC Recommendation 13(C). 12 1 i Federal Communications Commission FCC 99-:- the existing definition adopted in implementing the 1992 Cable Act should be used for both competing, provider and LEC effective competition determinations. As a general matter of statutory interpretation. a term used repeatedly in the same connection should be given the same meaning unless different meanings are required to make the statute consistent.'- Nothing in the statute requires a chantue in our definition. Although the Conference Report includes different language, it cites to our rule as support. We see no basis here for having inconsistent definitions. 19. We also note that the selection of which definition to use does not appear likel\ to have practical consequences in applying the LEC test in most instances. Under the Interim Order. NINIDS service could meet the comparable programming requirement if the MMDS operator offered access to local broadcast stations by direct microwave delivery or through a separate antenna." In effective competition petitions filed with the Commission to date. LEC MMDS operators cited as providing effective competition to cable have all delivered some television broadcast stations by microwave, and cable operators have not relied on integration of off-the-air delivery to show that the comparable programming requirement is met. The choice of definition also will not affect consideration of DBS under the LEC effective competition test, because the LEC test already specifically excludes "direct-to-home satellite services" as types of competitors that can be considered. 20. On the other hand. changing the definition of"comparable" as applied to the competing provider test could alter that test with respect to the treatment of DBS. DBS and other direct-to-home satellite services were specifically referenced as potential sources of effective competition in the legislative history of the 1992 Cable Act" and there is no indication in the history of the 1996 Act that Coniaress intended to alter the Commission's determination regarding the existing definition, which had been litigated and judicially affirmed in terms of the comparability test." Rather, the LEC test was added to create an additional deregulatory effective competition test, not to alter the existing test. Application of the interim definition to the competing provider test would require that we decide whether a DBS operator's offering of "superstations" would satisfy the requirement that a competitor offer broadcast stations,or whether integration of satellite and off-the-air broadcast signals at the receiving location would be considered to be an offering of broadcast signals for the purpose of determining whether a DBS operator offers comparable programming: 67 See Karl N. Llewellyn,Remarks on the Theon of Apprl/atr Decision and Rules or Canons about How Statutes are to be Construed,reprinted in 2A Norman J. Singer.Statutes and Statutory Construction 539, 544(5th Ed. 1992). "Interim Order, 11 FCC Rcd at 5943. The Interim order concluded that a LEC MMDS operator not delivering broadcast stations by microwave would be deemed to offer broadcast stations if the subscriber could receive the stations without an A/B switch or similar device for switching_ between an off-the-air antenna and the microwave antenna. The Interim Order further provided that, if an A B switch were required, the MMDS operator would be deemed to offer broadcast stations if it were responsible for installing the A/B switch. "See e.g. _Congressional Record S14253 (daily ed Sept 21, 1992)(discussion between Sen. Lieberman and Sen. Inouye of effective competition test, using DBS as a specific example of how provision was intended to function.) 70Time Warner Entertainment Co., L.P. v. FCC. 56 F 3d 151 (D.C. Cir. 1995) ("Time Warner"). I ; Federal Communications Commission FCC 99-5- 21. 9'_l. In light of our conclusion above, that the existing definition of comparable progranunin_ be applied under the LEC test as well as the competing provider test. we do not need to decide %%Nether satellite-delivered superstations should be counted as broadcast stations outside their local service areas.-' We also do not need to address the questions posed in the Notice about whether a LEC NINIDS operator will be considered to be offering effective competition if its subscribers receive television broadcast signals by means of an off-the-air antenna rather than as part of the operator's microwave offering. = Our interim rules governing these matters ' will cease to be effective on the effective date of this Report and Order. 22. Some commenters suggest that the video programming services of a competing= provider can only be deemed comparable if the competitor has equal access to programming provided by the incumbent cable operator.7' We do not believe such a requirement is warranted. As US West points out. the Commission's program access rules provide sufficient protection in this regard." We see no evidence that Congress intended for us to impose additional program access requirements in this context. We also see no evidence that Congress intended to impose PEG access requirements at the federal level by incorporating them into the comparable programming requirement."' 3. "Affiliate" 23. The LEC effective competition test applies when comparable programming is provided by a LEC or its affiliate. The 1996 Act amended Title 1, Section 3 of the Communications Act by adding a definition of "affiliate":" The Tetra "affiliate" means a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with another person. For purposes of this paragraph, the term "See Notice. 11 FCC Rcd at 5962. '=1d. "Interim Order, 11 FCC Rcd at 5942-43. "BellSouth Comments at 2-3; United States Telephone Association ("USTA") Comments at 4 and Reply Comments at 24;Ameritech New Media, Inc.("Ameritech") Reply Comments at 3-5; Los Angeles Reply Comments at 9. "US WEST Reply Comments at 6-7. See generally Implementation of the Cable Television Consumer Protection and Competition Act of 1992: Petition for Rulemaking of Ameritech Neu, Media, Inc. Regarding Development of Competition and Diversity in Video Programming Distribution and Carriage, Report and Order. 13 FCC Rcd 15822 (1998)(amending program access rules to expedite the resolution of disputes and allow damages on a case-by-case basis). ''Communications Act§621(#4)(B),47 U.S.C. §54 1(a)(4)(B),gives franchising authorities the discretion when awarding a franchise to require assurance that a cable operator will provide adequate PEG access channel capacity, facilities, or financial support. 1996 Act § 3(a) § 3(a), 110 Stat. 58, codified at 47 U.S.C. § 153(1). 14 T Federal Communications Commission FCC 99-:- "own"means to own an equity interest(or the equivalent thereof) of more than 10 percent. Although this definition applies "unless the contest otherwise requires.""' the definition of "affiliate" in Title VI of the Communications Act concerning cable television was unchanged." Unlike the definition in Title 1. the Title VI definition does not establish a threshold for determinin; when an entity is owned by another entity. 24. Because the Title VI definition does not specify an ownership threshold, the Noticc requested comment as to how "affiliate" should be defined for the purpose of the LEC test. In the interim. we adopted a rule that incorporated the 10% ownership threshold from Title 1. We also stated that %%e would determine "on a case-by-case basis" when interests other than traditional equity investments constituted "the equivalent" of an equity interest.60 We established that affiliation could be demonstrated through de facto control regardless of the actual ownership interest." 25. The Commission recently initiated a more general review of the ownership attribution rules in CS Docket No. 98-82.8= There the Commission noted the pendency of the affiliate issues in this proceeding and solicited comment on whether and how changes in cable attribution rules should affect the various definitions of"affiliate" in the Commission's rules regarding cable television.'.' including the LEC test affiliation rule in Section 76.1401(b).84 In light of that more general review of the attribution/affiliation issue, we will retain the interim rule in renumbered Section 76.1401(a) for the time being and address the LEC affiliate issue more fully in CS Docket No. 98-82. Relevant comments submitted in this proceeding will be considered in CS Docket No. 98-82. 26. One matter can be resolved in this proceeding, however. In the Notice, we solicited comment on whether we should aggregate the interests of various LECs when calculating ownership under the affiliation test." Cable operators favor aggregation, arguing that the failure to aggregate could mean that an MVPD is majority owned by several LECs but deemed unaffiliated under the effective competition 7847 U.S.C. § 153. 7"47 U.S.C. § 522(2): "Mhe term 'affiliate', when used in relation to any person, means another person who owns or controls, is owned or controlled by, or is under common ownership or control with, such person". This definition is also codified at 47 C.F.R. § 76.5(z). "Interim Order, I 1 FCC Rcd at 5944. "Implementation of the Cable Television Consumer Protection and Competition Act of 1993: Review of the Commission's Cable Attribution Rules, Notice of Proposed Rulemaking, 13 FCC Rcd 12990 (1998) ("Cable Attribution Notice"). "Id. at paras. 9, 15 & n.52. R447 C.F.R. § 76.1401(b). "Notice. I I FCC Rcd at 5964. IS � n Federal Communications Commission FCC 444-5- standard ystandard because no single LEC owns a cognizable equir` interest. In their vie%%. this \\ould amaritute an "absurd" result.86 The Massachusetts Cable Commission favors a:grecation, arauin�: that ani LEC investment is motivated by a desire to profit from video service delivery." SBC opposes a_gregation. asserting simply that the ownership standard should apply to single LECs." The State.of Ne\\ fork argues that aggregation is appropriate because the statute does not limit the affiliation test to in-region LECs. Thus. it advocates that all LEC involvements should be counted toward the ownership threshold."" By contrast, New York Cite opposes aggregation, contending that small independent interests \\ill not provide adequate incentives for investing LECs to act in a manner that restrains cable rates."" 27. We will not aggregate the investment interests of LECs in a single MVPD to determine affiliation. Even if the aggregated investment interests of multiple LECs in a sinale MVPD constitute a majority ownership of the MVPD, it cannot be concluded from that fact alone that any one of the LECs would have the power or incentive to control the MVPD. Likewise, a single LEC could not be assumed to be able to control the actions of any other MVPD affiliated LEC(s). This is consistent with the statutory language which requires us to find that the MVPD in question is affiliated with a LEC. If a LEC's relationship with the MVPD, by itself, does not rise to the level of affiliation as defined above, that lack of affiliation is not affected by the fact that one or more other LECs also have invested in the MVPD. If none of the LECs has a sufficient interest in the MVPD to constitute affiliation. then the MVPD is not • affiliated with a LEC, regardless of the aggregated interest of all the LECs. Our approach here is also consistent with our approach to aggregation in other contexts, such as that of small cable operators.' 4. Procedures 28. As of February 8, 1996, the date on which the 1996 Act was enacted, cable systems meeting all of the relevant criteria under the new effective competition test became exempt from rate regulation.'' We permitted operators seeking a determination of effective competition to file a petition with the Commission demonstrating the presence of effective competition according to our interim rules.' We believe our interim procedures should be incorporated into our final rules as discussed below. "NCTA Comments at 19; Cox Comments at 16; Time Warner Comments at 10-11. "Massachusetts Cable Commission Comments at 7. "SBC Communications Inc. and Southwestern Bell Video Services. Inc. ("SBC") Comments at 3. "State of New York Comments at 9. 90New York City Comments at 11-12. "See infra at para. 70. "=Interim Order, 11 FCC Rcd at 5944. /d. 16 Federal Communications Commission FCC 99-5- 29. Several cable commenters suggest that the Commission adopt rules %yhereb\ a cable operator will be deregulated upon simply filing a claim of effective competition." Thee araue that systems taking advantage of this initial deregulation would still be subject to a subsequent determination by the Commission that effective competition does not exist.and that the Commission could order refunds as a remedy for any unjustified rate increases that may occur as a result of deregulation."` We do not agree. As Los Angeles, the League of Cities and NATOA state, providing for immediate deregulation upon the filing of an effective competition claim is tantamount to creating a presumption that effective competition exists.' Congress did not alter Section 76.906 of our rules which provides: "in the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition.""' A finding of effective competition must be made based on a record that demonstrates effective competition exists, not on a mere claim by the cable operator that it is subject to effective competition. 30. The Commission's rules allow cable operators to demonstrate that their systems are subject to effective competition under the definitions of effective competition adopted with the 1992 Cable Act by filing a petition for change in regulatory status with the appropriate franchising authority." or by filing with the Commission a petition for reconsideration or revocation of the LFA's certification to regulate rates." Our interim rules provide that LEC effective competition cases should be filed as petitions for determination of effective competition under Section 76.7 of our rules.1U1 In the Notice, we proposed to adopt a uniform procedure applicable to all four tests for effective competition.101 In 1998 Biennial Regulatory Review -- Part 76 - Cable Television Service Pleading and Complaint Rules ("1998 Biennial Regulatory Review"), we consolidated the procedures regarding petitions for effective competition to achieve a uniform procedure applicable to all petitions seeking a determination of effective competition, except petitions for reconsideration of the LFA's certification to regulate rates.1°= Petitions for "Fleischman Comments at 34; NCTA Comments at 22. . "Time Warner Cable ("Time W,-iter") Comments at 24. 46Los Angeles. League of Cities, and NATOA Reply Comments at 5-6. "47 C.F.R. § 76.906. ""See 47 C.F.R. § 76.915. This section further provides: "Cable operators denied a than=e in status by a franchising authority may seek review of that finding at the Commission by filing a petition for: revocation." 47 C.F.R. § 76.915(e). 49See 47 C.F.R. §§ 76.911, 76.914, 76.915(e). 10°Interim Order, I I FCC Rcd at 5944 & n.28; 47 C.F.R. § 76.1401(c) (interim rule). 101 Notice, I 1 FCC Rcd at 5963. 10=Report and Order, FCC 98-348, 14 FCC Rcd_para. 10, 64 Fed. Reg. 6565 (1999). Several commenters in this proceeding have suggested that the Commission adopt various time limits for the filing of oppositions and replies, and for the resolution of claims based on the new effective competition test. See Fleischman Comments at 16-18;NCTA Comments at 22-24;New England Cable Television Association,Inc.("NECTA")Comments at 16-17; Time Warner Comments at 25. U S WEST Reply Comments at 4. These views were considered in 1998 Biennial 17 1 , Federal Communications Commission FCC 94 reconsideration of a local franchising authority's certification to regulate rates should continue to be tiled pursuant to the Section 76.911 and Section 1.106. the Commission's rules setting forth the procedures for petitions for reconsideration.1°' All other effective competition cases should be filed with the Commission as petitions for determinations of effective competition under Section 76.7 of the Commission's rules and new Section 76.907, which describers the petitioner's burden and addresses the availability of evidence. We are eliminating Section 76.915 from our rules. so cable operators will no longer petition local franchising authorities for a change in regulatory status based on effective competition. Section "/6.91' of our rules is not affected by this action." Section 76.917 provides procedures by which a franchising= authority certified to regulate rates may notify the Commission that it no longer intends to red:ulate basic cable rates. III. CPST RATE COMPLAINTS A. Sunset of CPST Rate Regulation 31. The 1996 Act provides that the Commission's authority to regulate CPST rates pursuant to Section 623(c) of the Communications Act will sunset "for cable programming services provided after March 31. 1999.i10S The Interim Order revised Section 76.950 of the Commission's rules to implement this provision.1 " We are further amending Section 76.950(b) to track the statutory language. Thus, we will continue to accept complaints filed pursuant to our complaint procedures regarding rates for services provided through March 31, 1999. B. Background 32. Prior to passage of the 1996 Act. the Communications Act permitted any subscriber or LFA or other relevant state or local government entity to seek Commission review of a rate charged for the CPST by filing a complaint with the Commission within a "reasonable period" of time following a change in the CPST rates.107 In implementing this provision we established a 45 day window following a CPST rate change as the reasonable period in which CPST rate complaints could be fiiled.1 ' As amended by the 1996 Act, Section 623(cX3) of the Communicatit.is Act now provides: Regulator►, Review 101 See new Section 76.10 adopted in 1998 Biennial ReVuiuiun Review, App. A. 1-47 C.F.R. § 76.917. A franchising authority may notlf. the Commission at any time that it no loner intends to regulate basic cable rates. 10547 U.S.C. § 543(e)(4), as amended by Telecommunications Act of 1996, Pub. L. No. 104-104 § 301(a)(1), 100 Stat. 115 (1996). "Interim Order, I 1 FCC Rcd at 5957, 5986. 1"'47 U.S.C. § 543(c)(3). 106Rate Order, 8 FCC Rcd 5840-5841. 18 Federal Communications Commission FCC 94 The Commission shall review any complaint submitted b% a franchising authority atter the date of enactment of the Telecommunications Act of 1996 concerning an increase in rates for cable programming services and issue a final order within 90 days after it receives such a complaint, unless the parties agree to extend the period for such reyie\\. A franchising authority may not file a complaint under this paragraph unless. %Nithin 90 days after such increase becomes effective it receives subscriber complaints.""' In the Interim Order, we promulgated interim rules to govern the procedures by which LFAs would file CPST rate complaints pursuant to the 1996 Act.1' 33. The interim rules require that, before filing a complaint with the Commission, the LFA must give the cable operator written notice of its intent to do so and allow the operator a minimum of 30 days to file with the LFA the relevant forms used to justify a rate increase."' Where appropriate the operator may submit to the LFA a certification that it is not subject to rate regulation, in lieu of the rate justification forms."-- The interim rules provide that the LFA shall then forward its complaint and the operator's response to the Commission no more than 180 days after the rate increase becomes effective."' If the operator fails to respond, the LFA may file its complaint with the Commission and speci& that the operator has not filed a response."' After we receive the complaint, we will decide the case based upon the information submitted. In addition to these changes. we eliminated the requirements that operators notify subscribers of their right to file complaints with the Commission and provide subscribers with the Commissions address and telephone number for purposes of filing rate complaints.` We also proposed eliminating the requirement in 47 C.F.R. § 76.952 that operators include the name, mailing address, and telephone number of the Cable Services Bureau on monthly subscriber bills and solicited comment on this action. 34. In addition, we noted that although Section 623(c)(3) permits the LFA to file a CPST rate complaint with the Commission only if the LFA has received subscriber complaints within 90 days of the effective date of a CPST increase, it specifies no deadline for the LFA to file its complaint with the 10"47 U.S.C. a 543(c)(3), as amended by Telecommunications Act of 1996. Pub. L. No. 104-104 § 301(a)(1), 100 Stat. 115 (1996). "Olnterim Order, 11 FCC Rcd at 5946. 1111d "31d. at n. 35. An operator might file such a certification if it is subject to effective competition. see supra at paras. 3-30, or is deregulated under the small cable operator provisions. See infra at paras. 61.89. "'Interim Order, 11 FCC Rcd at 5946. "'Id. "`Id. & n.34. '"'Notice, I 1 FCC Rcd 5964. 19 t Federal Communications Commission FCC 99 Commission." Accordingly, we sought comment on possible time limits for LFAs to file complaints%%itli the Commission.1' We solicited comment on our proposal to adopt the interim rule requiring LFAs to file CPST rate complaints with the Commission within 90 days of the close of the%yindo%% for subscribers to file complaints with the LFA (or 180 days after the rate becomes effective)."" Finally as part of revising our rules, we amended the Commission rate complaint form. Form 329.` and invited comments on those amendments. B. Discussion 1. LFA Filing Deadlines 35. The amount of time an LFA should have to file a CPST rate complaint must account for an LFA's own procedures and any procedural requirements that we impose. Before turning to those procedures, we agree with commenters representing both the cable industry and LFAs that urge us to make clear that LFAs have discretion to decline to file a complaint with the Commission. NCTA and the Massachusetts Commission both request that the Commission state explicitly that LFAs have the discretion not to file a rate complaint even if the requisite number of subscriber complaints has been timely filed with the LFA.'=' Other commenters suggest that the LFA or state authorities should have the prerogative to require a higher threshold of consumer complaints before filing than is prescribed by the statute.'== 36. An LFA may decide not to file a CPST rate complaint, based on its assessment of the validity of the underlying subscriber complaints or any other reason. There is nothing in the 1996 Act that suggests Congress sought to override the judgment of an LFA in this regard. An LFA should have the same absolute discretion in this context as it does when deciding whether to seek the Commission certification that is required before it may regulate BST rates." We clarify that under our rules an LFA is not obligated to file a CPST complaint and may set standards it deems appropriate for deciding whether to file a complaint, as long as the minimum standards set forth in Section 623(c)(3) and our rules are satisfied. 37. The New Jersey Advocate suggests that where an LFA osis not file a complaint with the Commission despite having the grounds and authority to do so, individual subscribers or consumer advocacy groups should have the right to appeal this omission to the Commission.'=' Rather than giving 117/d. 118Id ""Id. ''-OOrder at 5992. 12'NCTA Comments at 27, Massachusetts Cable Commission Comments at 16. '=Z Massachusetts Cable Commission Comments at 8. NCTA Comments at 27. '='See 47 C.F.R. § 76.910. '='New Jersey Ratepayer Advocate Comments at 12. :0 Federal Communications Commission FCC 99_:- subscribers the right to appeal an LFA's decision not to file, the 1996 Act eliminated provisions of tilt Communications Act that had recognized the authority of subscribers to initiate Commission reg ie\\ of CPST rates.'-5 As amended, Section 623(c)(3) does not permit the filing of CPST rate complaints \yith the Commission by any entity other than the LFA. Conuress thus entrusted the decision whether to file a complaint to the sole discretion of the LFA. Adopting the New Jersey Advocate's su;_gestion \\ould be inconsistent with the statute. 38. A number of cable operators contend that the LFA should notify the operator each time a subscriber complaint is received. Fleischman proposes that LFAs be required to provide cable operators with copies of written CPST rate complaints within 10 days of receipt of such complaints from subscribers.'=' According to Fleischman, this requirement would allow the operator to determine the validity of the complaint and place the operator on notice of its potential refund liability.'= Fleischman notes that under the 1996 Act's new CPST rate review process, refunds begin to accrue as soon as the LFA receives a valid subscriber complaint, not when a Form 329 is filed with the Commission.` Fleischman argues that cable operators must be given notice of their potential refund liability as soon as possible. Fleischman proposes that after two valid subscriber complaints are filed with the LFA and forwarded to the operator, the operator would then be required to submit its rate justification,or any other defense it deemed appropriate, to the LFA within 30 days. After receiving the response from the cable y operator. Fleischman suggests that the LFA have 30 days to file Form 329 and the operator's response with the Commission.'=' Time Warner proposes a similar procedure, except that under its plan the LFA would have 120 days from the effective date of the CPST rate increase in which to file a complaint with the Commission.10 39. These proposals would place unnecessary burdens on both LFAs and cable operators. We will not require an LFA to notify the cable operator of every CPST rate complaint the LFA receives from a subscriber, particularly since the LFA may choose not to file a complaint. We acknowledge that a cable operator may have a legitimate interest in learning of subscriber complaints, even if the LFA does not elect to pursue the claim with the Commission. There is no indication in the 1996 Act or its legislative history, however, that Congress sought to impose additional burdens on LFAs in this regard. We presume that subscriber complaints are matters of public record that are accessible under state or local laws. We will, however, retain the requirement adopted in the Interim Order that an LFA copy the cable operator with the complaint package it files with the Commission and certify that it has done so on Form 329."' '"See 1996 Act, § 301(b)(1)(A), 110 Stat. 115. `Fleischman Comments at 19. Accord NCTA Comments at 25. '='Fleischman Comments at 19. ''-'/d. See 47 U.S.C. 543(cx 1)(C)("refund such portion of the rates or charges that were paid by subscribers after the filing of the first complaint filed with the franchising authority . . . '; 47 C.F.R. 76.961(b) as amended herein, infra App. A. '2'Fleischman Comments at 18-21. "'Time Warner Comments at 26-27. See NCTA Comments at 26. "'interim Order, I1 FCC Rcd at 5946; 47 C.F.R. §§ 76.951(b)(6), 76.1402. 21 r Federal Communications Commission FCC 99-5- 40. CATA asserts that LFAs should act as a filter for subscriber complaints rather than simpl\ acting as a passive conduit.''' CATA suggests that an LFA should be required to include with each filin1_ ffi an affirmative statement that it believes the rates in question do not conform with the Commission's rules.13' We disagree. Under the Communications Act, the Commission,not LFAs, has the responsibility and authority to determine the reasonableness of CPST rates." Still. Coneress presumable did not intend an LFA to pass along to the Commission subscriber complaints that the LFA knolls to be invalid. The LFA should not file a complaint with the Commission that is based on subscriber complaints concerning: the BST or premium services. Furthermore. the LFA must determine that it has received more than one complaint per community unit served by the operator before filing a complaint against the operator's rates in that community unit. Beyond measures such as these, which merely ensure that the LFAs complaint is not procedurally defective under Section 623(c)(3), we see nothing in the 1996 Act that imposes on LFAs any requirements with respect to substantive review of CPST rates. 41. Some commenters suggest that we abandon our interim procedure of requiring an LFA to file its complaint and the cable operator's response simultaneously."s These commenters recommend that we direct the LFA to file its complaint with the Commission when it serves the operator with the complaint, after which the operator would file its response directly with the Commission, with a copy to the LFA. We will retain the interim procedure in the final rules. Allowing the LFA to consider both the r subscriber complaints and the cable operators rate justification will enable the LFA to make a more informed decision as to whether or not to file a complaint with the Commission. Furthermore. the 90 day window for the Commission to consider a rate complaint is triggered when the complaint is filed. We do not believe the Commission should begin its proceeding with less than a complete record. As noted elsewhere, the rules we are adopting here impose no obligation on the LFA to file a complaint, nor do they require the LFA to perform any in-depth analysis. Rather, they allow LFAs an opportunity. consistent with Congressional intent,to participate in the rate regulation process to the degree they choose to do so. 42. In our interim rules, we found it appropriate to allow an LFA 180 days from the effective date of a CPST rate increase to file a complaint with the Commission. Assuming the LFA received subscriber complaints on the 90th d.y following the rate i.icrease, it would have another 90 days to give the required notice to the cable operator, obtain the operator's response, and file a complaint and the response with the Commission. Some LFAs and consumer advocacy groups argue that no time frame is set out in the 1996 Act and that no firm deadline should be established.''`' According to these "=CATH Comments at 3-4. "Id "447 U.S.C. § 543(a)(2)(13), (c). "`Comcast Comments at 17-20; Cox Comments 16-18; U S WEST Reply Comments at 7-9; National League of Cities ("League of Cities") Reply Comments at 10-11. 1'See e.g., William Cook Comments at l; GMCC Comments at 2-4;New York City Comments at 16-17. But see Massachusetts Cable Commission Comments at 7-8(supporting the proposed 90 day window for LFAs to CPST rate complaints with the Commission). 22 Federal Communications Commission FCC 99-:- commenters. the proposed deadline risks imposing an unwarranted burden on the LFAs." Tire Lea_ue of Cities and NATOA argue that such a deadline only serves to restrict the access of subscribers to legitimate rate relief."' The Greater Metro Cable Consortium("GMCC")contends that the cable operator would not be prejudiced by the absence of a filing deadline because the rate increase could :=o into eftect while the LFA decides whether it can and should file a complaint.''` In the event the complaint is granted. the operator would refund only those amounts that it was never entitled to in the first instance. New York City contends that no deadline is warranted. but as an alternative suggests that operators be required to submit a rate justification to the LFA 30 days prior to the effective date of the proposed rate increase.1°" 43. We will adopt our interim rule as our final rule. A limited time frame is required if the ratemaking process is to have any closure or finality. Shortly before enactment of the 1996 Act, this factor persuaded us to discontinue the practice of reviewing a cable operator's entire rate structure when a CPST rate complaint is filed."' At that time we observed that the uncertainty created by the link=ering potential of refund liability "may generally discourage investment, without which operators may lack the resources to upgrade their networks. add new programming services, and provide new and innovative services.i14' For the same reasons. we will not subject cable operators to potential liability indefinitely under the revised CPST rate complaint procedure. LFAs are not prejudiced by the establishment of a reasonable deadline since they retain unfettered discretion to invoke the rate review process,assuming they have received subscriber complaints within the 90-day period mandated by Congress. 44. We reject New York City's proposal that would require an operator to provide the LFA with a rate justification in advance of the rate increase. Section 623(c)(3) precludes LFA involvement in the CPST rate review process until it has received subscriber complaints following a CPST rate increase. 45. The cable industry generally favors an abbreviated deadline for LFA rate complaints filed with the Commission. NCTA suggests that LFAs be required to file a complaint within 105 days of the effective date of the rate increase, thus giving the LFA 15 days beyond the close of the 90 day window "'See e.g., William A. Cook, Jr. ("William Cook") Comments at I: Greater Metro Cable Consortium, Metro Denver, CO,("GMCC")Comments at 24. See also Ne% Jersey Ratepayer Advocate Comments at I I (arguing that the LFA must have a minimum of 90 days from the close of the subscribers 90 day window to file a CPST rate complaint with the LFA but that the Commission must allow for an extension for good cause). "'National League of Cities and National Association of Telecommunications Officers and Advisors ("League of Cities and NATOA") Comments at 12-13. 19GMCC Comments at 24. ""New York City Comments at 17-18. "'Implementation of Sections of the Cable Television C,msumer Protection and Competition Act of 1992: Rate Regulation, Thirteenth Order on Reconsideration. II FCC Rcd 388, 451 (1995) ("Thirteenth Order on Reconsideration"). 1421d Federal Communications Commission FCC 99 for subscriber complaints.` Other commenters suggest that LFAs be allowed 13; days from the eftectiN e date of the CPST rate increase in which to file a complaint with the Commission."' The Massachusetts Cable Commission and the New Jersey Board agree that 180 days is reasonable.` Fleischman and NCTA express concern that the 180 day deadline undermines the Form 1240 annual rate adjustment methodoloa\. 46. We believe the proposals to shorten the 180 day window are unrealistic. The time period for the filing of a complaint by the LFA should not begin to run before the 90th day after a rate increase. since the underlying subscriber complaints may not be received until that day. Conceivably. we could start the time period as soon as the number of subscriber complaints reaches some numerical threshold, as suggested by Fleischman, even if that occurs within a few days of the rate increase."' It is clear. however, that Congress believed it reasonable that subscribers take up to 90 days to complain to the LFA. Since subscriber complaints are the linchpin for LFA complaints to the Commission, an LFA should be permitted to take account of the number of subscriber complaints filed within 90 days in deciding whether to pass those complaints on to the Commission. This means that the time period for LFA complaints should not begin to run until 90 days after the rate increase. 47. After the 90th day, the cable operator is given 30 days to respond to the LFA's notice, since that is the standard period for rate justifications. In addition, the LFA must be afforded sufficient time after the initial 90-day period to decide whether to give the cable operator notice of its intent to file a complaint, to give such notice and review the operator's response. and determine whether to file the complaint with the Commission. Importantly, this process must accommodate any state and local requirements that govern LFA procedures. We recognize that such local procedures may differ substantially among jurisdictions.147 Sixty days is not an excessive period of time to accomplish these responsibilities. 48. We note that both the LFA and the cable operator can expedite the process. The LFA may give notice of its intent to file a complaint with the Commission as soon as it receives two subscriber complaints. and need not wait until after the 90-day period for subscriber complaints has passed. Similarly, the cable operator need not take the full 30 days to respond to the LFA's notice of intent to file a compliant. We no.e, however, that the caoie operator must file its rate justification with the LFA and cannot simply refer the LFA to a form previously filed with the Commission."" If the operator certifies "'NCTA Comments at 26 "'See e.g.. Comcast Comments at 17-20; Cox Comments 16-18; US WEST Comments at 7-9. `Massachusetts Cable Commission Comments at 7-8;New Jersey Board Comments at 6. See also Indianapolis Comments at 3 (90 days is a reasonable time frame for the LFA to file a rate complaint on behalf of the subscribers who have already filed them with the LFA). 16Fleischman Comments at 19. `GMCC Comments at 3. ""When filing the relevant forms needed to justify a rate increase, we expect such justification to fully comply with our rules. See 47 C.F.R. § 76.956. 24 Federal Communications Commission FCC 99-5- that it is not subject to rate regulation. it must accompany the certification with supporting e\idence.'' We encourage LFAs and cable operators to attempt to resolve rate disputes expeditiously. as that is in all parties' interests. Once the LFA receives the cable operator's rate justification and believes the complaint meritorious. it should forward the complaint and the justification to the Commission promptly. As stated in the htterim Order, after the Commission receives the complaint. we "gill decide the case based upon the information submitted.15' Insufficient or incomplete cable operator responses mai result in our tindin'_ that the rate increase is unreasonable. Consistent with the statute. the Commission is required to issue a final order within 90 days of receiving a complaint."' The statute also provides that the parties ma\ agree to extend the Commission's 90 day review period.` We would anticipate an LFA and a cable operator agreeing to such an extension in the case of, for example. new information regarding a change in a cable operator's circumstance during the pendency of the Commission's review of the complaint. LFAs and operators agreeing to an extension of the 90 day review period must do so in writing and specify the period of time for which the extension is granted. 49. Therefore. we affirm our original proposal to require LFAs to file rate complaints with the Commission within 180 days of the effective date of the CPST rate increase, in accordance with the procedures described above. We find that this reconciles the operators' need for speedy resolution of complaints against its rates and the LFAs' need to accomplish any steps necessary before filing a complaint with the Commission. z Bill Enclosure Information 50. Since subscribers may no longer directly file rate complaints with the Commission, the Interim Order eliminated the requirement that cable operators include the name, telephone number and address of the Cable Services Bureau on all subscriber bills."' Cable operators generally support this proposal and point out that given the relevant amendments of the 1996 Act, this information is no longer necessary and is potentially confusing to subscribers."' Fleischman further suggests that operators no longer be required to list the LFA name and address on each subscriber bill. as currently required.'" Fleischman asserts that such information is only necessary on bills which reflect CPST rate increases subject to the complaint window. NCTA agrees and further suggests that such information shout : )nly be included if requested by the LFA.1S6 10''it should include evidence of a claim of effective competition or refer to a pending petition for such a finding. If the operator is small, it should include evidence that the operator meets the definition. 10Interim Order, I 1 FCC Rcd at 5946. "'47 U.S.C. § 543(c)(3). 152/d. '"Interim Order, 11 FCC Rcd at 5946. "'See e.g., Cox Comments at 18; NCTA Comments at 28, Time Warner Comments at 29. '"Fleischman Comments at n. 46. 16NCTA Comments at 28. Federal Communications Commission FCC 94-5- 51. Other commenters suggest that subscribers continue to need ready access to the Cable Services Bureau and that the name, address and telephone number of the Bureau should continue to he provided as part of the bill. New York City notes that while the Cable Services Bureau no longer accepts CPST rate complaints directly from subscribers, it remains responsible for other matters." Consequently. New York City recommends that we continue to require operators to include this information on subscriber bills.158 52. We adopt our proposal to discontinue requiring operators to include the name. address and telephone number of the Cable Services Bureau in each bill. Initial review of both the BST and CPST rates is left to the discretion of the LFA. In the case of CPST rates, however, this discretion can be exercised only if the LFA receives subscriber complaints within the 90-day statutory deadline. Given the critical role played by the LFA and the time sensitivity of consumer CPST rate complaints, we find that subscribers may be harmed if we continue to require subscriber bills to include the Cable Services Bureau information. If bills continued to include this information, subscribers might mistakenly direct CPST rate complaints to the Commission as opposed to their local franchising authority, and may consequently fail to meet the 90-day statutory deadline for LFA receipt of subscriber complaints. We will continue to require operators to include the LFA's name, address and telephone number because this information will generally assist subscribers in exercising their statutory right to file a CPST rate complaint with the LFA. However, because LFAs interact regularly with subscribers, we believe they are better positioned to evaluate the needs of subscribers and the means to serve those needs. We will therefore permit LFAs the discretion to allow operators to omit this information. 3. Tbreslrold for Subscriber Complaints 53. In our interim rules, we determined that for purposes of triggering the LFAs' authority to file a CPST rate complaint with the Commission, Congress intended to require at least two subscriber complaints be properly filed for each community unit before the LFA filed a complaint with the Commission. C-TEC Cable Systems, Inc. and Mercom argue that members of the franchising authority such as the mayor or a city council member, should not be counted toward the two subscriber threshold required for an LFA to file a complaint with the Commission.", 54. We reject C-TEC and Mercom's argument that members of the franchising authority should not be counted toward the two subscriber threshold. C-TEC and Mercom cites no authority for its position. To the extent that these individuals are cable subscribers, they have the same rights as other cable subscribers. 55. Similarly, C-TEC and Mercom urge the Commission to require all subscriber complaints to the LFA to be in writing if they are to count toward the two subscriber threshold."' Other commenters "'New York City Comments at 18. "'Id. `C-TEC Cable Systems, Inc. and Mercom, Inc. ("C-TEC and Mercom") Comments at 6. 1601d. at 12. 26 Federal Communications Commission FCC 99 suggest that complaints to the Commission be dismissed if they are not accompanied bN mo \.ritten subscriber complaints or if the underlying subscriber complaints are subsequently withdrawn.'"' 56. We will not dictate to the LFAs the manner in which tile\ deal with their o\\n constituencies. We will continue to allow the LFA to use the records maintained in accordance %\ith its regular business practices to establish that it has received the requisite subscriber complaints within 90 days of a rate increase. We will, however, condition the filing of a CPST rate complaint upon the LFA's certification that it has received two or more subscriber complaints about CPST rates during the 90 day period after the rate became effective.": 4. FCC Form 329 57. Our rules require that CPST rate complaints be filed with the Commission using_ the standard rate complaint form, FCC Form 329.163 TCI advocates that the Commission require LFAs filing rate complaints to use Form 329 with appropriate revisions.1G0 According to TC1, continued use of an amended Form 329 will ensure that valid complaints are resolved quickly and invalid complaints are weeded out expeditiously.16' NCTA urges the Commission to continue requiring subscribers to use Form 329 when filing CPST rate complaints with the LFA. NCTA argues that Form 329 provides a simple, easily understood format that can be completed by subscribers and reviewed by affected parties." 58. The State of New York suggests several changes to the Form 329. It recommends that references in the form to the complainant should be to the "franchising authority" and not to the "local franchising authority" for consistency with the statute and Commission rules.16' The State of New York also cites to language in paragraph 1 of page 2 of the form. The State of New York suggests that language in the Form 329 asking the LFA to certify that it has received subscriber complaints "within 90 days of the increase first appearing on the subscriber's bill" be amended to "within 90 days of the effective date of the rate increase" in order to conform with the statute, the rules and the balance of the form."' In addition, the State of New York notes that as proposed, Form 329 states that "[i]ncomplete filings cannot be processed and will be returned" even though the form requires "in detail" specific information which may not be readily available to the franchising authu.lty without the coop-ration of the cable operator. The State of New York expresses concern that as the form currently reads, the operator would control the LFA's ability to file a valid complaint. Accordingly. the State of New York suggests that the 161NCTA Comments at 27; Time Warner Comments at 28. 16'FCC Form 329 currently requires LFA certification that it has received complaints. 1G347 C.F.R. § 76.951. "M Comments at 25-27. 16`Id. 166NCTA Comments at 26, n. 75. 16'State of New York Comments at 17. i6ald 27 Federal Communications Commission FCC 99 form should indicate that if the cable operator has not responded in a timely manner to the notice of intent to file a complaint, the LFA need only use reasonable efforts to obtain and provide the information requested on Form 329.'6' 59. We agree that LFAs should continue to use Form 329 to file CPST rate complaints %%ith the Commission. As with our proposed rule. LFAs should use Form 329 to serve notice on the operator of its intent to file a CPST rate complaint with the Commission.10 When providing the operator of notice of its intent to file a complaint, the LFA also should indicate the date by which the cable operator must respond. The response date must be no less than 30 days from the date the notice of intent to file a complaint is received by the cable operator. The notice and the draft Form 329 should be seat to the cable operator simultaneously using a delivery service that can establish the date of receipt through routine business documents. 60. We see no need to require that subscribers use Form 329 when filing complaints with the LFA. Subscriber complaints to the LFA can be received in any form acceptable to the LFA. We will. however, condition the filing of a CPST rate complaint with the Commission upon the LFA's certification that it has received two or more subscriber complaints about CPST rates during the 90 day period after the rate became effective. Consistent with the statutory language, subscriber complaints filed with the LFA prior to the effective date of the rate increase may not be counted toward the subscriber complaint threshold for filing a complaint with the Commission.` Because subscriber notice of a planned rate increase by a cable operator may not in every case result in an actual rate increase, consideration of only those subscriber complaints filed with the LFA on or after the effective date of a rate increase will prevent unnecessary investigations of rate increases that were not in fact implemented. IV. SMALL CABLE OPERATORS A. Background 61. Section 301(c) of the 1996 Act amended Section 623 of the Communications Act to exempt smai. cable operators from rate regulation requirements. New Section 623(m) of the Communications Act defines a small cable operator as "a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual re%enues in the aggregate exceed $250,000,000.i172 The exemption applies to cable programming services or a basic service tier that was the only service tier subject to regulation as of December 31, 1994 in an% franchise area in which that operator services 50,000 or fewer subscribers. 169,(/. 1047 C.F.R. 76.951(a), (b)(6). "'See 47 U.S.C. § 543(c)(3)(an LFA may not file a complaint "unless, within 90 days after such increase becomes effective it receives subscriber complaints") 17=47 U.S.C. § 543(m). 28 Federal Communications Commission FCC 49-5- 62. The Interim Order treated an operator serving fewer than 617.000 subscribers as a sinal I operator if its annual revenues, including revenues of affiliated entities, do not exceed the 5250 million revenue ceiling."3 The interim rules defined an affiliate as an entity having a 20% or greater equity interest in the operator (active or passive) or exercising de jure or de facto control over tiie operator.' This definition of"affiliate" mirrors the definition of affiliate under our pre-existing small system cost-of- service rules governing rates charged by certain small systems that are not exempted by the statute.' ` The Interim Order also established interim procedures for asserting small operator eligibility.' " 63. The Notice solicited comment on several issues. The issues raised are the niethodoloe\ that should be emploved to determine the subscriber threshold under the statute;our proposal to implement as a permanent rule a definition of affiliate that would establish affiliation when an entity owns an active or passive equity interest of 20%or more in the cable operator or holds de facto control over the operator: the calculation of "gross annual revenues" counted toward the $250 million threshold. procedures for determining eligibility for small operator treatment: and the treatment of operators that lose eligibility for small operator relief and become subject to regulation."' B. Discussion 1. Subscriber Count 64. The Notice proposed that the national subscriber threshold in Communications Act Section 623(m) should be determined annually,using the most reliable means available from industry groups,trade journals or other sources.1' Commenters generally support this proposal."') SCBA however, contends that the Commission is obligated to seek approval from the Small Business Administration("SBA")before promulgating a final rule implementing the statutory definition of small operator set forth in the 1996 Act.180 SCBA argues that the Small Business Act requires all agencies, including the Commission, to "'Interim Order, 1 I FCC Rcd at 5947. "'Id. at 5948. "`See Implementation of Sections gl the Cable Television Consumer Protection and Competition Act of /992: Rate Regulation, Sixth Report and Order and Eleventh Order on Reconsideration. 10 FCC Rcd 7393. 7412 n. 88 (1995)("Small System Order');47 C.F.R. § 76.934(a); FCC Form--1230 Establishing Maximum Permitted Rates for Regulated Cable Services on Small Cable Systems (Aug. 1995). "`Interim Order, I I FCC Rcd at 5948-50. "'Notice, I 1 FCC Rcd at 5965-68. 1lid. at 5965. ""NCTA Comments at 29-30; CATA Comments at 5; Massachusetts Cable Commission Comments at 8. 10SCBA Comments at 4. 29 Federal Communications Commission FCC 99-5- obtain approval from the Administrator of the SBA before it can "prescribe a size standard for categorizin_ a business concern as a small business concern.i181 65. We disagree with SCBA's contention. Congress has defined a small cable operator in the 1996 amendments to the Commission's governing statute as an operator that serves fewer than 1%o of all subscribers in the nation and is unaffiliated with entities whose cross annual revenues exceed 5250 million. By selecting sources from which to estimate the national subscriber base. the Commission is not "prescribing a size standard" for small operators.'"= The Commission is merely implementing the specific terms of the statute. Accordingly, we will determine the subscriber count on a periodic basis LS11- tile most reliable sources publicly available. The SBA Assistant Administrator for Size Standards supports this approach.113 66. As proposed in the Notice, we will apply the small operator definition to qualifying systems serving 50.000 or fewer subscribers on an individual franchise area basis. We will not aggregate subscribers in adjoining franchise areas, even though they might be served by a common head end or be part of a common system. The explicit terms of the statute provide for the exemption "in any franchise area"and require this interpretation.'"' Commenters addressing this issue generally agreed.`5 In addition, each separately billed or billable customer will count as a household subscribing to the cable operator's cable service. As proposed in the Notice and supported by commenters,16 subscribers in MDUs should be counted by using the equivalent billing unit methodologv.1B7 Households used solely for seasonal, occasional, or recreational use should not be included in the customer count.188 "'!d. (quoting 15 U.S.C. § 632(a)(2)(C)). `See 15 U.S.C. § 632(ax2)(C). "'See U.S. Small Business Administration, Assistant Administrator for Size Standards, Comments at 2. "'Communications Act § 623(m), 47 U.S.C. § 543(m). P `NCTA Comments at 38;Fleischman Comments at 26;National Telephone Cooperative Association("NTCA") Comments at 3. But see LSGAC Recommendation 13(E). recommending that the Commission count all franchise territories operated by a single system if the system is held by a multiple system owner. ""See Notice, I 1 FCC Rcd at 5967, NCTA Comments at 38. '"See Public Notice: Questions and Answers on Cable Television Regulation,pp. 1-2(released July 27, 1994). Under the EBU methodology,subscribers to bulk-rate services are calculated by dividing the annual bulk-rate charge by the basic annual subscription rate for individual households. The specific individual household rate that is used should correspond to the level of service received by the bulk rate customer. '"`See generally 47 C.F.R § 76.905(c) (counting subscribers for the purpose of the effective competition tests). 30 Federal Communications Commission FCC 94-5- z Definition of "affiliate" 67. In the Interim Order,we determined that applying the definition of"affiliate" used in our small system cost-of-service rules"' to implement Section 62233 (_m) on an interim basis %vas reasonable because the small system rules and the small cable operator provisions of the 19% Act have similar objectives of minimizing regulation and enhancing the capital attractiveness of small cable entities. %%Itile ensuring that the benefits of small system regulation are not extended to larger entities where such relief is unnecessary and inappropriate.'96 We also concluded that we could depart from the definition of "affiliate" set forth in Title I of the Communications Act because Title VI, where the small cable operator provisions arise, contains its own definition of "affiliate.i191 We therefore implemented a definition of "affiliate" that conformed to the policy objectives of the small operator provisions of the Communications Act. 68. With respect to the 1996 Act's $250 million gross revenue threshold, the Interim Order adopted the gross revenue definition used to determine eligibility for certain frequencies devoted to personal communications services ("PCS"). Under that definition, gross revenue includes "all income received by an entity, whether earned or passive, before any deductions are made for costs of doing business(e.g., cost of goods sold), as evidenced by audited quarterly financial statements for the relevant period."' We determined, however. that audited quarterly financial statements would not be required to verify these amounts, although we requested comment regarding methods to verify gross revenue figures for natural persons.'' In addition, the Interim Order tentatively concluded that the statute requires aggregation of the revenue of all affiliates toward the $250 million threshold."' We sought comment on whether the operator's own revenues and non-cable revenues of affiliates should be counted toward the $250 million threshold.'`'' 69. We will adopt the 20% ownership standard to determine affiliation under Section 301(c) of the 1996 Act. As noted in the Interim Order, we adopted the 20% ownership standard in the course 18"47 C.F.R. § 76.934(a). "Interim Order. 11 FCC Rcd at 5948. '"'Notice at 5965. The Title VI definition provides: "[TJhe term 'affiliate', when used in relation to any person. means another person who owns or controls, is owned or controlled by, or is under common ownership or control with, such person." 47 U.S.C. § 522(2). "'21d. at 5966 (citing 47 C.F.R. § 76.720(f)). In determining whether the $250 million threshold has been crossed, we will evaluate revenues according to the fiscal year of the entity holding the ownership interest in the small cable operator. i",Id 104 Id. at 5966-67. '"Id. at 5967. 31 s r Federal Communications Commission FCC 99-5- of our earliest efforts to establish a separate regulatory scheme for smaller cable systems.'"" We explained that the 20% threshold served as the point where a large entity "will have a significant enough stake that it will be likely to extend financial resources to the small operator should that operator face financial difficulties.""7 As a general matter. commenters in this proceeding support the 200/6 threshold although they raise concerns regarding the types of investment interests applicable to the 200/6 test. Fleischman states that Congress was aware of the 20% ownership test at the time it adopted the 1996 Act. Hence. Congress's decision to leave the 20% test in effect as a small system affiliation standard suggests legislative acceptance of the 20% threshold."S On the other hand, the SCBA argues in favor of a "safe harbor" rule that would ensure that a holder of a 20% voting interest (or less) would not be deemed affiliated with the small operator, and that a holder of a 20% to 50% voting interest would be allowed to make an affirmative showine of non-affiliation based on the absence of control.1 ' Tile SBA Office of Advocacy encourages the Commission to model its rules after the SBA's affiliation rules to avoid discouraging inherently passive investment.2'0 70. In adopting the 20%threshold as a permanent rule, we adhere to our prior conclusion that investments at this level provide sufficient incentive for the affiliated entity to provide financial support to the smaller cable entity. The affiliation definition set forth in Title VI of the Communications Act recognizes that affiliation can be demonstrated either by an ownership interest or by control.="' Tile standard proposed by the SCBA, requiring the absence of control for voting interests of 20% to 50%, would eviscerate the ownership standard as an independent basis for affiliation. Moreover, we believe the absence of legislative action to change the standard in the 1996 Act is some indication that Congress did not object to the 20% test or the balance it strikes between supporting the capital attractiveness of smaller systems and the consumer protection objectives of Title VI. Accordingly, we will maintain the 20% ownership test as a final rule. If two or more unaffiliated entities hold an equity interest in the small cable operator, we will not aggregate the equity interests of the entities. For example, if two unaffiliated entities each held a 15% interest in the cable operator, neither would be deemed affiliated with the small ' cable operator. 71. Commenters also address whether the Commission should articulate distinctions between active and passive investment when determining whether an entity is affiliated with a _able operator. Cable operators argue that many smaller operators depend upon substantial passive equity investments and "'Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, Second Order on Reconsideration. Fourth Report and Order and Fifth Notice of Proposed Rulemaking. 9 FCC Rcd 4119, 4173 n.157 (1994) ("Second Reconsideration Order"). w7ld 1"Fleischman Comments at 23. `SCBA Comments at 19. =00U.S. Small Business Administration, Office of Advocacy, Ex Parte Submission (filed Nov. 12, 1996). The Office of Advocacy advises that the SBA's affiliation rules in 13 C.F.R. § 121.103 distinguish between different types of investors and focus on the amount of voting stock held by the investor and de facto control. The SBA Assistant Administrator for Size Standards also notes the SBA definition of affiliation in his Comments at 3. 20147 U.S.C. § 522(2). 32 Federal Communications Commission FCC 99- 5-that allowing such investments to constitute affiliation would detrimentally affect the operators' abilitx to maintain their current operating structures. They claim that passive investments by financial institutions fail to provide technical resources or operating efficiencies to small operators and thus revenues from these passive investments should be excluded from the ownership test.='= In the alternative. NCTA argues for either a more liberal threshold when passive investment is involved or the adoption of a procedure to enable small operators to request waiver of the affiliate standard when other attributes warrant small system regulatory relief.''' Citing the "small business"definition in the broadband C Block rules for PCS. Cole Raywid argues that passive investment should not be counted until it exceeds 50% ownership of the small operator.'" SCBA seeks a control-oriented test for investments counted toward the o%\nership threshold, arguing that passive investment is important to small operators and that its inclusion toward the threshold would shrink the number of small operators qualifying for regulatory relief=' If passive investment is excluded, the SCBA argues that limited investor oversight of the operator should not disqualify the investment from passive treatment.206 72. Investment firms also seek the exclusion of passive investments from the affiliation test. General Electric Capital Corporation claims that passive investors do not seek day-to-day management of the enterprise and would seek only to engage in limited oversight to ensure compliance with ownership and attribution rules. Thus, it argues for a passive/active distinction to ensure that investors do not shy away from cable operators when greater investment would fail to maximize the revenue advantages that stem from small operator status.20' Similarly, J.P. Morgan and other investment banks contend that small operators pose capital risks that underscore the importance of maximizing revenue potential. Accordingly, these investors assert that they would not risk losing such advantages by taking their investment beyond the 20%threshold.2" In addition,these institutions emphasize that their passive investments are conducted on behalf of investor-clients, and their primary allegiance is to these individuals rather than to the cable operator receiving the capital investment. Thus,passive investment does not afford operational advantages to the cable operator.'-'" Local regulators take the opposite view, arguing for inclusion of both active and passive interests. They emphasize that a 20% investment, active or passive, is a substantial enough investment to justify a finding of affiliation. In their view. the 20% threshold itself accommodates the 2'2NCTA Reply Comments at 22. CATA Comments at 4. Falcon Holding Group, L.P. ("Falcon") Comments at 5. '''NCTA Comments at 35-36. ="Cole Raywid Comments at 14-15. 20SSCBA Comments at 14-17. 206SCBA Reply Comments at 10: See also FrontlerVisiOn Operating Partners, L.P. Comments at 6. '-"General Electric Capital Corporation ("GE Capital") Reply Comments at 2-4. 201.P. Morgan & Co., Brown Brothers Harriman & Co . Olympus Partners, and First Union Capital Partners, Inc. Reply Comments at 3. "'ld. at 4. 33 Federal Communications Commission FCC 94 more limited nature of passive investment. recognizing that any investment at such leNels %%ill Justin a determination that the interests of the affiliated entities are aligned." 73. We will exclude truly passive investments when determining whether an investor's interest in a cable operator exceeds 20% for purposes of small cable operator deregulation. Tile record in this proceeding demonstrates that the typical smaller operator is likely to depend upon passive equit\ investment from large financial institutions that have annual revenues in excess of the $250 million cap established by Congress. A large investor with more than $250 million in revenues may be reluctant to take the investment bevond a 20% ownership interest if that added investment jeopardizes more fa\orable regulatory treatment. Counting truly passive investment toward the 20%affiliation standard could punish a large number of operators that presumably were the intended beneficiaries of the small operator provision of the 1996 Act. Only truly passive investments will be excluded for these purposes.:" A cable investor that takes an equity interest in the cable operator goes beyond passivity when the investor places its own representative on the cable operator's board of directors or on an advisory committee or in an other manner has its representatives involved in the operation of the business. Likewise, an investor will not be deemed passive if it retains the authority to approve or disapprove the cable operator's standard business transactions. In these cases, the investor is taking an active role in the operation of the cable system and thus should be deemed affiliated with the operator. if the investment meets the 20% threshold. We recognize that this approach is different than that used in many other areas where the Commission addresses "attribution" or affiliation issues. We believe it is appropriate here because the concerns that are being addressed are not the usual issues of program content influence or anticompetitive economic ' incentives. Here the concern is to limit the class of operators to whom this exemption applies while not cutting off investments that will aid in system growth and modernization. 74. The affiliation test of Section 301(c) also depends upon whether entities affiliated with the small operator generate at least $250 million in annual revenue. A number of commenters expressed concern regarding the revenue sources that might be included in this statutory formula for affiliation. Cole Raywid, for example, argues against the inclusion of non-cable revenues in calculating gross revenues, suggesting that the potential field of small cable investors could be affected significantly by a broad definition of applicable revenue sources.''= Moreover, Cole Raywid sugL..sts Congress may havc Intended the $250 million figure as a "backstop"to determine tite propriety of small system relief when an operator moves above the one percent subscriber limit, because $250 million is roughly what an operator would "'Michigan, Illinois and Texas Communities Reply Comments at 13. "We note that both active and passive investments are counted toward the affiliation standard set forth in the Small System Order. 10 FCC Rcd at 7412 n.88. Unlike the Small Svstem Order's affiliation inquiry, however, the affiliation test in the context of the $250 million revenue threshold focuses on access to financial resources rather than the expertise and efficiencies associated with access to a wider subscriber base. We further note, however, that even in the context of the Small System Order, the Commission has indicated that it may discount the impact of purely passive investment in its affiliation inquiry. See Insight Communications Company. L.P., 1 I FCC Rcd 1270, 1271-73 (1995) (cable operator whose passive owner held 34% interest was allowed small system rate relief). ''=Cole Raywid Comments at 10-11. 34 Federal Communications Commission FCC 99-5- generate with a one percent share of the national subscriber market." C-TEC and Mercom male a similar argument."" 75. GE Capital also contends that non-cable revenues should be excluded from the $250 million revenue cap. According to GE Capital, the Commission should limit the cap to cable revenues because those revenues indicate whether the large affiliated entity can provide practical assistance to the small operator, including operational expertise, administrative economies of scale and discounts on programming or equipment.2" Telephone companies have also opposed counting non-cable revenues. BellSouth asserts that non-cable revenues should not count toward the cap because only large operators with revenues above the cap have the resources and expertise to ease regulator burdens on small operators.=' USTA asserts that inclusion of non-cable revenues would impair small cable operator access to capital needed to compete in a competitive video services market.'' On the other hand. local regulatory authorities argue for the inclusion of all revenues, cable and non-cable, because Congress decided aaainst limiting the sources of applicable revenue in the statute itself.218 76. We also conclude that non-cable revenues should be counted toward the$250 million cap. In determining whether the$250 million threshold has been crossed, we will evaluate revenues according to the fiscal year of the entity holding the ownership interest in the small cable operator. The language of the statute describes the $250 million cap in general terms and we believe a reasonable construction of the statute includes non-cable revenues toward the cap. We believe that Congress, in establishing the revenue cap, presumed that capital access is enhanced through affiliation with an entity that generates substantial revenues. Whether the revenues derive from cable or non-cable enterprises. the existence of a large revenue base was deemed sufficient to increase the affiliated operator's access to capital sources. Given tite range of current and potential investors in the cable industry. Congress could have limited estimations of the revenue cap to cable revenues. It did not do so. We will therefore include non-cable revenues when determining whether an operator is affiliated with an entity generating $250 million in annual revenues. 77. Finally, we must also consider whether multiple equity stakes in a small operator can be n::cumulated toward tip;. $250 million threshold. SCBA urges the Commission to resist aggregation based on language in the Joint Committee Report that seems to limit the small operator's ability to affiliate "with any entitv" whose annual revenues exceed the cap.=" In the alternative. SCBA advocates a proportional aggregation under which the affiliated entity's revenues are applied toward the cap in proportion to the 3`Cole Raywid Comments at 10-11. "C-TEC and Mercom Comments at 4-5. "GE Capital Reply Comments at 6-7. 2"BellSouth Comments at 45. "United States Telephone Association ("USTA") Reply Comments at 11. 2"'Massachusetts Cable Commission Comments at 9:Michigan.Illinois and Texas Communities Reply Comments at 16. 219SCBA Comments at 22. 35 a r Federal Communications Commission FCC 99 equity proportion it holds in the small operator.==' Cole Raywid also opposes aggregation. contendin;_ aggregation will impair the ability to raise capital.==' NCTA and the Michigan. Illinois and Texas Communities argue that aggregation is appropriate because the statutory language clearly requires The FCC Local State Government Advisory Committee recommends that the Commission-adopt a bread definition of affiliate that counts all systems operated by a multiple system owner and its subsidiaries." 78. We agree with those commenters who contend that the statute requires age=regation in this context. Section 623(m)(2) of the Communications Act states that a small operator seeking_ re�:ulaton relief pursuant to that provision cannot be affiliated "with any entity or entities whose d=ross annual revenues in the aggregate exceed $250.000.000."22° The explicit language specifies that revenues are calculated "in the aggregate" and we will implement this provision accordingly. In calculating the gross revenue cap, we will not require entities to submit audited quarterly financial statements if such entities do not routinely generate them.='-' Rather, a small operator can provide published financial data of its affiliated entities or provide declarations of affiliated entities describing their interest in the small operator. If such materials do not provide adequate information regarding affiliation. we will consider other evidence of affiliation as we deem appropriate on a case-by-case basis. 3. Procedures 79. The interim rules set forth a procedure that enables operators to assert eligibility for small operator treatment. For cable operators that offered only a single tier of service as of December 31, 1994. eligibility for small operator treatment can be established through a certification application to the LFA. The LFA is obligated to act upon the request within 90 days and appeals from the decision may be filed with the Commission. Also, qualifying systems with more than one tier of service as of December 31. 1994, may assert deregulated status in response to notice from the LFA that it intends to file a CPST rate complaint. The operator's certification of eligibility for small operator treatment serves as the response r to the complaint."- 80. We solicited comment on our proposal to adopt the procedures set forth in the interim rules on a permanent basis. We also sought comment rt�sarding alternative nicchanisms or approaches that would further minimize the administrative burdens on operators and franchising authorities in cases where eligibility for small operator treatment is not in dispute.==' Cable operators support simplified 2201d. at 22-23. =='Cole Raywid Comments at 15. `NCTA Comments at 37; Michigan. Illinois and Texas Communities Reply Comments at 15. 227LSGAC Recommendation 13('E)• 2'-'47 U.S.C. § 543(m)(2). 22'See NCTA Comments at 37; SCBA Comments at 20. 226 Interim Order, 11 FCC Rcd at 5949. 22'Notice, I 1 FCC Rcd at 5969. 36 Federal Communications Commission FCC 99 procedures for asserting eligibility for small operator treatment. NCTA urges the Commission to clarith that certifications need not be filed unless and until the LFA reaulates BST rates.` The SCBA araues that a simple declaration of eligibility should be sufficient and that the LFA's failure to act on the certification declaration within 60 days would render the certification effective.==" Fleischman supports filing certification requests directly with the Commission to obviate multiple filings %vith several LFAs having jurisdiction over the system.'-'' Both NCTA and the SCBA request rules that %%ould allo%-. operators to appeal to the Commission when information requests made by LFAs are considered unduly burdensome.-` s 81. Subject to one modification, we will adopt the procedures set forth in the Interim Order. 1 We believe they are sufficiently streamlined to minimize administrative burdens on operators "ltile enabling LFAs a reasonable opportunity to address the merits of the operator's assertions. Under the 1996 Act, operators qualifying for small operator treatment are exempt from certain regulatory provisions on the date of enactment. Operators claiming entitlement to such treatment may operate accordingly. We believe, however, that LFAs must have the opportunity to assess the circumstances of each case. The 90- day response period allows LFAs sufficient time to determine eligibility for small operator treatment. Because LFAs initiate the CPST rate complaint process and address BST rate issues,certification requests should be addressed at the LFA level subject to Commission review, and can be filed at any time. We will allow operators to appeal to the Commission when information requests from LFAs are deemed too burdensome and the LFA refuses to drop or modify the information request in response to the operator's challenge. As stated in the Interim Order, an LFA may request that an operator seeking certification identify in writing all of its affiliates providing cable service, the total cable subscriber base of itself and each affiliate, and the aggregate gross revenues of all its cable and non-cable affiliates.''' 82. With respect to small operators with only one tier of service subject to regulation as of December 31. 1994, we will adhere to our tentative conclusion that such operators are deregulated on all tiers of service if they otherwise qualify for small operator treatment. A system that now offers more than one tier of service but had only one tier subject to regulation on December 31. 1994, would now be deregulated on its BST as well as its CPST(s) if it meets the relevant numerical thresholds and limits of the statue. The statute states that its deregulatory provisions apply to small operators with respect to "a basic service tier that was the only tier subject to regulation as of December 31, 1994."23." Commenters agree with the Commission's tentative conclusion in this regard.' g '' Operators claimineligibility for ='-`NCTA Comments at 41. ='-''SCBA Comments at 28. '-"Fleischman Comments at 25. "NCTA Comments at 41; SCBA Comments at 28. ='=Interim Order, 11 FCC Rcd at 594849. =''47 U.S.C. § 543(m). "State of New York Comments at 28;National Telephone Cooperative Ass'n("NTCA")Comments at 4;NCTA Comments at 39. 37 Federal Communications Commission FCC 99 deregulator- treatment based on this aspect of the small operator provision ma% assert such eli;_ibilit\ consistent with the procedures established in this Order. 4. Transition From Small Operator Treatment 83. In the Notice,we requested comment regarding the implementation of a transition process for operators that lose eligibility for small operator treatment and become subject to red=ulation. We tentatively concluded that an instantaneous shift from deregulation to full regulation could prove disrupti\e to consumers and operators. We also noted that the potential imposition of regulation simple because subscribers have been added to the system could discourage operators from providing_ the qualit\ of service that expands the operator's customer base.=35 84. Cable operators advocate a transition rule similar to the rule applied in the Small Svstem Order.231, Under the Small Svstem Order,a small system(no more than 15.000 subscribers)affiliated with a small cable company (no more than 400,000 subscribers) may set rates in accordance with the small system cost-of-service rules. The transition rule has two components. First, a small system that establishes its eligibility for the small system cost-of-service rules retains that even if the parent cable company subsequently exceeds the 400,000 subscriber threshold, or the small system is acquired by a separate cable company that exceeds that threshold.'-" Second, when the system itself exceeds the 15,000 subscriber limit, it can continue to charge the last maximum rate it was able to justiA, while it still qualified under the small system rules, although subsequent rate increases must be justified under our standard benchmark or cost-of-service rules applicable to cable operators generally. 85. NCTA contends that application of the latter approach is consistent with the goal of increasing the value of smaller cable systems in the eyes of potential investors.'ie In cases where a small operator exceeds the 50,000 subscriber ceiling in the franchise area. NCTA advocates maintenance of rates established while the operator was deregulated but allowing subsequent rate increases under applicable rate regulations.=39 Other operators support a "snapshot"approach under which operators qualifying as "small operators" on the date of enactment of the 1996 Act can maintain their deregulated status regardless of events subsequent to that date.2" With rc.pect to the $250 millit—, revenue threshold, for example, cable operators request a rule that would preserve an operator's deregulated status even if entities affiliated with the operator later increase their revenues to the point of exceeding the$250 million threshold. They argue 2"Notice, 11 FCC Rcd at 5969. See also SCBA Comments at 10-11. 2"NCTA Comments at 43; Cole Raywid Comments at 16 "Small Svstem Order, 10 FCC Rcd at 7413-14. 2"NCTA Comments at 43. 2391d. "Fleischman Comments at 29; Time Warner Comments at -14. 38 Federal Communications Commission FCC 99 that the threat of losing regulatory relief based on expanded affiliate revenues would discourage ins estors from affiliating with small operators.'" 86. CATA advocates an extended transition period of two years to ensure the operator's financial stability."' On the other hand. the City of Fairfield. California ("Fairfield") ark=ties that the statute mandates regulation when an operator loses small operator eligibility.''' According to Fairfield. subscribers should not lose the benefits of regulation during a transition period. It argues that rate refund liability should extend back to the date that small operator eligibility was lost. Moreo\er. Fairtield contends that operators have increased their subscriber totals under regulation and will continue to have incentives to do so when small operator status is terminated.'" 87. As recognized in the Notice, the language of the 1996 Act requires regulation to commence once an operator no longer qualifies for small operator treatment under the governing statute's subscriber or revenue criteria.2" Before the 1996 amendments, the Communications Act did not give us the discretion "totally to exempt small systems,even those very small systems with under 400 subscribers, from rate regulation . . . .',24' The 1996 Act now mandates such an exemption for small cable operators in franchise areas where they serve fewer than 50,000 subscribers but, with respect to operators that do not meet these criteria, gives us no more discretion than we had before. When a system no longer meets the small cable operator criteria for deregulation. the statute imposes rate regulation.='' 88. At the same time, we recognize that a sudden transition to regulation upon the loss of small operator treatment could prove disruptive to consumers and operators. Accordingly, we will implement a transition approach that is conceptually similar to the approach used pursuant to the Small System Order but cognizant of the statutory obligations to protect consumers under Section 623. 89. We will allow small operators that lose eligibility for small operator treatment to maintain the rates that prevailed prior to the loss of eligibility. After a cable operator loses eligibility under the small operator provisions of the statute, subsequent rate increases will be subject to generally applicable '-"Fleischman Reply Comments at 14: Time Warner Reply Comments at 57; Cole Raywid Reply Comments at 7; NCTA Reply Comments at 25; US WEST Reply Comments at 5. 212CATA Comments at 7. "'City of Fairfield, CA ("Fairfield") Comments at 2-3. See also Los Angeles, League of Cities. and NATOA Reply Comments at 14. '"Fairfield Comments at 3. 211nterim Order, 11 FCC Rcd at 5969. 24"Rate Order, 8 FCC Rcd at 5922 (footnote omitted). 247 The transition rules established under our Small System Order, which temporarily maintain rate relief for systems that lose their technical eligibility for small system relief. are not a good analogy because those rules simply provide for transition from one form of rate regulation to another. Systems covered by those rules are always subject to some form of regulation, as required by the statute. 39 T Federal Communications Commission FCC 99-5- regulations governing increases.'-"' BST rates that were subject to small cable treatment %%III not be subject to full benchmark review. Our objectives are to minimize disruption to newly regulated operators and to assure operators that successful subscriber growth will not subject them to burdensome regulation. We do not want our regulations, however, to act as an incentive for an operator to raise rates dramatically as a means of protecting those rates from regulatory review, when it becomes apparent that the operator is about to lose its deregulatory status. In order to carry its rates over into regulation. an operator must demonstrate that it has had such rates in effect three months prior to the loss of small operator eligibility. Although some reasonable variation in rates over the preceding three-month period %ould not disqualitj an operator from transition treatment, a substantial spike in rates during the three-month period would indicate that rates were increased primarily to ensure that higher rates cam over into the regulated environment. V. DEFINITION OF "AFFILIATE" IN THE CONTEXT OF CABLE-TELCO BUY-OUTS 90. Section 302 of the 1996 Act added Section 652 to the Communications Act. Section 652 provides in relevant part: (a) Acquisitions By Carriers. No local exchange carrier or any affiliate of such carrier owned by, operated by, controlled by, or under common control with such carrier may purchase or otherwise acquire directly or indirectly more than a 10 percent financial interest, or any management interest, in any cable operator providing cable service within the local exchange carrier's telephone service area. (b) Acquisitions By Cable Operators. No cable operator or affiliate of a cable operator that is owned by,operated by,controlled by,or under common ownership with such cable operator may purchase or otherwise acquire, directly or indirectly, more than a 10 percent financial interest, or any management interest, in any local exchange carrier providing telephone exchange service within such cable operator's franchise area.2" 91. In the Interim Order, we implemented Section 652 by adopting its terms into our rules. In the Notice, we solicited comment regarding the definition of "affiliate" as that term is used in the context of the cable-telco buy-out provision.2" Subsequent to the Notice, we released the Cable Attribution Notice initiating a broad review of the attribution/affiliation issue as it pertains to cable.2' As we are doing with the LEC affiliate definition raised in the effective competition context in this "See Thirteenth Order on Reconsideration, I I FCC Rcd at 451 (operators not previously subject to CPST rate regulation will not face Commission review of entire rate structure if a complaint is filed). 24947 U.S.C. § 572. 2"Notice, 11 FCC Rcd at 5970. The Notice also solicited comment regarding the definition of affiliate in the context of open video systems. That issue was addressed in Implementation of Sectinn 302 of the Telecommunications Act of 1996: Open Video Svstems. Third Report and Order and Second Order on Reconsideration, 11 FCC Rcd 20227, 20230-37 (1996), and may be revisited in Cable Attribution Notice, 13 FCC Rcd at 12998-99 para. 15 & n.52. 2"Cable Attribution Notice, 13 FCC Rcd at 12998-99 para. 15 & n.52. 40 Federal Communications Commission FCC 99_5- proceeding, we are referring the definition of"affiliate" in the context of buN-outs to the C'ahle•Attribution Notice proceeding. Relevant comments submitted in this proceeding will be considered in CS Docket 98- 82. VI. UNIFORM RATE REQUIREMENT A. Background 92. Section 623(d) of the Communications Act requires that: "A cable operator shall have a rate structure, for the provision of cable service,that is uniform throughout the geographic area in which cable service is provided over its cable system."-" The 1996 Act clarifies that the uniform rate requirement does not apply where the cable operator is subject to effective competition and does not apple to programming offered on a per channel or per program basis. The 1996 Act also exempts bulk discounts to multiple dwelling units("MDUs") from the uniform rate requirement, and prohibits a cable operator from charging predatory prices to an MDU. The amendment provides: This subsection does not apply to (1) a cable operator with respect to the provision of cable service over its cable system in any geographic area in which the video ` programming services offered by the operator in that area are subject to effective `. competition.or(2)any video programming offered on a per channel or per program basis. Bulk discounts to multiple dwelling units shall not be subject to this subsection, except that a cable operator of a cable system that is not subject to effective competition may not charge predatory prices to a multiple dwelling unit. Upon a prima facie showing by a complainant that there are reasonable grounds to believe that the discounted price is predatory, the cable system shall have the burden of showing that its discounted price is not predatory.-S' 93. The Interim Order amended Section 76.984 of our rules to conform with the new statutory language.2S4 The Notice sought comment on several aspects of this amendment. We tentatively concluded that the bulk rate exception does not permit a cable operator to offer discounted rtes on an individual basis to subscribers simply because they are residents of an MDU, but rather requires a bulk discount agreement negotiated by the property owner or manager on behalf of all of the tenants.2S5 We sought comment as to whether the bulk discount exception applies where MDU residents are billed individually, or only where the discount is deducted from a bulk payment paid to the cable operator by the property 25=47 U.S.C. § 543(d), see 47 C.F.R. § 76.984. "'1996 Act, § 301(bx2), 110 Stat. 115. 2541nterinr Order, 11 FCC Rcd at 5951. _"Notice, 11 FCC Rcd at 5970-5971. 41 t r Federal Communications Commission FCC 99-5- owner or manager on behalf of all its residents.2" We also sought comment on the meaning of the term "multiple dwelling units."-" 94. We proposed that allegations of predatory pricing be made and reviewed under principles of federal antitrust law as interpreted and applied by the federal courts.=`$ We requested commenters to address what standards should be applied to determine whether a complainant has made out a prima facie case "that there are reasonable grounds to believe that the discounted price is predator%. . . . . Because complaints in this connection could involve some measure of discovery. we proposed adopting_ the procedures set forth in our rules for adjudication of program access complaints.2 1 We sought comment as to whether the program access procedures or some modified version of those procedures, should apply on a permanent basis."' B. Discussion 1. Bulk Discounts 95. Congress established the uniform rate requirement in the 1992 Cable Act "to prevent cable operators from having different rate structures in different parts of one cable franchise . . . [and] to prevent cable operators from dropping the rates in one portion of a franchise area to undercut a competitor temporarily." In implementing the 1992 Cable Act. the Commission concluded that, consistent with the requirement of a uniform rate structure, a cable operator could establish some differences in rates between separate categories of subscribers. We found, for example. that nonpredatory bulk discounts to multiple dwelling units ("MDUs") were permissible if offered on a uniform basis.'`" We explained: "[W]e . . . are mindful that all multichannel distributors can realize significant efficiencies and cost savings by service [to] multiple dwelling units and other high-occupancy buildings, and we do not wish to foreclose the prospect that those savings might be passed on to consumers in those dwellings."-`' Later, we clarified that cable operators could offer different rates to MDUs of different sizes and could set MDU rates based on the duration of the access agreement with the property owner or manager, provided that the operator could demonstrate that its cost of serving MDUs varied with the size of the building and the duration of 256 Id. "'!d. "!d "!d. at 5971-72, citing Communications Act § 632(d). 47 U.S.C. § 543(d). '-"'See 47 C.F.R. § 76.1003. 261Notice. 1 I FCC Rcd at 5972. 161S. Rep. No. 92, 102d Cong., 1st Sess. 76 (1991). 2"Rate Order, 8 FCC Rcd at 5898. 264 Id. 42 i r Federal Communications Commission FCC 99-5- the agreement.:` However, we found that bulk arrangements on a variable basis between like MDL s x%ere specifically prohibited by the 1992 Cable Act. 96. The 1996 Act retains the uniform rate requirement for cable operators not subject to effective competition but authorizes affected cable operators to deviate from their uniform rate structures in response to competition at MDUs.266 The House Commerce Committee proposed the statuton chaa:e because the Commission's former regulations did "not serve consumers well by effectively prohibiting cable operators from offering lower prices in an MDU even where there is another distributor offering_ the same video programming in that MDU ."'6 The New Jersey Ratepayer Advocate's argument for uniform discounts much like the uniformity required by the Commission's former rules2" does not reflect the change effected by the 1996 Act. As the State of Nev York points out, the bulk rate exception only has meaning if it provides regulated cable operators with an opportunity to respond to competition at MDUs.2"' Allowing cable operators to respond to competition in individual MDUs gives consumers the benefit of lower prices from incumbent cable operators. 97. The record in this proceeding reflects disagreement as to what qualifies as a bulk discount. SMATV and wireless cable operators argue that"bulk discount" is widely understood to mean a negotiated agreement with an MDU owner or manager that reflects the efficiencies of rendering one invoice and n achieving 100% penetration of the MDU.270 These commenters contend that a true "bulk discount"exists t only if the property owner or manager pays the discounted rate directly to the MVPD, and does not include an arrangement where subscribers are billed individually.'-" An individually paid "bulk discount" is an oxvmoron, according to ICTA."= 98. Cablevision argues that the discount should not have to be negotiated with the property owner because such negotiations enhance the power of the landlord over the residents and makes the 265 Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation. Buv-Through Prohibition,Third Order on Reconsideration.9 FCC Rcd 4316,4326(1994)("Third Order on Reconsideration"). =661996 Act § 301(b)(2), amending 47 U.S.C. $ 543(d). notice. 1 1 FCC Rcd at 5971. 267H.R. Rep. No. 204(1), 104th Cong. I st Sess. 109 (1905) (emphasis in original). 268 New Jersey Ratepayer Advocate Comments at 17 "'According to the State of New York, the bulk rate exception only has meaning if it provides regulated operators with an opportunity to respond to competition at 'NDUs. State of New York Comments at 31. See Cablevision Comments at 15. 270ICTA Comments at 10; OpTel Comments at 6. 27jWCA Comments at 3; OpTel Comments at 6; Allied Associated Partners, LP and Geld Information Systems Comments at 3. 2721d. 43 Federal Communications Commission FCC 99 landlord the gatekeeper of price competition-='' Comcast argues that some operators ma\ not need agreements to gain access to buildings and, therefore, would have no need to negotiate with the building_*s owner or management.'-" Some cable operators explain that their MDU service agreements do not ai\%a\s guarantee 100% penetration.=" Fleischman argues that a cable operator should not be discouraued from offering bulk rates to MDU residents simply because the residents have the option not to subscribe.=-" 99. Cable operators explain that they have a variety of billing arrangements with owners and residents of MDUs. In some instances. the operator provides services to all the residents in the hnildin;_ and renders a single bill to the property owner or manager.2-7 Other operators bill the owner or manager at a bulk rate for basic service to all -residents and bill subscribers individually for premium or other optional services they order.27' According to Cole Raywid, there has been an increasing trend toward direct billing to the individual MDU resident to promote maximum flexibility and consumer choice.=79 Cablevision states that some MDU managers and owners negotiating bulk discounts prefer to have the MVPD provider bill residents individually and may make the billing arrangement a consideration in deciding to accept a provider's services.2" Some cable operators assert that the method of billing should not be a reason for disallowing a discounted rate that would otherwise be permissible.2" Cox suggeststhat as long as MDU residents are able to obtain service at a reduced rate. a bulk discount exists.='= Cox argues that there is no practical or economic difference between serving an MDU by offering services under a rate negotiated with the owner or manager of the development or by simply offering service to all residents of the MDU.2'' Cox also argues that concern regarding predatory pricing does not warrant restrictions on bulk discounts because the statute allows aggrieved parties to file a predatory pricing =73Cablevision Comments at 18. "Comcast Comments at 13. 27'Cox Comments at 10-I1; Time Warner Comments at 35. Sec also Comcast Comments at 11: NOTA Comments at 45. "Fleischman Comments at 30-31. =77Cole Raywid Comments at 17. 27`/d. at 17-18; see Fleischman Comments at 31 n.63. 2"Cole Raywid Comments at 18. "Cablevision Comments at 16. According to Cablevision,services from a competitor in its New York and New Jersey franchise areas have been accepted in MDUs following the competitor's guarantee that it would bill residents individually and solicit newly arrived residents. /d. at 16-17. "GTE Comments at 5, Cole Raywid Comments at 17; Time Warner Comments at 35-36. "=Cox Comments at 10-11; see also Comcast Comments at 11. 2"Cox Comments at 10-11. 44 1 1 Federal Communications Commission FCC 99 complaint with the Commission.'" The Massachusetts Cable Commission opposes any restrictions that would prevent cable operators from offering discounts to individual MDU residents.=$` According_ to the Massachusetts Cable Commission,restricting the cable operator's ability to offer discounts liamstrina's the operator's ability to compete with other providers and denies consumers who reside in the building_ the resulting discount.=" U.S. Wireless and Wedgewood, on the other hand. advocate requiring: that bulk discounts be offered only when property owners negotiate the rate and pay the operator directiN. in order to prevent discrimination among tenants.217 The Wireless Cable Association is also concerned about non- uniform discounts and advocates limiting bulk discounts to true "bulk" sales to MDUs.2" 100. For the purpose of the 1996 Act, a bulk discount is a volume discount. available to all residents of the MDU. Although we tentatively concluded in the Notice that a bulk discount must be negotiated with the MDU owner or manager before the exemption from the uniform rate requirement can apply, we share Cablevision's concern that mandating negotiations would make the MDU owner or manager the gatekeeper of competition, potentially regulating the operator's discounts and affecting the operator's ability to respond to competition. We also are concerned that a requirement of negotiated discounts applicable only to cable operators may limit the cable operator's ability to respond to competition. We conclude that Congress' objective, that cable operators have the flexibility to offer discounts to MDUs, is satisfied if the discounted rate is offered to all residents of the MDU. Negotiation about the discounted rate with the MDU owner or manager is not required.'" 101. In the Notice,we tentatively concluded that the bulk discount must be negotiated on behalf of all the residents in the MDU. Upon further consideration, we conclude that bulk discounts should not be premised on a cable operator's exclusive access to all residents or its level of penetration of the MDU. While bulk discounts must be offered to all residents in order to avoid rate discrimination among the cable operator's subscribers within the MDU, we are also mindful that Congress enacted the bulk discount exemption in anticipation of price competition within MDUs. We also see no statutory or policy reason ;- for disallowing variances in a bulk discount to reflect introductory offers or promotions. and we see no reason why a bulk discount cannot be adjusted to reflect increases in penetration levels as long as changes based on penetration levels are uniformly applied within the MDU. •"Cox Comments at 11. see also Comcast Comments at 11. •"Massachusetts Cable Commission Comments at 9-10. 2R1iId.. at 10. =•'U.S. Wireless Cable, Inc. and Wedgewood Communications, Inc. ("U.S. Wireless and Wedgewood") Reply Comments at 2. See US WEST Comments at 9 (regardless of billing arrangement, all tenants should receive the same negotiated rate). ICTA argues that negotiating with the property owner is the industry practice and should not be changed. ICTA Comments at 9. •••Wireless Cable Ass'n International, Inc. ("WCA") Comments at 3. 2"9We do not mean to suggest that an owner or manager's control over access to the building is in any way altered by this rule. 45 J Federal Communications Commission FCC 99-5- 102. We also see no statutory or police reason for conditioning a bulk discount cin an\ particular billing arrangement with the building owner or manager. Although as OpTel and ICTA arue.= bulk discounts have been justified in the past by the efficiencies of rendering one invoice and achievI112 100 percent penetration. the bulk rate exemption was codified to permit competitive responses as well as to reflect efficiencies in serving subscribers concentrated in an MDU.'" Most commenters addressing this issue have argued that the billing arrangement should not determine whether a bulk discount can be offered.2'2 To the extent that cable operators bill subscribers separately for optional and premium services. adding services covered by the bulk discount to the bill should not significantly affect the cable operator's costs. To the extent that billing arrangements affect access to buildings. as Cablevision argues. or have other competitive im act.'-'' we do not wish to create any competitive advantage or disadvantage p p p e or restrict consumer choice in services or service providers by imposing rules regarding the billing arrangements used by cable operators. 2. Definition of MDU 103. In the Notice, we sought comment on the meaning of MDU for the purpose of the bulk rate exception and specifically on whether the definition should be revised to correspond to the expanded "private cable" exemption to the definition of a cable system."' In response to the Notice a number of parties urged a narrow definition of the exemption from the uniform rate requirement in the 1996 Act. GTE, for example, stated that Congress granted no authority for the Commission to expand the established definition of an MDU. To the contrary, Congress left the existing definition intact while it explicitly amended the definition of a cable system because it desired to effect a change."'" ICTA argues that altering the "widely understood definition [of MDU] would defy congressional intent by changing the ground rules absent any congressional directive to do so." OpTel argues that, because Congress continued to use the MDU limitation when describing those bulk discounts that are exempt from the uniform rate requirement, it intended to retain the limitation that it deleted from the definition of a cable system.'-" 2110pTel Comments at 6 n.13; ICTA Comments at 9-10. '"Cablevision argues that an operator's ability to offer bulk discounts "stems from its ability to deliver service to a concentrated locus of subscribers." Cablevision Comments at 18 n.40. -`City of New York Comments at 19-20: New Jersey Ratepayer Advocate Comments at 17; State of New York Comments at 31.Massachusetts Cable Commission Comments at 9;NCTA Comments at 45;Fleischman Comments at 31; Cablevision Comments at 16; Comcast Comments at 12; Time Warner Comments at 36. 'For example, cable service may be bundled with the rent in some buildings. '"`Notice, 11 FCC Rcd at 5971. "'GTE Comments at 6. '"''ICTA Comments at 13; see OpTel Comments at 7. 297 OpTel Comments at 7, accord WCA Reply Comments at 4-5. 46 Federal Communications Commission FCC 99-:- 104. Other parties urge that the Commission use a revised definition of MDI more closer tracking the 1996 Act's "private cable" exemption. Cole RayWid argues that this would "harmonize t\\o provisions of the 1996 Act that further the same goal of replacing regulation with market competition. This revision, according to Cole Raywid, will unleash "fierce" competition at all properties that no\% can be served without a cable franchise.y" For this reason, it and other cable interests support a corresponding, expansion in the definition of MDU that will allow cable operators to respond to competition b\ deviating from their uniform rate structure at such properties.'°' Other cable parties point to the expanded understanding of MDU in the Rate Order implementing the uniform rate requirement in the 1992 Cable Act.3U1 Comcast,TCI, and Time Warner urge that the Rate Order interpretation is entirely consistent\\ith the 1996 Act's expansion of the private cable exemption.'°' Cox distinguishes service to the private and quasi-private developments listed in the Rate Order from service to single family homes. and argues that the 1996 Act simply expands the class to include all subscribers located wholly on private propem, without regard to the nature or common ownership of the property served.30' 105. We believe that following the 1993 Rate Order's coverage is consistent with the 1996 Act exemptions from the uniform rate requirement. In the 1993 Rate Order, the Commission considered exemptions from the uniform rate requirement based on reasonable categories of customers and cable service rather than the definition of a cable system."' The Rate Order took a more expansive view of MDUs than we had taken in the context of defining cable systems,and concluded that "bulk discounts to multiple dwelling units, including apartment buildings, hotels, condominium associations, hospitals. universities, and trailer parks. could form a valid basis for distinctions among subscribers" and would be consistent with the uniform rate requirement.30' Although the 1996 Act removed the Commission's requirement that bulk discounts be offered pursuant to a uniform rate structure, the Act does not broaden the class to which bulk discounts can be offered beyond multiple dwelling units and does not require a different interpretation of "MDU" from that in the Commission's Rate Order. We, therefore, conclude that the exemption from the uniform rate requirement should apply in situations such as those addressed in the Rate Order. We need not decide, and expressly do not decide, whether and how the definition of MDU corresponds to the private cable exemption under the 1996 Act. Cole Raywid Comments at 18. 2"Id. at 19. 100Id. Accord Fleischman Comments at 31-32; TCI Comments at 24; Time Warner Comments at 37, Reply Comments at 48-49. 30'Comcast Comments at 12-13 citing Rate Order, 8 FCC Rcd at 5897-99, accord Cox Comments at 11-12. "'-Comcast Comments at 12-13; TCI Comments at 24. 10tCox Comments at 11-12. 101Rate Order, 8 FCC Rcd at 5897-98. 3051d at 5897. 47 Federal Communications Commission FCC 99-5- 3. Predatory Pricing 106. Congress provided for bulk discounts to MDUs in the context of its broader effort in the 1996 Act to create an environment that offered consumers the benefits of competition. including better quality service and lower prices. At the same time, Congress prohibited cable operators offering bulk discounts from charging predatory prices to an MDU. Congress further provided that, if a complainant makes a prima facie showing that there are reasonable grounds to believe that the discounted price is predator-, the cable operator has the burden of showing that the discounted price is not predator. We believe that, by addressing predatory pricing in the context of the bulk discount exception to the uniform pricing requirement, Congress intended to make available a timely, cost effective revie\\ of predatory pricing complaints separate from the antitrust review available under federal or state antitrust laws or other state consumer laws." We conclude, therefore, that our consideration of predatory pricing complaints should be guided by principles of federal antitrust law.'O' as proposed in our Notice, but should not replicate or replace antitrust litigation. 107. We disagree with those commenters who argue that Congress intended to provide video services competitors with a higher degree of protection than is provided by the federal antitrust laws."' Nothing in the statutory language or the legislative history suggests that Congress wanted this Commission to limit price reductions arbitrarily if the discounts cable operators offered were otherwise not predatory. To paraphrase the Supreme Court, it would be ironic indeed if the standards for predatory pricing liability were so low that predatory pricing complaints themselves became a tool for keeping prices high.30' 108. In considering how to address predatory pricing for the purpose of Section 623(d), we have looked for guidance to predatory pricing cases in other areas of the law, particularly judicial decisions relating to the Sherman and Robinson-Patman Acts. Under both the Sherman and Robinson- Patman Acts, the essence of a predatory pricing claim is a business rival's pricing of its products in an unfair manner with an object to eliminate or retard competition and thereby gain and exercise control over prices in the relevant market."' The test for predaton' pricing, therefore, is: (1) whether the prices complained of are below an appropriate measure of the alleged predator's costs; and (2) whether the alleged predator had at least a reasonable prospect of recouping its investment in below-cost l,_ices."' A 30G5,ee 1996 Act § 601(b), 110 Stat. 143 (Act does not modify, impair, or supersede the antitrust laws). "',See NCTA Comments at 47; Fleischman Comments at 32: Cole Raywid Comments at 19-20: TO Comments at 18: Time Warner Comments at 38: Comcast Repl} Comments at 10. see U.S. Wireless Reply Comments at 3 (commenter supports using federal antitrust standards "so Ion:_ as the cost analysis accounts for a cable operator's a actual costs"). 10'ICTA Reply Comments at 13-16; OpTel Comments at 8-1). U.S. Wireless and Wedgewood Comments at 6-7; see New Jersey Ratepayer Advocate Comments at 17(advocating_ lenient standards to determine when a complainant has made a prima facie case). 109Brooke Group, Ltd. v. Brown & Williamson Tobacco Corp. 509 U.S. 209, 226-27 ("Brooke"), reh. denied, 509 U.S. 940 (1993). "Old at 222. "'!d. at 222, 224. 48 Federal Communications Commission FCC 99-5- complainant must make a prima facie case on both elements to substantiate its allegations.� = commenters point out, there are differences among the federal circuit courts about what is the appropriate measure of cost in antitrust litigation. For the purpose of considering whether a bulk discount to an NIDU is predatory, we will consider whether a cable operator's price to an MDU recovers at least the incremental costs of serving that MDU, including any new costs from constructing or upgrading: its physical facilities in order to offer the bulk service agreed to with the buildings owner or manager. and whether the cable operator has a reasonable prospect of recouping its investment in below cost prices in the MDU. 109. Many commenters expressed concern about the burden of filing and defending_complaints. particularly if the adjudicatory process replicates antitrust litigation. To avoid this burden, several commenters support using some objective threshold or "quick-look" procedure for determining whether rate reductions are either presumptively permissible or whether the complainant has made a prima facie case, at least with respect to the pricing factor."3 Commenters were not in agreement as to what the threshold should be, however. Cable commenters support a threshold based on the industry cash flow margin31" as reported in the Commission's annual competition reports or specified in the Commission's cost of service rules.''S ICTA, on the other hand, argues that if discounted prices vary among like MDUs by ten percent or greater, the price is predatory.31' OpTel argues that discounts greater than 25 percent off rates to like MDUs should be deemed predatory.'" U.S. Wireless argues that a 25% discount is far too great. 110. We are not persuaded that a ready mechanism exists for a quick look at a cable operator's bulk discount. Costs involved in serving a particular MDU are likely to vary considerably, depending on the location involved or the specifics of the MDU. We recognize. as some parties suggest, that the cash flow margin is likely to be a reasonable surrogate for an operator's fixed costs, so that any price reduction within the cash flow margin could be assumed to recover the operator's variable or incremental costs. Thus, although price reductions falling within the cash flow margin might be significant, they are not likely to be predatory. However, the data readily available in the Commission's annual competition reports for the cable industry reflect a national average and are not specific to individual markets or ''=See PanAmSat Corp. v. COMSAT Corp. -- COMSAT World Ststems, 12 FCC Rcd 6952. 6957-59 (1997) ("PanAmSar") (the offense of predatory pricing has a pricing element and a recoupment element). 11."'Fleischman Comments at 33-34; Cole Raywid Comments at 20; Time Warner Comments at 38, OpTel Comments at 9; ICTA Comments at 17; U.S. Wireless and Wedgewood Reply Comments at 4. "'The cash flow margin is the ratio of cash flow to revenue. it is a commonly used financial analysis tool for determining an MSG's operating efficiency, profitability, and liquidity. See Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming, Fourth Annual Report, 13 FCC Rcd 1034, 1054 para. 25 & n.65 (1998) ("Fourth Annual Competition Report"). ' "`Time Warner Comments at 40(argues that a prima facie case might be made where the cable operator's bulk discount to an MDU, compared to the retail residential rate, is greater than the industry cash flow margin); Cole Raywid Comments at 20. ""ICTA Comments at 17. '"OpTel Comments at 9. 49 Federal Communications Commission FCC 99_:- MDUs."" For this reason, the industn• cash flow margin provides little basis for drawing conclusion about a particular discount. Recommendations that the Commission set the threshold at some percentage variation from rates of like MDUs neither include economic support for the percentages advocated nor take into account the fact that the 1996 Act ended any requirement of uniform rates for like 1110DUs. Accordingly, we are not adopting a quick look mechanism for determining whether a cable operator's discount is permissible. 111. A prima facie showing of predatory pricing under Section 623(d) has two essential elements. First, a complainant bears the burden of showing reasonable grounds to believe that the cable operator's discounted price does not recover the cable operator's incremental costs:namely, all non-fixed costs the operator incurs that are directly attributable to serving the particular MDU, but also including any new costs from constructing or upgrading its physical facilities in order to offer the bulk service for the MDU at issue. Second, a complainant must meet the recoupment requirement. It must present a plausible theory showing that the cable operator has a reasonable prospect of ultimately recouping its investment in below-cost prices, including the time value of the money invested in below-cost pricing."Q Because Section 623(d) of the Communications Act addresses "predatory prices to a multiple dwelling unit."a complainant's showing should address recoupment of below-cost prices from future price increases in the same MDU. A complainant may also address additional profits from other MDUs where entry may have been discouraged by the same predatory pricing strategy. 112. Once a complainant has made a prima facie showing, the cable operator has the burden of showing that its discounted price is not predatory.''-' The cable operator can meet its burden under the cost requirement by showing its price recovers the incremental costs of serving the particular MDU. including the cost of any new or upgraded facilities installed to provide the discounted service. The amount of any royalty or revenue sharing benefit that the MDU owner or manager receives from the cable operator should be taken into consideration, since this amount effectively reduces the rate paid.'=' A cable operator can meet its burden under the recoupment requirement by showing that there are no significant barriers to reentry or the appearance of new entrants andthat it cannot raise prices sufficiently to recoup its investment in below-cost prices without creating opportunities for a competitor. The nature and duration of the cable operator's bulk rate agreement with the MDU would be relevant to this showing. 3'See Fourth Annual Competition Report, 13 FCC Rcd 1034, 1054 para. 25 & n.65, 1179 Table B-6. The data used in determining industry revenues and cash flow were from public filings with the Securities and Exchange Commission,press releases,and discussions with company personnel for cable firms with a subscribership of 500.000 or more. Id. at 1180. The 1996 industry cash flow margin reported in the Fourth Annual Competition Report was 45% after rounding to the nearest whole number. !d. at 1054, 1179 Table B-6. 1996 cash flow margins for the individual companies in the survey are shown in Id. at 1185. Table 713. In Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming, Fifth Annual Report, 13 FCC Rcd 24284 (1998), the Commission reported industry-wide figures in Table B-6 but did not determine firm-specific cash flow information. The cash flow figures used in the Fifth Annual Report differed somewhat from the figures used previously. The revised cash flow margin for 1996 in Table B-6 is 43%rounded to the nearest whole number. The cash flow margin for 1997 is 44%. "°Brooke, 509 U.S. at 225. 12047 U.S.C. § 543(d). '='See ICTA Comments at 17. 50 Federal Communications Commission FCC 49 The cable operator can also show that below-cost prices are justified by some economic efficienc\. such as promotional pricing. For example, low prices accompanying new product introductions and temporarn price promotions to induce future sales have not been viewed as predator)•, even though they might have been below an appropriate measure of cost.'== In addition, the cable operator can shoe that differences in prices result from conduct undertaken in good faith to meet an equally low price of a competitor."' 1 13. Time Warner has asked that MDU rates based on regulations promulgated under the 1992 Cable Act not be made subject to new provisions.'=' We agree that bulk discounts permissible under the standards in effect when they were implemented should not become impermissible because tite standards changed subsequently.'''' However, any contractual changes or renewals after the 1996 Act must conform to Section 632(d) as amended by the 1996 Act. 4. Other Issues 114. Because predatory pricing complaints are likely to involve some measure of discovery. the Notice asked for comment on adopting the procedures of the Commission's program access rules in Section 76.1003.'26 Commenters generally agree with this proposal.-2' Some commenters are also concerned about protections against disclosure of proprietary information,` a matter also addressed in our T. program access rules.329 Subsequent to our proposal, we have streamlined our procedural rules b) specifying general procedures for discovery in Section 76.7(f) of our rules and by specifying general 322PanAmSai, 12 FCC Rcd at 6962, citing Vollrath Co. ►. Samni Corp., 1990-91 Trade Cases (CCH)¶ 68955 at 63133 (C.D. Cal. 1989). '='See Brooke, 509 U.S. at 220, citing Standard Oil Co. v. FTC, 340, U.S. 231. 250 (1951): Great Atlantic d Pacific Tea Co.. v. FTC. 440 U.S. 69, 80 & n.13 (1979).Automatic Canteen Co. q America v. FTC, 346 U.S. 61, 63, 74 (1953). In its Comments at 19-23. TCI advocated that a "meeting competition" defense be recognized. See State of New York Comments at 31 (bulk rate exception only has meaning if the operator can respond to competition). But see U.S. Wireless Reply Comments at 6(opposing a"meeting competition"defense); ICTA Reply Comments at 8-9(a"meeting competition"defense is inconsistent with Time Warner, 56 F.3d at 191-92). The court in Time Warne,however,held only that the Commission did not act arbitrarily or capriciously in denving a"meeting competition" defense when applying the language of the 1992 Cable Act. 56 F.3d at 191-92. 32'Time Warner Comments at 42. "'See generally Third Order on Reconsideration, 9 FCC Rcd at 4326 para. 22 (grandfathering bulk discounts in effect when Commission implemented uniform rate requirement of the 1992 Cable Act). '2"47 C.F.R. § 76.1003. 327See NCTA Comments at 48; Fleischman Comments at 35: Time Warner Comments at 42; WCA Comments at 8-10. '-`E.g., Fleischman Comments at 30-35; Time Warner Comments at 42-43. '3947 C.F.R. § 76.1003(h). - 51 Federal Communications Commission FCC 99-:- procedures governing the confidentiality of information in new Section 76.9 of our rules.''' Complaints about predatory pricing should be filed pursuant to the general filing procedures in Section 76.7 of our rules."' Discovery and confidential proprietary information shall be handled as the\- are under the Commission's Freedom of Information Act rules"= and Sections 76.7(f) and 76.9 of our rules.`"' 115. Section 76.7(f) of our rules provides that Commission staff, in its discretion. may order discovery limited to specific issues specified by the Commission. In addition. Commission staff has the discretion to direct parties to submit discovery proposals. together with a memorandum in support of the discovery requested. While NCTA has suggested that discovery should be available onl\ atter a complainant has met the prima facie showing threshold,'-' our rules give Commission staff the discretion to permit discovery both preceding and after a prima facie showing has been made, as long as a complaint establishes a sufficient factual basis to proceed. 116. Cablevision encourages the Commission to make clear that states and LFAs may not impose uniform rate requirements that are inconsistent with federal law.331 Citing the decision in Time Warner, Cablevision argues that allowing local authorities to adopt uniform rate requirements on unregulated services or in areas subject to effective competition would be not only inconsistent with the 1996 Act, but would also contravene the 1992 Act by imposing "a form of rate regulation" in circumstances where it is not authorized by federal law.331i We agree. States and LFAs may not adopt uniform rate requirements that conflict or are in any way incongruent with the statutory provisions or our rules. VII. TECHNICAL STANDARDS A. Background 117. Pursuant to Section 624(e)of the Communications Act,the Commission adopted technical standards that govern the picture quality performance of cable television systems.--' Prior to enactment of the 1996 Act, Section 624(e) provided, in part: A franchising authority may require as part of a franchise (including a modification, renewal, or transfer thereof) provisions for the enforcement of the standards prescribed 3101998 Biennial Regulatory Review, FCC 98-348 at para. 15. 37147 C.F.R. § 76.7. 33=47 C.F.R. §§ 0.457, 0.459. 33347 C.F.R. §§ 76.7(1), 76.9, as amended in 1998 Biennial Regulatory Review, Appendix A, § 76.7(f), § 76.9. 334NCTA Comments at 49. 31'Cablevision Comments at 19-20. 131 Id., citing Time Warner v. FCC, 56 F.3d at 191. "'See 47 C.F.R., Part 76, Subpart K. 52 Federal Communications Commission FCC 99-5- under this subsection. A franchising authority may apple to the Commission for a wain er to impose standards that are more stringent than the standards prescribed b\ the Commission under this subsection."` 118. Section 301(e) of the 1996 Act amended Section 624(e) by replacing this language with the following: No State or franchising authority may prohibit. condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology.j9 119: In the Interim Order, we eliminated language in Note Six to Section 76.605 of the Commission's rules that permitted an LFA to apply to the Commission for a waiver to impose more stringent cable technical standards than the standards prescribed by the Commission.3" We replaced this language with the new language from Section 301(e) of the 1996 Act."" 120. Current Commission rules dictate specific technical standards and provide for enforcement by LFAs.''' Upon request by an LFA, an operator must be prepared to demonstrate compliance with the Commission's technical standards.;" In addition, the rules provide that, in some instances, an operator may negotiate with its LFA for standards less stringent than otherwise prescribed by the Commission's rules.''° Section 76.607 of the Commission's rules requires an operator to establish a process for receiving signal quality complaints."" Subscriber complaints regarding compliance with the Commission's technical standards must be referred to the LFA and the operator before being referred to the Commission.'"' 121. In the Notice, we sought comment on the overall scope and meaning of Section 624(e) of the Communications Act, as amended by Section 301(e) of the 1996 Act. We inquired as to the effect of this provision on the rules cited above, and on the cable franchising, renewal and transfer processes. 381992 Cable Act § 16(a), 106 Stat. 1490. 391996 Act, § 301(e), I10 Stat. 116, 47 U.S.C. § 544(e) "'See also Committee on Science. Technologv and Ener n of rhe New Hampshire House of Representatives, I 1 FCC Rcd 10250(1996)("Committee on Science. Technologn and Enerzv"). In that item, the Cable Services Bureau concluded that state and local laws prohibiting the use of converter boxes were preempted by Section 301(e)of the 1996 Act. "'Note 6 to Section 47 C.F.R. 76.605 now reads: "No State or franchising authority may prohibit. condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology." "-47 C.F.R. § 76.601-76.630. "'47 C.F.R. § 76.601(a), (d) and (Note). "447 C.F.R. § 76.605 (Notes I and 2). ' 547 C.F.R. § 76.607. "`'/d. 53 Federal Communications Commission FCC 99-5- We noted that the 1996 Act did not amend the franchising or the renewal provisions of the Communications Act. Specifically, we observed that Section 626(b)(2) of the Communications .pct provides that, "[s]ubject to Section 624" an operator's proposal for franchise renewal "shall contain such material as the franchising authority may require, including proposals for upgrade of the cable system."" In addition. Section 626(cx 1)(B) provides for LFA consideration of the "quality of the operator's service. including signal quality" during the course of a renewal under Section 626." Section 621(a)(4)(C) provides. in part, that an LFA awarding a franchise "may require adequate assurance that the cable operator has the . . . technical . . . qualifications to provide cable service.049 B. Discussion 122. Commenters have generally focused on two interrelated aspects of amended Section 624(e) of the Communications Act. The first is whether that section precludes an LFA from enforcing the Commission's technical standards. The second is the effect of Section 624(e) on the ability of an LFA to establish franchise requirements for facilities and equipment. during initial franchising or renewal, and to enforce these requirements. Some commenters read Section 624(e) broadly (for example, that Section 624(e) prohibits all local regulation and enforcement in the areas of cable equipment, facilities, technical standards and transmission technologies), while others interpret the ban in Section 624(e) on local restrictions on "subscriber equipment" and "transmission technology" more narrowly (for example. the ban is meant to refer only to restrictions on converter boxes, remotes, and scrambling and trapping technologies). 123. Cable operators generally rely on the deletion of the permissive enforcement language. inserted by the 1992 Cable Act. as unequivocal proof that Congress intended to eliminate completely LFA enforcement of the Commission's technical standards. NCTA states the Commission must eliminate day- to-day LFA oversight and enforcement of technical standards. NCTA asserts that the elimination of enforcement language in Section 624(e) is confirmation of Congress' "unambiguous intent to preclude" local establishment and enforcement of technical standatds, and that "no other Congressional action was req uired."'S0 Similarly, TO states that Congress' deletion of the enforcement language, and its addition of language forbidding an LFA from restricting the use of ani subscriber equipme• - or transmission technology, "unequivocally prohibits" State and local authorities from enforcing technical standards.'" Time Warner asserts that Congress would not have deleted the enforcement language from Section 624(e) if it had wanted LFA's to continue enforcement of the Commission's technical standards." 34747 U.S.C. § 546(bx2). "47 U.S.C. § 546(c)(1 XB). 14947 U.S.C. § 541(a)(4)(C). 30NCTA Comments at 50-51. Accord Time Warner Comments at 49. ' 1TC1 Reply Comments at 2. "=Time Warner Comments at 49. 54 Federal Communications Commission FCC 99-5- 124. As several LFA commenters have noted. prior to the 1992 Cable Act's addition of the permissive enforcement language in Section 624(e), LFAs were the priman enforcers of cable operator technical standards, and the language added in the 1992 Cable Act did nothing to change that status." The Commission,according to these commenters, has long recognized the importance of. and relied upon. local enforcement in the area of technical standards.3" These commenters point out that Section 624(e). as amended. does not expressly prohibit a state or LFA from enforcing the national technical standards established by the Commission, rather it is silent with respect to this issue.'-" According_ to these commenters. because of the history of local enforcement in this area. coupled with established Commission technical standards which call for primary enforcement by local authorities.Congress would have included a prohibition on local enforcement in the language of the statute if had intended to end local enforcement.'"' 125. Denver states, "Simply. all Congress did in the 1996 Act is to keep certain technical standards development at the federal level." New York City emphasizes that the Conference Report is concerned with states and franchising authorities regulating in the areas of technical standards, customer equipment and transmission technology."' According to the New Jersey Board, the changes to Section 624(e) do not preclude LFA oversight of "a minimum level of technical quality relating to considerations such as standards for visual carrier to noise ratios, signal leakage, visual and aural signal levels to subscriber equipment or safety considerations such as bonding or grounding.".'" Denver states. "If Congress wished to take a stance directly against LFA involvement in the enforcement of technical standards. it would have, for example, proactively inserted the word "not" after the word "may"" in the deleted sentence.360 126. According to the legislative history of the amendment to Section 624(e): Subsection 6) [now section 301(e)] amends section 624(e) of the Communications Act by prohibiting States or franchising authorities from regulating in the areas of technical standards. customer equipment, and transmission technologies. The Committee intends by this subsection to avoid the affects of disjointed local regulation. The Committee finds '"See Denver Comments at 7-8;Michigan. Illinois,and Texas Communities Reply Comments at 7;Los Angeles, League of Cities, and NATOA Reply Comments at 15-16. 7eld "`!d. See also Kramer, Monroe.& Wyatt, LLC ("Kramer") Comments at 6-8. ""See e.g., Denver Comments at 14; New York City Comments at 20, New Jersey Boaro Comments at 7. "'Denver Comments at 14 (emphasis in original). ""New York City Comments at 20-21, citing Conference Report at 168, 170. "'New Jersey Board Comments at 7. "Denver Comments at 7 55 Federal Communications Commission FCC 99 that the patchwork of regulations that would result from a local ity-bv-local ity approach is particularly inappropriate in today's intenseiv dynamic technolo_ical environment."' 127. The legislative history clearly states that the amendment prohibits states or LFAs from regulating in the area of technical standards. We agree with those commenters asserting that Section 624(e) now precludes an LFA from enacting and enforcing technical standards that differ from those established by the Commission.362 Prior to the passage of the 1992 Cable Act. we stated. "uniformity of technical standards . . . is essential to prevent the inefficiency and confusion that threatened the cable industry during the period when local authorities . . . could set stricter standards than those promulgated by the Commission.ii' The 1996 Act echoes these concerns. 128. The Commission has long relied on LFAs to enforce technical standards.'`'' This was the case even before Congress added the permissive enforcement language to the Communications Act in 1992.3 5 In 1992, we stated that "we have in the past referred complaints concerning service quality to local authorities for resolution, and this practice resulted in the disposition of the vast majority of such complaints.,161 In addition, we stated that LFAs are "the proper initial locus of any complaint about the quality of technical service provided by a cable operator," and that they are "most familiar with the local system operation and plant, as well as any local factors which could impact on the resolution of a 361 H.R. Rep. No. 204(1), 104th Cong.. 1st Sess. 110 (1995). i6=See 47 C.F.R. pt. 76 subpt.K--Technical Standards. See e.g., Michigan,Illinois and Texas Communities Reply Comments at 2; Comcast Comments at 20-22: GMCC Comments at 2: US WEST Reply Comments at 11. We note that franchising authorities may petition the Commission for a waiver w impose "additional or different" requirements,pursuant to 47 C.F.R. § 76.7. See also City of Neu, York v. FCC,486 U.S. 57, 108 S.Ct. 1637(1988). In that decision, the Court found that the Commission did not exceed its statutory authority by preempting state and local technical standards, but also noted that state and local authorities remained free to petition the Commission for individualized waivers pursuant to 47 C.F.R. § 76.7. Id. at n.5. 163Competition. Rate Deregulation, and the Commission's Policies Relating to the Provision of Cable Television Service. Report, 5 FCC Rcd 4962, 5056 (1990). 'See Cable Television Technical and Operational Requirements, Review of the Technical and Operational Requirements of Part 76, Cable Television, Report and Order ("Technical Order"), 7 FCC Rcd 2021, 2035 (1992). See also Cable Television Technical and Operational Requirements, Review of the Technical and Operational Requirements of Part 76, Cable Television,Notice of Proposed Rulemaking("Technical Notice"),6 FCC Rcd 3673, 3679 (1991). 36`See Denver Comments at 7-8, citing Technical Order and Technical Notice. "" See Technical Order at 2035. See also Technical Notice at 3679 ("our previous practice upon receiving complaints concerning a cable system's deviation from our technical standards was to refer the complaint for local resolution . . ."). 56 Federal Communications Commission FCC 99-:- problem."3`' As many municipal commenters have noted. residents rely on local authorities to resole e cable picture quality problems, and expect their LFA to intercede on their behalf'"F 129. Commenters also have pointed to the difficulties that would be associated Nvitli Commission enforcement of its technical standards. Several commenters note that local enforcement of the Commission's technical standards is "the only practical method of handling complaints" regarding signal quality problems.369 Denver states the Commission would simply lack the resources to enforce its technical standards on a system by system basis.3" According to Denver. LFAs have been involved in literally thousands of technical standard enforcement actions. and the Commission could not undertake such enforcement without a significant increase in Commission personnel and fundingZZ` Similarly. Kramer states that the Commission does not have the resources to be "the first and onlypoitit of contact in resolving the many thousands of technical quality complaints that are filed with LFAs annually."' = r Federal Communications Commission FCC 99-5- of this change in enforcement entities would be significantly more far reaching than merely representing_ a switch in the proper forum for a subscriber complaint. Subscriber reliance on timely responses to their complaints regarding technical problems would be thrown into considerable doubt if local authorities were not permitted to engage in day-to-day enforcement of the Commission's technical standards. 13'_. We do not believe that Congress meant to set in motion such a fundamental change in technical standards enforcement without affirmatively stating its intent to do so either in the language of the 1996 Act or in the legislative history. Nowhere in the 1996 Act or its legislative histon does Congress state an intent to end local enforcement of the Commissions technical standards. Rather, as noted above, the legislative history clearly states that the amendment to Section 624(e) of the Communications Act prevents states or LFAs from regulating in the areas of technical standards,customer equipment, and transmission technologies. Local enforcement of uniform national standards furthers Congress' intent. While Congress sought to preclude the development of a patchwork of technical standards varying between franchise areas, it did not make mention of any additional intended effects of its amendment to Section 624(e). 133. Additional factors help clarify the intended scope of new Section 624(e). For example. the 1996 Act did not alter an LFA's ability to deny a franchise renewal based on deficient signal quality. If LFAs were unable to monitor cable operator compliance with the Commission's technical standards. they would likewise be unable to give an operator the notice and opportunity to cure signal quality defects ` required under Section 626 of the Communications Act as a prerequisite to denying a franchise renewal based on the documented violations. Thus, interpreting Section 624(e) as precluding LFA oversight and enforcement of the Commission's technical standards would render meaningless the statutory language in Section 626. 134. Time Warner attempts to resolve this ambiguity by stating that while Section 624(e) prohibits an LFA from monitoring the cable operator's signal, an LFA may still take into account compliance with the Commission's standards. as determined by the Commission, in a franchise grant or renewal."' Time Warner's views as to elimination of LFA day-to-day review and enforcement of the Commissions standards, coupled ith its belief that As may consider Commission determined compliance with these standards in franchising renewal proceedings, would leave franchising authorities in the position of being able to deny a franchise based on these failures, without being able to exercise less drastic measures to ensure cor�liance as commonly provided for in franchise agreements. We do not believe Congress intended such a result. 135. Given the long tradition of LFA enforcement of technical standards, the practical difficulties of Commission enforcement of technical standards at the local level, and the difficulties in reconciling a ban on LFA enforcement of technical standardswith other parts of the Communications Act that were unaltered by the 1996 Act, we conclude that if Congress had intended to end local enforcement of the Commission's technical standards, it would ha%e expressly stated such a prohibition in the actual language of the 1996 Act. 3'Time Warner Comments at 49-51. Time Warner states that determinations of compliance with the Commission's technical standards must be conducted by the Commission. Time Warner Comments at 51. See also NCTA Comments at 51-52. 58 Federal Communications Commission FCC QQ 136. With respect to the prohibition against State or franchising authority regulation of a system's use of subscriber equipment or any transmission technology added to Section 624(e) by the 1996 Act, Cole Raywid and other cable commenters assert that this restriction is not necessarily_ inconsistent with the unaltered portions of the Communications Act regarding local involvement in facilities and equipment.' As several cable and municipal commenters state, an LFA may still require upgrades under Section 626 in conjunction with franchise renewal."" 137. Although agreeing that LFAs can require upgrades. TCI argues that Section 624(e) "fundamentally alters" the role of state and local authorities in an operator's technical decisions. eyes though the franchising authority can .still require system upgrades."" TCI asserts that LFAs may not continue to require standards in conjunction with upgrades or rebuilds, such as channel capacity requirements at specific MHz levels, numbers of optical fibers deployed, homes served per fiber optic node, amplifiers per cascade. and the amount of standby power at the headend."0 Los Angeles, the League of Cities and NATOA disagree, contending that the negotiation of specific terms of�a system upgrade (such as system capacity, homes per node, and amplifiers per cascade) within the initial franchising or renewal process is necessary to implement determinations of local community needs and interests, and is also critical to the associated LFA authority to reject a franchise for failing to meet these needs and interests.'"' 138. Los Angeles. NLC, and NATOA argue that Section 624(e) is intended to preclude LFAs from adopting and enforcing their own standards regarding subscriber equipment, such as converter boxes. and transmission technology, such as the scrambling or trapping methods used to secure an operator's signals..` They state that the amendment was a response to efforts by local authorities' to restrict the use of converter boxes introduced by Time Warner in several New England communities, and therefore that `/d. at 23-24; Fleischman Comments at 38-39 (LFAs may still consider compliance with the Commission's standards in the context of franchising and renewal). -""TCI Reply Comments at 8 (Section 624 (b) "allows the LFA, for example, to require that a cable operator provide certain services or facilities (such as minimum channel capacity) but does not empower an LFA to dictate the specific technical means by which the operator meets such generic requirements."); Los Angeles. NLC, and NATOA Reply Comments at 20-21 (the amendments to Section 624(e) do not interfere with LFA's authority to establish, during the franchising process, facilities and equipment requirements, including upgrade requirements). See also Comcast Comments at 21; NCTA Comments at 51; SCBA Comments at 37-39. `TCI Comments at 28-32. 1101d. at 29. "'Los Angeles, League of Cities, and NATOA Reply Comments at 20 & n.43. See State of New York Comments at 23. "los Angeles, League of Cities, and NATOA Reply Comments at 17-18. See Michigan, Illinois, and Texas Communities Reply Comments at 5-6. 59 t Federal Communications Commission FCC 99 the terms "subscriber equipment" and "transmission technolo2v" should be interpreted narro%%l\." Tile\ contend that a reasonable interpretation of the amendment to Section 624(e) is that it clarifies that an LF.-%. when establishing equipment and facilities requirements under Sections 624(bx 1) and 624(b)(2), mai not specify technologies relating to converter boxes or scrambling.3b" 139. The Commission's Local State Government Advisory Committee ("LSGAC") like\\ise argues for a narrow reading of the prohibition against nonfederal regulation of transmission technolop.," It argues that the prohibition should be read in the context of signal protocols and, in this context. is consistent with Congress' grant of authority to the Commission in Section 624A of the Communications Act386 to address equipment compatibility standards. It recommends that the prohibition should be limited to converter boxes, scrambler and unscrambler devices, and similar customer reception equipment, and that franchising authorities' ability to negotiate, include, and enforce provisions for specific cable system equipment and facilities under Section 624(b) of the Communications Act"' should be unrestricted. 140. Section 624 of the Communications Act relates to the regulation of services.facilities. and equipment of cable operators. Paragraph (a) of Section 624 states: Any franchising authority may not regulate the services,facilities,and equipment provided by a cable operator except to the extent consistent with this title. Paragraph (b) of Section 624 generally provides that franchise authorities may enforce requirements contained within the franchise - for facilities and equipment Paragraph (e) of Section 624, as added by the Telecommunications Act of 1996, states: No State or franchising authority may prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology. It is clear from the above, and agreed among the commenting parties, that "subscriber equipment" may no longer be "prohibited, conditioned, or restricted " by local authorities under Section 624. "Transmission technology" may also not be "prohibited, conditioned, or restricted ." The question '"Los Angeles, League of Cities, and NATOA Reply Comments at 17-18, referring to Committee on Science, Technology and Energy. I I FCC Rcd 10250. See also Kramer Comments at 4-6, State of New York Comments at 25-26. ae./d. `LSGAC Recommendation 13(A): Resolution on Technical Standards Amendment. 7647 U.S.C. § 544a, Consumer Electronics Equipment Compatibility. "'47 U.S.C. § 544 (in requesting proposals for a franchise or franchise renewal, a franchising authority "may establish requirements for facilities and equipment . " and may enforce such requirements). 60 Federal Communications Commission FCC 9Q remains, however, as to what is encompassed in the phrase "transmission technology" and ho\\ the ne\\1\ added limitation can be reconciled with the Brant of authority regarding "facilities and equipment." 141. "Transmission technology" is not a defined term in the Communications Act nor does the legislative history help to define its breadth."" Rather. Congress appears to have used the phrase in the everyday sense in which it has been used in discussions of communications police issues. A re\ie\\ of the usage of the phrase indicates that it has been frequently used to include both the transmission medium. i.e. microwave. satellite, coaxial cable. twisted pair copper telephone lines, and fiber optic systems..'"and the specific modulation or communications format, i.e. analog or digital communications.""" Based on the foregoing, we believe,for example,that local authorities may not control whether a cable operator uses digital or analog transmissions nor determine whether its transmission plant is composed of coaxial cable. fiber optic cable, or microwave radio facilities. An LFA's authority under Section 624(b) to establish requirements for facilities and equipment is granted only "to the extent consistent with this title" and "'The Conference Report,for example,simply explains that Section 624(e)amends the Act"by prohibiting States or franchising authorities from regulating in the areas of technical standards, customer equipment, and transmission technologies." H.R. Conf. Rep. No. 458, 104th Cong., 1st Sess. 168(1996). Section 3Q)3)of the Communications Act does define the term "radio communications" and includes within it "transmission" by radio "including all instrumentalities, facilities, apparatus, and services . . . incidental to such transmission." 47 U.S.C. § 153(33). `""Thus, for example. the State of Tennessee adopted a regulatory reform program involving the replacement of existing telephone plant with fiber optics that was judicially described as involving a change in "transmission technologies." See Tennessee Cable Television Association v. Tennessee Public Service Commission. 844 S.W. 2d 151, 156 (1992). A Commission report, Trends in Telephone Service, 1999 WL 83930 (February 1999), contains a ' discussion of"transmission technology"and lists"copper"and."fiber optic cables"as two transmission technologies. The Commission has discussed satellites and undersea cables as two "transmission technologies." Communications Satellite Corp., 56 FCC 2d 1101, 1161 (1975). See also Comsat Corp., 13 FCC Rcd. 14083, para. 32(1998)(There is no evidence that parties "owning or controlling both satellite and cable connectio►ts . . . are favoring toe use of one transmission technology."). 7O0The Commission has consistently described "analog" and "digital" communications as well as various modulation schemes as different "transmission technologies." See e.g. Development o> Wireline Services Offering Advanced Telecommunications Capability, 1998 WL 458500, para. 35 ("xDSL and packet switching are simply transmission technologies"); Public Notice: Commission Staff Seek Comment on Spectrum Issues Related to Third Generation Wireless/IMT-2000, 13 FCC Rcd 16221, 16222(commercial mobile radio service licensee has flexibility "to change their existing radio transmission technology."); Application for Transfer of Control of MCi Communications to Worldcom, 1998 WL 611053,para.45("Qwest's network will include more fibers per cable than the current average national network, and will employ high capacity transmission technologies."), Development of Operational. Technical and Spectrum Requirements for Meeting Federal. State and Local Public Safety Agency Communication Requirements through the Year 2010, 1998 WL 667599, n.315 (1998) ("In the Second Notice, we entitled sections primarily addressing the question of analog versus digital modulation 'Transmission Technology', a more general term that seemingly could encompass many other issues as well."); Creation of A Low Power Radio Service, MM Docket No. 99-25, 1999 WL 46878, para. 29 (1999) ("We are also concerned whether an LP1000 service would limit or impair the ability of full power stations to implement digital transmission technology such as in-band-on-channel ('IBOC') conversion."). ''Section 624(a), 47 U.S.C. § 544(a). 61 t Federal Communications Commission FCC 99 must be read in the context of the limits imposed by the revisions to Section 624(e) in the 1996 .-\ct. As noted above. the legislative history of the amendment to Section 624(e) states that "the patch%N ork of regulations that would result from a locality-by-localit} approach is particularly inappropriate in toda\'s intensely dynamic technological environment." 142. While the 1996 Act imposes some specific limits of the role LFAs play with respect to subscriber equipment and transmission technology, it does not diminish the LFAs' important responsibilities in determining local cable-related needs and interests and seeing that those needs are met through the franchising and renewal process.39' Although local authorities are limited in dictating the use of transmission technologies,other facility and equipment requirements can still be enforced under Section 624(b).-"' In addition, Section 611 of the Communications Act affirms the ability of an LFA to establish and enforce franchise provisions concerning facilities and equipment related to PEG channels and for educational and governmental use of channel capacity on institutional networks. Section 621(a)(3) authorizes franchising authorities to ensure access to cable services throughout the franchise area. regardless of the income levels of potential residential subscribers. Section 621(a)(4) authorizes the LFA to require adequate assurance of the cable operator's financial, technical, and legal qualifications to provide cable service. Section 621(b)(3XD) allows an LFA to require institutional networks. Section 626(b)(2) states that, subject to Section 624, a franchise renewal proposal "shall contain such material as the franchising authority may require, including proposals for the upgrade of the system." Section 632(a)(2) enables an LFA to establish and enforce "construction schedules and other construction-related performance requirements.i395 The Commission likewise has long acknowledged areas of local concern, such as studio capacities, electrical safety codes, construction requirements, and management of public rights-of-way.39G Local governments perform a range of vital tasks necessary to preserve the physical integrity of streets and highways, to control the orderly flow of vehicles and pedestrians, and to manage facilities that crisscross the streets and public rights-of-way, which are unaffected by Section 624(e). The 1996 Act also does not preclude LFA review of the adequacy of the cable operator's plans for meeting the cable-related needs identified by the LFA. 143. Although this Order clarifies to some extent the meaning of"transmission technology"for purpo.es of Section 624(_), we recognize that over three years have passed since the 1996 Act was signed into law. We also recognize that, in the absence of a final federal rule, local franchise authorities and cable operators have entered into agreements based on their own understandings of the language of Section "=See H.R. Rep. No. 934, 98th Cong., 2d Sess. _(1984), P&F Radio Re.. 11 1277, p. 10:779. ""See Section 626(a)(1), 47 U.S.C. § 546(a)(1). 39'47 U.S.C. § 544(b). 39"47 U.S.C. §§ 531, 541(ax3), (4), (bx3)(D), 546(b)(2), 552(ax2). "'See Review of the Technical and Operational Requirements of Part 76, Cable Television, Report and Order, 102 FCC2d 1372, 1380 n.12 (1985); TCI Cablevision of Oakland Counry, Inc., 12 FCC Rcd 21396, 21441 (1997), reconsideration denied, 13 FCC Rcd 16400. In TC1 Cablevision, the Commission also found that a city condition that cable construction permits would not be used for telecommunications purposes did not violate Section 624(e) because the condition concerned the nature of services the cable operator would be providing over its facilities pursuant to its cable franchise rather than either the transmission technology or subscriber equipment used for the services. 12 FCC Rcd at 21430-32. 62 Federal Communications Commission FCC 99 624(e). In the absence of today's guidance, parties mai have drafted certain franchise provisions in a x%a% that they believed was permissible under Section 642(b). but that now would be found impermissible under our reading of Section 624(e). Had the parties had the benefit of today's Order, these provisions could have been drafted in a way that would have permitted local authorities to exercise their legitimate rights under Section 624(b) without running afoul of Section 624(e). We have received no formal complaints from any parry claiming Section 624(e) has been violated. Given these settled contractual arrangements, nothing in this Order is intended autontatically to preempt or affect the entorceabilit\ of existing franchise agreements.'" VIII. PRIOR YEAR LOSSES A. Background 144. Section 301(kx 1) of the 1996 Act amended Section 623 of the Communications Act to preclude the disallowance of certain losses incurred by original franchisees prior to September 4, 1992. Specifically, the statute provides: (n) Treatment of Prior Year Losses. -- Notwithstanding any other provision of this section or of section 612. losses associated with a cable system (including losses associated with the grant or award of a franchise) that were incurred prior to September 4, 1992, with respect to a cable system that is owned and operated by the original franchisee of such system shall not be disallowed. in whole or in part, in the determination of whether the rates for anv tier of service or any type of equipment that is subject to regulation under this section are lawful.3" This provision was effective upon enactment and applicable to rate filings made after September 4, 1993 that had not been acted upon by December 1, 1995."') '"See, e.g., Pan American Life insurance Co. v. Blue Cross and Blue Shield, 127 F.3d 1099 (4th Cir. 1997) (unpublished disposition,per curium)(finding that voluntan agreement was enforceable,even if agreement was based on parties' mistaken belief that ERISA did not preempt state statute), E. Norman Peterson Marital Trust v. Commissioner of Internal Revenue, 78 F.3d 795 (2d Cir 1996 1: If the particular language used in a statute is hieh1% susceptible to misunderstanding by a lay person, and if the clarification which the regulations are intended to provide is available only after ordinary people have made choices in reliance on the more common meaning of the statutory term, it might be a situation of such substantial unfairness would arise that it would be permissible to apply the late-coming regulations only prospectively. 78 F.3d at 800. "`1996 Act, § 301(k)(1), 110 Stat. 118, 47 U.S.0 § 543tni 1996 Act, § 301(k)(2), 110 Stat. 118. 63 Federal Communications Commission FCC 99-:- 145. In the Notice, we identified apparent distinctions between this new statutory provision and the treatment of start up losses under our existing cost-of-service rules.i0' We noted that, unlike the statute, our rules do not preclude recovery of start up losses for all cable operators. while the recovery of prior year losses under Section 301(k)(1) is limited to original franchisees.J01 We also noted that our cost- of-service rules do not limit the years for recovery of such losses,while Section 301(k)(I) limits recover% to losses incurred prior to September 4, 1992.40' Finally, we noted that Section 301(kx1) does not limit losses to those incurred in the early years of a system's operation. Instead, it allows recovery of losses for all years up to the September 4, 1992 cut-off date." In the Notice, we requested comment on these tentative conclusions and requested comment on whether Section 301(k)(1) should be interpreted to al lo\\ recovery of prior year losses even when such losses are attributable to unreasonable or imprudent expenditures.404 xpenditures.404 B. Discussion 146. We affirm the tentative conclusions set forth in the Notice. Under Section 301(kx 1), prior year losses incurred before September 4, 1992 cannot be disallowed in determining the lawfulness of cable rates under our rules when such losses are claimed by the original franchisee of the system."(` This provision, however, is not applicable to losses incurred after September 4, 1992, and does not apply to an operator that is not the original franchisee of its system. 147. The Massachusetts Commission suggests that the scope of Section 301(k)(1) should not be limited to original franchisees. It argues that the statute does not explicitly prohibit other operators from recovering start up losses incurred prior to September 4, 1992.4" We agree that the statute does not prohibit the recovery of start up losses based on other qualifying criteria. Indeed, as noted above, we have authorized the recovery of certain start up losses without the time period limitation or the original franchisee requirement contained in Section 301(k)(1). Nevertheless,we find no basis for further changing the rules beyond what the statute directs. The existing rules, it should be emphasized, authorize the 100Nntice, 11 FCC Rcd at 5974, citing Implementation. of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation and Adoption of a Uniform Accounting Svstem.for Provision of Regulated Cable Service, I 1 FCC Rcd 2220 (1996). 47 C.F.R. § 76.922(i)(6). 40'Notice at 5974. To the extent that acquiring operators are permitted recovery of acquisition premiums as part of the rate base, operators would not be permitted to recover start up losses for which they are compensated by acquisition premiums. 402 Id. sold. 4wld '05Applicability of Section 301(kx l),however,remains subject to the conditions contained in Section 301(k)(2) of the 1996 Act. 406 Massachusetts Cable Commission Comments at 11. 64 Federal Communications Commission FCC 99 recoven, of certain start up losses for operators who are not original franchisees. and these rules remain available to such operators to guide their recovery of start up losses."' 148. In the Notice, we requested comment on whether losses claimed pursuant to Section 301(k)(1) are subject to limitations involving the reasonableness or prudence of expenditures. No commenters addressed this issue specifically. Under the explicit terms of Section 301(1:)(1), the Commission. in determining the lawfulness of cable rates, is prohibited from limiting: the recover\ of losses "in whole or in part" if such losses are associated with a cable system and incurred before September 4, 1992 by an original franchisee. Standards of prudence and reasonableness have luny_ characterized the review of regulated rates."" We have incorporated these standard regulator\ concepts in our review of cost based rates. Section 301(k)(1) itself specifies that losses, to be recoverable, must be "associated with a cable system." We believe this condition underscores that a reasonable relationship must exist between the amounts claimed as losses and the provision of regulated cable services. We further note that the statute, despite the Commission's historic practice of excluding unreasonable or imprudent costs from rate recovery, is silent regarding this established regulatory approach. Accordingly, we will continue to apply the prudent investment standard to the evaluation of cost-based rates, including rates submitted by operators that otherwise fall within the terms of Section 301(kx 1). IX. ADVANCED TELECOMMUNICATIONS INCENTIVES A. Background 149. Subsection 706(a)of the 1996 Act requires the Commission to"encourage the deplovment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience and necessity. price cap regulation. regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.i"" in the Notice.'we sought comment on how we could advance Congress' goal within the context of our cable services regulation. This has been addressed in the Commission's report into the deployment of r 'vanced telecommu—rations capability adopted pursuant to Section 706(b) of the 1996 Act."" '"'See note 400, supra. - ""See Implementation of Sections of the Cable Television Consumer Protection an Competition Act of 1992:Rate Regulation, and Adoption of a Uniform Accounting System for Provision of Regulated Cable Service, Report and Order and Further Notice of Proposed Rulemaking, 9 FCC Rcd 4563 (1994). 4001996 Act § 706(a), 110 Stat. 153. siolnquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timelv Fashion, and Possible Steps to Accelerate.Such Deplovment Pursuant io Section 706 of the Telecommunications Act of 1996, Notice of Inquiry(CC Docket 98-146), 13 FCC Rcd 15280 (1998), Report, FCC 99-5 (released Jan. 28, 1999). 65 Federal Communications Commission FCC 99-5- X. CABLE OPERATOR REFUSAL TO CARRY CERTAIN PROGRAMAILNG A. Background 150. The 1996 Act amended Sections 611(e) and 612(c)(2) of the Communications Act to provide that a cable operator may refuse to transmit any leased access or public access programming containing "obscenity, indecency, or nudity.i"1 In the Order, the Commission amended Sections 76.701 and 76.702 of the Commission's rules concerning leased access and PEG access, respectivel\, to incorporate these amendments.": Because the rules had originally been adopted pursuant to Section 10 of the 1992 Cable Act and been stayed on appeal,"' the Order stayed the rules as amended pending Supreme Court review of the constitutionality of Section 10."' The Notice solicited comment on the Commission's tentative conclusion that the term "nudity" in each rule should be interpreted to mean nudity that is obscene or indecent."' 151. The Supreme Court later issued its opinion on Section 10 of the 1992 Cable Act."" In Denver Area Educational Telecommunications Consortium. Inc. v. FCC ("Denver Consortium").' ' the Court held that language in Section 10(a), which permits cable operators to adopt prospective rules prohibiting the transmission of indecent materials over leased access channels, is consistent with the First Amendment. The Court held that language in Section 10(c), which permits cable operators to refuse to transmit indecent programming over PEG access channels, is not valid."' 152. In response to Denver Consortium, the Commission amended the PEG access rule in Section 76.702.4" The rule now states that a cable operator may refuse to transmit any public access programming that the operator believes contains obscenity. 1996 Act § 506(a), (b), 110 Stat. 136-37, codified 47 U.S.C. §§ 531(e), 532(c)(2). "=Order. 11 FCC Rcd at 5960. "'Alliance for Community Media v. FCC, 56 F.3d 105 (D.C. Cir. 1995). "'Id. at 5961. "'Notice, 11 FCC Rcd at 5975. 1bSee 1992 Cable Act § 10, 106 Stat. 1486, codified 47 U.S.C. § 532(h). 41"1 116 S.Ct. 2374 (1996). 4"The Court also invalidated Section 10(b) of the 1992 Cable Act, which required cable operators to place indecent programming on a "blocked" leased access channel if they did not voluntarily prohibit indecent programming. The Commission eliminated rules implementing Section 10(b). See Implementation of Section 10 of the Cable Television Consumer Protection and Competition Act of 1992. 12 FCC Rcd 6390, 6393 (1997) ("Implementation of Section 10"). 191d. at 6393-94, 6398; see 47 C.F.R. § 76.702. 66 Federal Communications Commission FCC 99-5- 15 3. 9153. The Commission amended the leased access rule in Section 76.701 to respond to the Court's decision in Denver Consortium, and clarified in Section 76.701(b) that "[a] cable operator nta% refuse to transmit any leased access program or portion of a leased access program that the operator reasonably believes contains obscenity, indecency, or nudity.` The Commission lett the interpretation of the word "nudity" to the instant docket.''' B. Discussion 154. We adopt the tentative conclusion in the Notice that "nudity" in the leased access rule should be interpreted to mean nudity that is obscene or indecent. As many commenters advise, this interpretation avoids the overbreadth problem addressed in Erznoznikv. City of Jacksonville. in which the Supreme Court invalidated a city ordinance that prohibited showing films containing nudity at drive-in theaters visible from public places.''-'- This interpretation is also consistent with the concern the Court acknowledged in Denver Consortium: namely, protecting children from patently offensive depictions of sex on leased access channels.'=' Obscene programming is unprotected under the Constitution. "Indecent" programming for purposes of Section 76.701(b) is the kind of programming a cable operator may prohibit under Section 76.701(a); namely, programming which describes or depicts sexual or excretory activities or organs in a patently offensive manner as measured by contemporary community standards. Commenters have generally supported this interpretation of"nudity." XI. SUBSCRIBER NOTICE A. Background 155. As amended by Section 301(g) of the 1996 Act, Section 632 of the Communications Act includes the following new subsection: (c) Subscriber Notice. A cable operator ttlay provide notice of service and rate changes using any reasonable written means at its sole discretion. Notwithstanding Section 623(b)(6) or an, ather provision of*'-is Act,a cable operator shall not be required to provide prior notice of any rate change that is the result of a regulatory fee, franchise fee, or any other fee, tax assessment, or charge of any kind imposed by any Federal agency, State, or franchising authority on the transaction between the operator and the subscriber.'"' 120lmplerrrentation of Section 10 at 6393-94, 6398, see 47 C.F.R. § 76.701. '211d. at 6393 n.10. 42=422 US 205 (1975). See, e.g., Alliance for Community Media Comments at 4. ''-'Denver Consortium, 116 S.Ct. at 2385-86. 424110 Stat. 117, codified 47 U.S.C. § 552(c). 67 Federal Communications Commission FCC 99-5- 156. We amended Sections 76.309(cx3xixB) and 76.964 of our rules to correspond N%itll this statutory revision."' In making these amendments. we noted that the Commission had preyiousl\ distinguished written notice sent to subscribers from written announcements on the cable system or in the newspaper.121 We had made these distinctions as necessary to ensure that notice was adequate depending on the circumstances.` However, the legislative history of the House amendment concerning: notice to subscribers of rate increases stated that "[n]otice need not be inserted in the subscriber's bill.""' Accordingly, in the Interim Order, we determined that notices of rate changes provided to subscribers through written announcements on the cable system or in the newspaper will be presumed sufficient.'=" We stated that we would address any disputes that might arise in this area on a case-by-case basis."" B. , Discussion 157. The State of New York asserts that the 1996 Act does not preempt franchising authorities from adopting more stringent subscriber notice standards than are required by Section 632(c).'` The State of New York further asserts that Section 632(d) specifically preserves the authority of LFAs to impose customer service standards that exceed the standards adopted by the Commission under other provisions of Section 632."32 158. Los Angeles. the League of Cities, and NATOA argue that "reasonable written notice" should include notice directly to the subscribers.` They also argue that notice by way of publication in a newspaper is usually prescribed when the parties' whereabouts are unknown. Because an operator knows the whereabouts of its subscribers, they maintain that "reasonable written notice" would entail giving direct notice to subscribers via a bill enclosure.'." They agree with the State of New York that the new statutory language does not preempt more strinuent state or local notice requirements.'`5 ''-`Interim Order at 1 I FCC Rcd 5952; see 47 C.F.R. §§ .76.309(c)(3)(i)(13), 76.964(b). 420 Interim Order, 11 FCC Rcd at 5952 (citing 47 C.F.R. 76.964(c)). See also Rate Order, 8 FCC Rcd at 5713- 14. `Interim Order. 11 FCC Rcd at 5952. 421 Id. citing Conference Report at 169. ''-''Interim Order, 1 I FCC Rcd at 5952. aold "'State of New York Comments at 11-15. 41=1d. at 11-12. Accord LSGAC Recommendation 13(D). which recommends that local jurisdictions be able to define "reasonable written means" within their communities "'Los Angeles, League of Cities, and NATOA Rept% Comments at 14. "'!d at 14-15. 411d. at 15. Accord LSGAC Recommendation 13(D) 68 Federal Communications Commission FCC 94-5- 159. Fleischman urges the Commissionto clarify that the ne%% statutory language preempts state and local consumer protection and customer service requirements specifying the means bv which cable operators must notify subscribers of rate and service changes.i6 Absent such a clarification. Fleischman asserts that disputes regarding subscriber notice requirements will almost inevitabl% arise bet%%een cable operators and LFAs."-'' Fleischman argues that its position is supported not only by the plain lall`_uage of Section 632(c), but also by the 1996 Act's legislative history. which establishes a federal police of promoting "increased flexibility" in the provision of subscriber notice and which declares that "[t]llere is no need for intrusive regulations to dictate how cable operators communicate" advance notice of rate and service chances to their subscribers.''$ 160. NCTA agrees with Fleischman that Section 632(c) is preemptive and prohibits states and LFAs from prescribing specific mechanisms for subscriber notice."' According to NCTA.Congress would not have used the phrase "sole discretion" in describing a cable operator's latitude regardinu subscriber notice if it intended state and local governments to dictate the nature of such notice."" 161. Furthermore, NCTA disputes the assertions that Section 632(d) permits LFAs to impose stricter requirements than those required by Section 632(c)."' NCTA argues that Section 632(d) allows state law or municipal ordinances to establish customer service requirements that exceed the standards the Commission is authorized to establish.' In the case of customer notice standards. NCTA argues that Congress has prohibited the Commission from interfering with a cable operator's decision to provide notice by any reasonable written means."' The Commission has no authority to establish subscriber notice standards. according to NCTA, and therefore LFA's lack such authority as well."" 162. Congress's use of the phrase "sole discretion" indicates that Congress intended to limit the Commission's discretion in this area. Congress, however, did not completely eliminate the role of regulatory authorities. In Section 632(d)(1), Congress specifically preserved LFA authority to enact and enforce consumer protection laws to the extent not specifically preempted by Title VI of the Communications Act.` Nor did Congress grant cable operators unbridled discretion regarding the means 0�'Fleischman Comments at 41. e;7/d. °78/d. at 42 citing Conference Report at 111-112. 4.1'NCTA Reply Comments at 18-19. °'°/d citing Section 632(c). ..lid. "=Id. 443 Id. 4"Id. "`Communications Act § 632(dx 1), 47 U.S.C. § 632(d)(1). 69 Federal Communications Commission FCC 99-5- used to notifv subscribers of changes in rates and service. Congress allo%%ed cable operators to exercise their "sole discretion" within the constraints of "reasonable written" means. LFAs and the Commission retain the authority to determine that a particular mechanism is not reasonable. Congress also :enerall\ permits LFAs to enforce customer service standards that exceed federal requirements. We note. ho%\ev er. the suggestion in the legislative history that cable operators need not give subscribers individual \\ritten notice of rate and service changes in their bills."' 163. Los Angeles. the League of Cities, and NATOA argue that reasonableness of a notice of a rate change appearing in a newspaper depends upon several variables such as its location in the newspaper, the size of the notice, and the font of the print used in the notice.i3 We agree. We do not believe that Congress intended to set uniform national standards, however, since the reasonableness of a particular manner of giving notice will vary from community to community. We urge cable operators and LFAs to negotiate notice procedures that are reasonable in light of local circumstances. 164. In the absence of an agreement. the LFA should prescribe notice requirements consistent with this Order. Local requirements should leave cable operators with considerable discretion and should be designed primarily to identify unreasonable means of giving notice, rather than specifying a particular means that the cable operator must follow. An aggrieved cable operator may file a petition with the Commission seeking a declaration that the notice requirements are unreasonable. A cable operator should abide by local notice requirements unless granted relief from them by the Commission. 165. We adopt the State of New York's recommendation to amend Section 76.964(a)to require cable operators to inform subscribers of their right to file complaints with the LFA within 90 days of the effective date of the increase, as well as to provide the name, address and telephone number of the LFA.°°e We also agree with the State of New York's suggested amendment to add the word "written" to Section 76.964(b) in describing the reasonable means by which a cable operator may provide notice of service or rate changes. These changes are designed to more accurately conform our rules with the new statutory language.S41 166. Time Warner suggests that operators subject to effective :ompetition no: �e required to provide advance notice of changes in service and rates."" According to Time Warner, such operators will be severely disadvantaged by having to divulge to their competitors new rate and services initiatives thirty ""See H.R. Rep.No.204(1), 104th Cong., I st Sess. I I 1-1 12(1995). We note that the Commission has proposed that telephone companies provide their customers with clear andconspicuous notification of changes in rates and services in their telephone bills. See Truth in Billing and Billing Format, Notice of Proposed Rulemaking in CC Docket No. 98-170, FCC 98-232 (released September 17. 1998). This proposal was made pursuant to the Commission's authority under Title 11 of the Communications Act, e.g., 47 U.S.C. § 201(b). "'Los Angeles, League of Cities, and NATOA Reply Comments at 14. "`State of New York Comments at 14. 409/d. at 13. "'Time Warner Comments at 29-30 70 Federal Communications Commission FCC 99 days in advance."" Competitors will have sufficient time not only to devise a marketing strateg,% io respond to a cable operator's initiative, Time Warner asserts. but also to put into effect their o%%n counter strategy and pricing plans before the cable operator's changes even become effective.` 167. Section 632 is not in the rate regulation portion of the Communications Act. and as a result applies even where there is effective competition. Therefore. we will not adopt a blanket rule automatically exempting a cable operator from the subscriber notice requirement once effective competition is shown. However, advance notice will not be required in the case of a rate decrease. In that case, the benefits of giving advance notice to consumers are minimal. XII. MARKET ENTRY ANALYSIS 168. Section 257 of the Act requires the Commission to complete a proceeding to identify and eliminate market entry barriers for entrepreneurs and other small businesses in the telecommunications industry.'•' The Commission is directed to promote a diversity of media voices and vigorous economic competition, among other things.'•' We believe that this Order is consistent with the objectives of Section 257 in that it implements the Cable Act Reform provisions of the 1996 Act which were designed, in part. to eliminate provisions of the Act which disadvantaged new competitors, and to hasten the development video competition in order to provide consumers with increased program choice."` XIII. FINAL REGULATORY FLEXIBILITY ACT ANALYSIS 169. As.required by the Regulatory Flexibility Act (RFA),'" an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Order and Notice of Proposed Rulemaking in CS Docket No. 96-85 ("Notice").457 The Commission sought written public comment on the proposals in the Cable Act Reform item, including comment on the IRFA. The comments received are discussed below. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA."R 170. Need for, and Objectives of, Cable Act Reform . The rulemaking implements portions of S,ctions 301 and :;2 of the Telecommunications Act of 1996(the "1996 Act"), Pub. L. No. 104-104, 110 °"!d 's'-Id. "'Communications Act § 257(a), 47 U.S.C. § 257(a). 4"Communications Act § 257(b), 47 U.S.C. § 257(b). ...Conference Report at 173. 1S"See 5 U.S.C. § 603. The RFA, see 5 U.S.C. § 601 et. seq., has been amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847(1996)(CWAAA). Title If of the CWAAA is the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA). "711 FCC Rcd 5937, 5976-77 (1996). '"See 5 U.S.C. § 604. 71 Federal Communications Commission FCC 94 Stat. 56. The purposes of this action are to establish final rules re_ulatin_ cable television sen ice and cable system operators pursuant to the 1996 Act, which amended or deleted numerous portions of Title VI of the Communications Act of 1934 (the Communications Act"). 47 U.S.C. §§ 15 1-6 1 . and added new provisions affecting cable television. 171. Summary of Significant Issues Raised by Public Commenters in Response to the IRFA. Municipal parties filed a comment in response to the initial regulatory flexibility analysis. The parties state that the Commission failed to consider, in the 1FRA to the Notice, the effect of the proposed rules on small governmental entities. Specifically, the municipal parties state the Commission's proposal to require a local franchising authorities ("LFA") to send complaints to the cable operator. wait for a response. and then forward the response to the Commission, would impose additional burdens on small government entities. Additionally, municipal commenters state that burdens for small governmental entities will increase if operators are not required to give direct notice to subscribers of rate increases (because LFAs will receive additional complaints from subscribers that were not aware that rate increases were taking place), and that LFAs, if unable to negotiate facilities and equipment requirements, will need to devise indirect means of assuring community needs and interests are met under renewal portions of the Communications Act. The municipal commenters state that, in the alternative, the Commission should reinstate its original process for rate complaint filings, should simply redesign the rate complaint form to allow an LFA to certify that it has received subscriber complaints, and should allow a franchising authority to file the complaint with the Commission and the operator, with the operator filing its rate justification directly with the Commission. We discuss these alternatives in the body of the Order, and in the below analysis. In addition, other commenters raised issues in response to the Notice that could involve small entities. These comments are addressed in the Order and below. 172. Description and Estimate of the Number of Small Entities to Which Rules Will Apply. The RFA defines the term "small entity" as having the same meaning as the terms "small business," "small _ organization," and "small governmental jurisdiction," and the same meaning as the term "small business concern" under Section 3 of the Small Business Act.""' A small concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation: and (3) satisfies any additional criteria established by the Small Business Ad; Aistration (SBA' "' 173. The Communications Act at 47 U.S.C. 543 (m) (2) defines a small cable operator as "a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000." Under the Communications Act, at 47 U.S.C. 543 (m) (1), a small cable operator is not subject to the rate regulation requirements of Sections 543 (a), (b) and (c) on cable programming service tiers("CPSTs")in any franchise area in which it serves 50,000 or fewer subscribers. The Commission has determined that there are 61,700,000 subscribers in the United States. Therefore, in the Interim Order, we found that an operator serving fewer than 617,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate."' Based on available data, we find that the 4`9RFA, 5 U.S.C. § 601(3) (1980). 'Small Business Act, 15 U.S.C. § 632 (1996). '"'47 C.F.R. § 76.1403(b). 72 Federal Communications Commission FCC 99-5" number of cable operators serving 617.000 subscribers or less totals 1,450.'6= Although it seems certain that some of these cable system operators are affiliated with entities whose cross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable s%stern operators that would qualify as small cable operators under the definition in the Communications Act. We are likewise unable to estimate the number of these small cable operators that serve 50.000 or fever subscribers in a franchise area. We can, however, assume that the number of cable operators serving; 617,000 subscribers or less that 1) are not affiliated with entities whose gross annual revenues exceed $250.000.000 or 2) serve 50.000 or fewer subscribers in a franchise area, is less than 1450. 174. The Commission has developed its own definition of a small cable system operator for the purposes of rate regulation. Under the Commissions rules, a "small cable company." is one serving fewer than 400.000 subscribers nationwide."' Based on our most recent information, we estimate that there were 1,439 cable operators that qualified as small cable system operators at the end of 1995.'6' Since then, some of those companies may have grown to serve over 400.000 subscribers. and others may have been involved in transactions that caused them to be combined with other cable operators. Consequently,we estimate that there are fewer than 1,439 small entity cable system operators. Under the Commission's rules, a small cable system is a cable system with 15,000 or fewer subscribers owned by a cable company serving 400.000 or fewer subscribers over all of its cable systems. We stated in the r Notice that we were unable to estimate the number of small cable systems nationwide, and we sought comment on the number of small cable systems. No comments were received with respect to this number. 175. SBA has developed a definition of small entities for cable and other pay television services, which includes all such companies,generating less than $11 million in revenue annually. This definition includes cable system operators. closed circuit television services, direct broadcast satellite services. multipoint distribution systems, satellite master antenna systems and subscription television services. According to the Census Bureau, there were 1.323 such cable and other pay television services generating less than $11 million in revenue that were in operation for at least one year at the end of 1992. 176. The term "small governmental jurisdiction" is defined as "governments . . . districts, with a pc,ulation of less than fifty thousand." There are 85.006 governmental entities in the United States. This number includes such entities as states,counties, cities, utility districts and school districts. We note that any official actions with respect to cable systems will typically be undertaken by LFAs, which primarily consist of counties. cities and towns. Of the 85.006 governmental entities. 38.978 are counties. cities and towns. The remainder are primarily utilit% districts. school districts, and states,which typically are not LFAs. Of the 38,978 counties, cities and towns. 3,.566, or 96% have populations of fewer than 50,000. Thus, approximately 37,500 "small governmental jurisdictions" may be affected by the rules adopted in this Order. 462 Paul Kagan Associates, Inc., Cable TV Investor. Feb 29. 1996 (based on figures for Dec. 30, 1995). 46347 C.F.R. § 76.901(e). The Commission developed this definition based on its determinations that a small cable system operator is one with annual revenues of S100 million or less. Implementation q1 sections•q the 1992 Cable Act: Rate Regulation, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393. i64Paul Kagan Associates, Inc., Cable TV Investor. Feb 29. 1996 (based on figures for Dec. 30, 1995). 13 Federal Communications Commission FCC 94-5- 177. Reporting, Recordkeeping and Other C onrpliarnce Requirements. The foI lox%in`_ add rebse,., the requirements of regulations adopted. amended, modified or clarified in the Order. 178. Effective Competition. The 1996 Act adds a fourth test for effective competition to Section 623 of the Communications Act. The rules adopted in this Order will affect municipalities and cable operators, including those that are small entities. The rules adopted in this Order require that a finding of effective competition must be based on a record that demonstrates that effective competition exists, and not on a mere claim by a cable operator that it is subject to effective competition. Our rules state that all claims of effective competition should be filed as petitions for determinations of effective competition under Section 76.7 of our rules. We do not believe that the rules adopted here today \\ill require any specialized skills beyond those already used by LFAs and operators beyond those already required by our rules. 179. CPST Rate Complaints. The 1996 Act amended the CPST rate complaint procedures in Section 623(c)(3) of the Communications Act. Under our rules adopted here today, we clarify that an LFA may decide not to file a CPST rate complaint, based on its assessment of the validity of the underlying subscriber complaints or any other reason. The rules adopted here today clarify that the LFA should not file a complaint with the Commission that is based on subscriber complaints concerning the BAST or premium services. Furthermore, the LFA must determine that it has received more than one complaint per community unit served by the operator before filing a complaint against the operator's rates in that community unit. In our rules. we determine that for purposes of triggering the LFA's,authority to file a CPST rate complaint with the Commission.Congress intended to require at least two subscriber complaints be properly filed for each community unit before the LFA files a complaint with the Commission. We allow the LFA to use the records maintained in accordance with its regular business practices to establish that it has received the requisite subscriber complaints within 90 days of a rate increase. However, we condition the filing of a CPST rate complaint upon the LFA's certification that it has received two or more subscriber complaints about CPST rates during the 90 day period after the rate became effective. LFAs should continue to use Form 329 to file CPST rate complaints with the Commission. LFAs should use Form 329 to serve notice on the operator of its intent to file a complaint with the Commission. When providing the operator with notice of its : Ment to file a comr':int, the LFA also should indicate the date by which the cable operator must respond. The response date must be no less than 30 days from the date the notice of intent to file a complaint is received by the cable operator. The notice and the draft Form 329 should be sent to the cable operator simultaneously via certified mail, return receipt requested. A copy of the return receipt showing delivery of the complaint to the cable operator should be included when the complaint is filed with the Commission. We do not believe that determining whether subscriber complaints concern the BAST or premium services will require any specialized skills beyond those already used by LFAs and operators beyond those already required by our rules. Furthermore. we do not believe that the determination that the LFA has received more than one com;plaint per community unit served by the operator before filing a complaint against the operator's rates in that community unit and certifying to the date of the first valid complaint will require any specialized skills. 180. Small Cable Operators. The 1996 Act exempts small cable operators in some circumstances from the rate regulation requirements of Section 623 of the Communications Act. The Communications Act at 47 U.S.C. 543(m)(2) defines a small cable operator as a cable operator that, directly or through an affiliate, serves in the aggregate fewer that 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000." Under the Communications Act, at 47 U.S.C. 543(m)(1), a small cable operator is not 74 Federal Communications Commission FCC 99 subject to the rate regulation requirements of Sections 543(a). (b). and (c) on cable programming ser% ice tiers (CPSTs") in any franchise area in which it serves 50.000 or fewer subscribers. Tile interim rules set forth a procedure that enables operators to assert eligibility for small operator treatment. The rules adopted here today allow LFAs a 90 day response period to determine eligibility for small operator treatment. Our rules also allow operators to appeal to the Commission when information requests from LFAs are deemed to burdensome and the LFA refuses to drop or modify the information request in response to the operator's challenge. An LFA may request an operator seeking certification to identify in writing all of its affiliates providing cable service. the total cable subscriber base of itself and each affiliate. and the aggregate gross revenues of all its cable and non-cable affiliates. Small operators %%ith only one tier of service subject to regulation as of December 31. 1994 are deregulated on all tiers of service if they otherwise qualify for small operator treatment. A system that now offers more than one tier of service but had only one tier subject to regulation on December 31, 1994 would now be deregulated on its BST if it meets the relevant numerical thresholds and limits of the statute. Operators clairming eligibility for deregulatory treatment based on this aspect of the small operator provision may assert such eligibility consistent with the procedures established in the Order. We do not believe that the rules adopted here today will require any specialized skills beyond those already used by LFAs and operators beyond those already required by our rules. 181. Transition from Small Operator Treatment. In the Notice, we requested comment regarding the implementation of a transition process for operators that lose eligibility for small operator treatment and become subject to regulation. The 1996 Act mandates such an exemption for small cable operators in franchise areas where they serve fewer than 50,000 subscribers but, with respect to operators that do not meet these criteria, gives us no more discretion than we had before. When a system no longer meets the small cable operator criteria for deregulation, the statute imposes rate regulation. In the Order, we allow small operators that lose eligibility for small operator treatment to maintain the rates that prevailed prior to the loss of eligibility. We do not believe that the rule adopted here today will require any specialized skills beyond those already used by LFAs and operators beyond those already required by our rules. 182. Technical Standards. In the Notice, we sought comment on whether Section 624':) of the Communications Act. as amended by Section 301(e)of the 1996 Act precludes an LFA from enforcing the Commission's technical standards. In the Order, we preclude LFAs from specifying the technical means by which a cable operator delivers its signal to subscribers. 183. Subscriber Notice. Section 301(g)of the 1996 Act added a new subsection to Section 632 of the Communications Act. We amended Sections 76.30 and 76.964 of our rules to correspond with this statutory revision.4' The legislative history of the House amendment concerning notice to subscribers of rate increases stated that "[n]otice need not be inserted in the subscriber's bill.,'41 Accordingly, in the Interim Order. we determined that notices of rate changes provided to subscribers through written announcements on the cable system or in the newspaper will be presumed sufficient. We stated that we would address any disputes that might arise in this area on a case-by-case basis. In the Order, we allow cable operators and LFAs to negotiate notice procedures that are reasonable in light of local circumstances. In the absence of an agreement, the LFA should prescribe notice requirements consistent with this Order. "'s/nterim Order at 1 I FCC Rcd 5952. See 47 C.F.R. § 76.964(b). ""Id citing Conference Report at 169. 75 Federal Communications Commission FCC 99.5- We do not believe that the rule adopted here today will require any specialized skills beyond those already used by LFAs and operators beyond those already required by our rules. 181. Steps Taken to Minimize the Significant Economic Impact on Small Entities and Sizniftcant Alternatives Rejected. 185. Effective Competition. The 1996 Act adds a fourth test for effective competition to Section 623 of the Communications Act."' The rules adopted in this Order will affect municipalities and cable operators, including those that are small entities. The rules adopted in this Order require that a finding of effective competition must be based on a record that demonstrates that effective competition exists, and not on a mere claim by a cable operator that it is subject to effective competition. Our rules state that all claims of effective competition should be filed as petitions for determinations of effective competition under Section 76.7 of our rules. Adopting this procedure as the sole means of establishing effective competition eliminates confusion and comports with the statutory requirement that such determinations be made by the Commission. 186. CPST Rate Complaints. A number of cable operators contend that the LFA should notify the operator each time a subscriber complaint is received. and these operators suggest proposals for implementation of this contention. In many instances,these proposals would place unnecessary burdens on both LFAs and cable operators. We see no purpose in requiring an LFA to notify the cable operator of every CPST rate complaint the LFA receives from a subscriber, particularly since the LFA may choose not to file a complaint. There is no indication in the 1996 Act or its legislative history that Congress sought to impose additional burdens on LFAs in this regard. Moreover, we presume that subscriber complaints are matters of public record that are accessible under state or local laws. An LFA should not file a complaint with the Commission that is based on subscriber complaints concerning the BST or premium services. Furthermore, the LFA must determine that it has received more than one complaint per community unit served by the operator before filing a complaint against the operator's rates in that community unit. Beyond measures such as these, which merely ensure that the LFA's complaint is not procedurally defective under Section 623(c)(3), we see nothing in the 1996 Act that increases the role of LFAs with respect to subst...,tive review of CF-T rates. Allowing the LFA to consider both the subscriber complaints and the cable operators rate justification will enable the LFA to make a more informed decision as to whether or not to file a complaint with the Commission. Furthermore, the 90 day window for the Commission to consider a rate complaint is triggered when the complaint is filed. We do not believe that the Commission should begin its proceeding with less than a complete record. As noted elsewhere, the rules we are adopting here impose no obligation on the LFA to file a complaint, nor do they require the LFA to perform any in-depth analysis. Rather they allow LFAs an opportunity, consistent with Congressional intent,to participate in the rate regulation process to the degree they choose to do so. 187. Small Cable Operators. The 1996 Act exempts small cable operators in some circumstances from the rate regulation requirements of under Section 623 of the Communications Act. The Communications Act at 47 U.S.C. 543 (m) (2) defines a small cable operator as""a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000." Under the Communications Act. at 47 U.S.C. 543 (m) (1), a small cable operator is not subject to the rate regulation requirements of Sections 543 (a), (b) and (c) on cable programming 4671996 Act § 301(b)(3); see 47 U.S.C. § 543(I)(1)(D): see also 47 C.F.R. § 76.905(b)(4). 76 Federal Communications Commission FCC 944-5- service yservice tiers ("CPSTs") in any franchise area in which it serves 50.000 or fewer subscribers. The interim rules set forth a procedure that enables operators to assert eligibility for small operator treatment. We sought comment regarding alternative mechanisms or approaches that would further minimize the administrative burdens on operators and franchising authorities in cases where eligibilit\ for small operator treatment is not in dispute."" Cable operators support simplified procedures for asserting eligibility for small operator treatment. The SCBA argues that a simple declaration of eligibility should he sufficient and that the LFA's failure to act on the certification declaration within 60 days would render the certification effective. SCBA requests rules that would allow operators to appeal to the Commission when information requests made by LFAs are considered unduly burdensome. Under the 1996 Act, operators qualifying for small operator treatment are exempt from certain regulatoryprovisions on the date of enactment. Operators claiming entitlement to such treatment may operate accordingly. We believe, however, that LFAs must have the opportunity to assess the circumstances of each case. The 90-day response period adopted here today allows LFAs sufficient time to determine eligibility for small operator treatment. Our rules also, however, allow operators to appeal to the Commission when information requests from LFAs are deemed too burdensome and the LFA refuses to drop or modify the information request in response to the operator's challenge. An LFA may request an operator seeking certification to identify in writing all of its affiliates providing cable service, the total cable subscriber base of itself and each affiliate, and the aggregate gross revenues of all its cable and non-cable affiliates. 188. Transition From Small Operator Treatment. In the Notice, we requested comment regarding the implementation of a transition process for operators that lose eligibility for small operator treatment and become subject to regulation. The 1996 Act mandates such an exemption for small cable operators in franchise areas where they serve fewer than 50,000 subscribers but, with respect to operators that do not meet these criteria, gives us no more discretion than we had before. When a system no longer meets the small cable operator criteria for deregulation, the statute subjects the small operator to rate regulation. At the same time, we are concerned that the prospect of rate rollbacks either immediately at the local level or at the time of rate adjustments at the federal level will create an incentive for operators to restrict their own growth, which would disserve both consumers and operators. Accordingly, in the Order,we allow small operators that lose eligibility for small operator treatment to maintain the rates that prevailed prior to the loss of eligibility. This will ensure that operators are not su';ected to sudden a--d disruptive rate rollbacks that create a perverse incentive for small operators to restrict their own growth. Our objectives are to minimize disruption to newly regulated operators and to assure operators that successful subscriber growth will not adversely affect their economic position. 189. Technical Standards. In the Notice, we sought comment on whether Section 624(e) of the Communications Act,as amended by Section 301(e)of the 1996 Act precludes an LFA from enforcing the Commission's technical standards. In the Order, we agree with commenting LFAs that local enforcement is not precluded. In the Notice, we also sought comment on the language in Section 624(e) that provides that no state or franchising authority may prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology. Municipal interests argue that burdens for small governmental entities will increase if LFAs are unable to negotiate facilities and equipment requirements, because the LFAs will need to devise indirect means of assuring community needs and interests are met under renewal portions of the Communications Act. In the Order, we note the lack of controversy regarding interpretation of"subscriber equipment." With respect to "transmission technology," we note that the term is commonly used to include both the transmission medium and the 468 Notice, 11 FCC Rcd at 5969. 77 i Federal Communications Commission FCC 99_5- specific modulation or communications format, and find that it is reasonable clear that local authorities may not control whether a cable operator uses digital or analog transmission nor determine whether its transmission plant is composed of coaxial cable, fiber optic cable, or microwave radio facilities. %Ve further note that an LFA's authority to establish requirements for facilities and equipment must be read in the context of the limits imposed by the revisions to Section 624(e). As stated in the (b-der. the legislative history of the amendment to Section 624(e) states that the patchwork of regulations that would result from a locality-by-locality approach (in the areas of technical standards, transmission technology. and subscriber equipment) is particularly inappropriate in light of today's intensely dynamic technological environment. Allowing LFAs to specify transmission technology would be inconsistent with the clearly stated intent of Congress. 190. Subscriber Notice. Section 301(g) of the 1996 Act added a new subsection to Section 632 of the Communications Act. We amended Sections 76.30 and 76.964 of our rules to correspond with this statutory revision."") The legislative history of the House amendment concerning notice to subscribers of rate increases stated that "[n]otice need not be inserted in the subscriber's bill.""" Accordingly. in the Interim Order. we determined that notices of rate changes provided to subscribers through written announcements on the cable system or in the newspaper will be presumed sufficient. We stated that we would address any disputes that might arise in this area on a case-by-case basis. In the Report and Order, we conclude that Congress intended to limit the Commission's discretion in this area but that Congress did not intend to eliminate completely the role of regulatory authorities. Congress specifically preserved LFA authority to enact and enforce consumer protection laws to the extent not specifically preempted by Title VI of the Communications Act. We also concluded that Congress did not give cable operators unbridled discretion regarding the means for notifying subscribers of changes in rates and service. Congress allowed cable operators to exercise their sole discretion within the constraints of "reasonable written" means of giving notice. LFAs and the Commission retain the authority to determine that a particular mechanism is not reasonable. We noted, however, the suggestion in the legislative history that cable operators need not give subscribers individual written notice of rate and service changes in their bills. 1 Municipal par--s argue that burdens for small governmental entities will increase if operators are not required to give direct notice to subscribers of rate increases, because LFAs will receive additional complaints from subscribers that were not aware that rate increases were taking place. Municipal parties state that reasonableness of a notice of a rate change appearing in a newspaper depends upon several variables such as its location in the neµspaper, the size of the notice, and the font of the print used in the notice. In the Order, we allow cable operators and LFAs to negotiate notice procedures that are reasonable in light of local circumstances. In the absence of an agreement, we allow the LFA to prescribe notice requirements consistent with this Order. 192. Report to Congress: The Commissicm Hill send a copy of the Report and Order, including this FRFA, in a report to be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, see 5 U.S.C. S 801(aN I XA). In addition, the Commission will send a copy of the Report and Order, including FRFA, to the Chief Counsel for Advocacy of the Small `b"lnterim Order at 11 FCC Red 5952. See 47 C F R ; 761)64(b). 0701d. citing Conference Report at 169. ,8 Federal Communication ommission FCC 94 Business Administration. A copy of the Report and Order and FRFA (or summaries thereof) %�ili aISo be published in the Federal Register. See 5 U.S.C. § 604(b). XIV. PAPERWORK REDUCTION ACT OF 1995 ANALYSIS 193. The requirements adopted in this Report and Order have been analyzed with respect to the Paperwork Reduction Act of 1995 (the "1995 Act") and found to impose modified information collection requirements on the public. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget("OMB")to take this opportunity to comment on the information collection requirements contained in this Report and Order, as required by the 1995 Act. Public comments are due 30 days from date of publication of this Order in the Federal Register. OMB comments are due on or before 60 days from date of publication of this Order in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission,including=whether the information shall have practical utility: (b) the accuracy of the Commission's burden estimates. (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. 194. Written comments by the public on the modified information collection requirements are due 30 days from date of publication of this Report and Order in the Federal Register. Written comments must be submitted by OMB on the modified information collection requirements on or before 60 days after date of publication in the Federal Register. In addition to filing comments with the Secretan•, a copy of anv comments on the information collections contained herein should be submitted to Judy Boley. Federal Communications Commission. Room 1-C804. 445 l2th Street. S.W., Washington. DC .20554. or via the Internet tojbolev@fcc.gov and to Timothy Fain, OMB Desk Officer, 10236 NEOB. 725 - 17th Street. N.W.. Washington. DC 20503 or via the Internet to fain_t@al.eop.gov. 79 Federal Communications Commission FCC 99-5- XV. ORDERING CLAUSES 195. Accordingly, IT IS ORDERED that, pursuant to Sections 4(i). 40). 303(r), as amended. 47 U.S.C. §§ 154(i), 1540), 303(r), and the Telecommunications Act of 1996. Sections 301 and 30-2, the requirements and policies discussed in this Report and Order, ARE AMENDED as set forth below. 196. IT IS FURTHER ORDERED that the requirements and regulations established in this decision shall become effective upon approval by OMB of the new information collection requirements adopted herein, but no sooner than 60 days after publication in the Federal Register. 197:- IT IS FURTHER ORDERED that the Commission's Office of Public Affairs. Reference Operations Division, SHALL SEND a copy of this Report and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION Ma¢alie Roman Salas Secretary 80 j A Federal Communicatio Commission FCC 94 APPENDIX A COMMENTERS Alliance for Community Media, Consumer Project on Technology. and Alliance for Communications Democracy Allied Associated Partners. LP and GELD Information Systems Bell Atlantic BellSouth Corporation ("BellSouth") Cable Telecommunications Association ("CATA") Cablevision Systems Corporation ("Cablevision") California Cable Television Association ("CCTA") City and County of Denver, CO ("Denver") City of Fairfield, CA ("Fairfield") City of Indianapolis. IN ("Indianapolis") Cole. Raywid, & Braverman (on behalf of Bresnan Communications Company. L.P.. Charter Communications, Inc.. Daniels Communications, Inc.. Halcyon Communications Partners. James Cable Partners, L.P., Jones Intercable, Inc.. Rifkin & Associates, Inc., TCA Cable TV, Inc. ("Cole, Raywid")) Comcast Cable Communications, Inc. ("Comcast") Cook Jr., William A. ("William Cook") Cox Communications, Inc. ("Cox") C-Tec Cable Svstems, Inc. and Mercom, Inc. ("C-TEC and Mercom") Falcon Holding Group, L.P. ("Falcon") Fleischman and Walsh, L.L.P (on behalf of Adelphia Communications Corporation. Arizona Cable Telecommunications Association. Century Communications Corporation. Charter Communications, Inc.. Insight Communications Co.. State Cable TV Corp., and Suburban Cable TV Co. Inc. ("Fleischman")) FrontierVision Operating Partners, L.P. ("FrontierVision") Greater Metro Cable Consortium. Metro Denver, CO ("GMCC") GTE Service Corporation ("GTE") Independent Cable & Telecommunications Association ("ICTA") Kramer, Monroe & Wyatt ("Kramer") Massachusetts Cable Television Commission("Massachusetts Cable Commission") National Cable Television Association, Inc. ("NCTA") National League of Cities and National Association of Telecommunications Officers and Advisors ("League of Cities and NATOA") National Telephone Cooperative Association ("NTCA") New England Cable Television Association, Inc. ("NECTA") New Jersey State Board of Public Utiiites ("New Jersey Board") New Jersey State Division of the Ratepayer Advocate ("New Jersey Ratepayer Advocate") New York City Department of Information Technology and Telecommunications ("New York City") New York State Department of Public Service ("State of New York") 81 s r Federal Communications Commission FCC 99 Optel. Inc. ("OpTel") People for the American Way and Media Access Project Residential Communications Network. Inc. SBC Communications. Inc. and Southwestern Bell Video Systems. Inc. ("SBC") Small Cable Business Association ("SCBA") State of California Agency ("SMATV") Tele-Communications, Inc. ("TCI") Time Warner Cable (Time Warner) United States Small Business Administration ("SBA") United States Telephone Association ("USTA") United States Wireless Cable. Inc. and Wedgewood Communications, Inc. ("U.S. Wireless and Wedgewood") US WEST. Inc. ("U.S. WEST") Wireless Cable Association International, Inc. ("WCA") REPLY COMMENTERS Alliance for Community Media Ameritech New Media, Inc. ("Ameritech") Bell Atlantic City of Atlanta. GA City of Los Angeles, CA; National League of Cities: and National Association of Telecommunications Officers & Advisors ("Los Angeles, League of Cities, and NATOA") City of Austin. TX ("Austin") City of Lake Forest, 1L ("Lake Forest") City of Naperville, IL ("Naperville") City of Rolling Meadows, IL ("Rolling Meadows") Cob_, Raywid. & Bra. ..-man (on behalf of Bresnan Communications Company, L.P.. Charter Communications, Inc., Daniels Communications, Inc., Halcyon Communications Partners. James Cable Partners, L.P., Jones Intercable, Inc.. Rifkin & Associates, Inc., TCA Cable TV, Inc. ("Cole. Raywid")) Comcast Cable Communications, Inc. ("Comcast") Fleischman and Walsh, L.L.P (on behalf of Adelphia Communications Corporation. Arizona Cable Telecommunications Association, Century Communications Corporation, Charter Communications, Inc., Insight Communications Co., State Cable TV Corp., and Suburban Cable TV Co. Inc. ("Fleischman")) General Electric Capital Corporation ("GE Capital") Independent Cable & Telecommunications Association ("ICTA") J.P. Morgan & Company, Brown Brothers Harriman & Co., Olympus Partners, and First Union Capital Partners, Inc. Massachusetts Cable Television Commission("Massachsetts Cable Commisssion") Metropolitan Area Communications Commission representing Oregon communities ("MACC") Michigan, Illinois and Texas Communities 82 Federal Communicatiot Commission FCC 94 National Cable Television Association. Inc. ("NCTA") New York Cite Department of Information Technology and Telecommunications ("Ne%% York CIt%") Optel. Inc. ("OpTel") Small Cable Business Association ("SCBA") Tele-Communications. Inc. ("TCI") Time Warner Cable ("Time Warner") United States Telephone Association ("USTA") United States Wireless Cable. Inc. and Wedgewood Communications. Inc. ("U.S. Wireless and Wedgewood") US WEST, Inc. ("U.S. WEST") Viacom. Inc.-("Viacom") Village of Lincolnwood, IL ("Lincolnwood") Wireless Cable Association International. Inc. ("WCA") 83 t s Federal Communications Commission FCC 91)--;- APPENDIX 9APPENDIX B Part 76 of Title 47 of the Code of Federal Regulations is amended as follows: PART 76 -- MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE I. The authority citation for Part 76 continues to read as follows: AUTHORITY: 47 U.S.C. 151. 152. 153. 154. 301. 302. 303. 303a. 307, 308. 309. 312. 3 15. ;1 325. 503. 521. 522, 531, 532, 533, 534. 535, 536, 537, 543. 544, 544x, 545, 548. 549. 552. 554. 556. 558. 560. 561, 571, 572, 573. 2. Section 76.701 is amended by adding a new note to paragraph 701(b) as follows: § 76.701 Leased access channels. NOTE: "Nudity" in paragraph (b) is interpreted to mean nudity that is obscene or indecent. J. Section 76.901 is amended by adding a new paragraph (f) to read as follows: Sec. 76.901 Definitions. (f) Small Cable Operator. A small cable operator is an operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250.000.000. For purposes of this definition, an operator shall be deemed affiliated with another entity if that entity holds a 20 percent or greater equity interest (not including truly passive investment) in the operator or exercises de jure or de facto control over the operator. NOTE 1: Using the most reliable sources publicly available, the Commission periodically will determ: - and give public notice of the subscriber count that will serve as the I percent threE' Ad until a new number is calculated. NOTE 2: For a discussion of passive interests with respect to small cable operators, see Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996. Report and Order in CS Docket No. 96-85, FCC 99-57 (released March --, 1999). NOTE 3: If two or more entities unaffiliated with each other each hold an equity interest in the small cable operator, the equity interests of the unaffiliated entities will not be aggregated with each ' other for the purpose of determining whether an entity meets or passes the 20 percent affiliation threshold. 3. Section 76.905 is amended by revising paragraph 76.905(g) to read as follows: § 76.905 Standards for identification of cable systems subject to effective competition. 84 ' s t Federal Communications Commission FCC 914-;- (a) y(g) In order to offer comparable programming as that term is used in this section. a competing multichannel video programming distributor must offer at least 12 channels of \ideo programming, including at least one channel of nonbroadcast service programming. 4. A new Section 76.907 is added to read as follows: 76.907. Petition for a determination of effective competition. (a) A cable operator (or other interested party) may file a petition for a determination of effective competition with the Commission pursuant to the Commission's procedural rules in § 76.7. (b) The cable operator bears the burden of rebutting the presumption that effective competition does not exist with evidence that effective competition, as defined in § 76.905. exists in the franchise area. NOTE: The criteria for determining effective competition pursuant to § 76.905(b)(4) are described in Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996. Report and Order in CS Docket No. 96-85. FCC 99-57 (released March --. 1999). (c) If the evidence establishing effective competition is not otherwise available. cable operators may request from a competitor information regarding the competitor's reach and number of subscribers. A competitor must respond to such request within 15 days. Such responses may be limited to numerical totals. In addition. with respect to petitions filed seeking to demonstrate the presence of effective competition pursuant to § 76.905(b)(4), the Commission may issue an order directing one or more persons to produce information relevant to the petition's disposition. 5. Section 76.911 is amended by revising paragraphs (a) and (ax 1) to read as follows: by deleting paragraph (b); and by renumbering paragraphs (c). (d), and (e) to read (b). (c). and (d). respectively. § 76.911 Petition for reconsideration of certification. (a) A cable operator (or other interested party) may challenge a franchising authority's certification by filing 1petition for reconsid .ration pursuant tc S 1.106. The petition may allege either of the following: (1) The cable operator is not subject to rate regulation because effective competition exists as defined in § 76.905. Section 76.907(b) and (c) apply to petitions filed under this section. • R t 4 t 6. Section 76.915 is deleted. 7. Section 76.934 is amended by adding a note at the end of the rule to read as follows: § 76.934 Small systems and small cable companies NOTE: For rules governing small cable operators, see § 76.990 of this Subpart. 8. Section 76.950 is amended by revising paragraph (b) as follows. 85 t s Federal Communications Commission FCC 9U-;- § 76.950 Complaints regarding cable programming service rates. R # R # R (b) This section shall not apply to cable programming services provided after March 31. 1999. 9. Section 76.952 is amended by revising paragraph (a) as follows: § 76.952 Information to be provided by cable operator on monthly subscriber bills. (a) The name, mailing address and phone number of the franchising authoritN, unless the franchising authority in writing requests the cable operator to omit such information. 10. Section 76.956 is amended by revising paragraph (a) to read as follows: § 76.956 Cable operator response. (a) Unless otherwise directed by the local franchising authority, a cable operator must file with the local franchise authority a response to the complaint. The response shall indicate when the cable operator received notice of the complaint. Service by mail is complete upon mailing. See r, 1.47(f) of this chapter. The response shall include the information required by the appropriate FCC form, including rate cards, channel line-ups, and an explanation of any discrepancy in the figures provided in these documents and the rate filing. The cable operator must file its response with the local franchise authority via first class mail. 11. Section 76.961 is amended by revising paragraph (b) to read as follows: § 76.961 Refunds. R R R R R (b) The cumulative refund due subscribers shall be calculated from the date of the first complaint filed with the franchising authority until the date a cable operator implements a prospective rate reduction as ordered by the Commission pursuant to § 76.960. The Com: :ssion shall calculate refund liability according to the rules in effect for determining the reasonableness of the rates for the period of time covered by the complaint. 12. Section 76.964 is amended by revising paragraph (b) to add the word "written" between the words "reasonable" and "means" as follows: § 76.964 Written notification of changes in rates and services. (b) To the extent the operator is required to provide notice of service and rate changes to subscribers, the operator may provide such notice using any reasonable written means at its sole discretion. 13. Section 76.984 is amended by deleting the last sentence of paragraph (b): by moving the last 2 sentences of paragraph (c)(2) to new paragraph (c)(3), and by adding notes 1 and 2 as follows: 86 Federal Communications Commission FCC ()Q--;- § 76.984 Geographically uniform rate structure. (cx2) Any video programming offered on a per channel or per program basis. (c)(3) Bulk discounts to multiple dwelling units shall not be subject to this section. except that a cable operator of a cable system that is not subject to effective competition may not char;_e predatory prices to a multiple dwelling unit. Upon a prima facie showing by a complainant that there are reasonable grounds to believe that the discounted price is predaton•, the cable system shall ltaye the burden of showing that its discounted price is not predatory. NOTE 1: Discovery procedures for predatory pricing complaints. Requests for discovers %%III be addressed pursuant to the procedures specified in § 76.7(f). NOTE 2: Confidential information. Parties submitting material believed to be exempt from disclosure pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. 552(b), and the Commission's rules, § 0.457, should follow the procedures in § 0.459 and § 76.9. 14. A new Section 76.990 is added to read as follows: § 76.990 Small cable operators. (a) Effective February 8. 1996, a small cable operator is exempt from rate regulation on its cable programming services tier, or on its basic service tier if that tier was the only service tier subject to rate regulation as of December 31, 1994, in any franchise area in which that operator services 50.000 or fewer subscribers. (b) Procedures. (1) A small cable operator, may certify in writing to its franchise authority at any time that it meets all criteria necessary to qualify as a small operator. Upon request of the local franchising authority, the operator shall identify in writing all of its affiliates that provide cable service, the total subscriber base of itself and each affiliate, and the aggregate gross revenues of its cable and non-cable affiliates. Within 90 days of receiving the original certification, the local franchising authority shall determine whether the operator qualifies for deregulation and shall notify the operator in writing of its decision, although this 90=day period shall be tolled for so long as it takes the operator to respond to a proper request for information by the local franchising authority. An opt.ator may appeal to th- Commission a Ie J franchise authority's information request if the operator seeks to challenge the information request as unduly or unreasonably burdensome. If the local franchising authority finds that the operator does not qualify for deregulation, its notice shall state the grounds for that decision. The operator may appeal the local franchising authority's decision to the Commission within 30 days. (2) Once the operator has certified its eligibility for deregulation on the basic service tier, the local franchising authority shall not prohibit the operator from taking a rate increase and shall not order the operator to make any refunds unless and until the local franchising authority has rejected the certification in a final order that is no longer subject to appeal or that the Commission has affirmed. The operator shall be liable for refunds for revenues gained (beyond revenues that could be gained under regulation) as a result of any rate increase taken during the period in which it claimed to be deregulated, plus interest, in the event the operator is later found not to be deregulated. The one-year limitation on refund liability will not be applicable during that period to ensure that the filing of an invalid small operator certification does not reduce any refund liability that the operator would otherwise incur. 87 Federal Communications Commission FCC QQ (3) Within 30 days of being served with a local franchising authorit-,•'s notice that the local franchising authority intends to file a cable programming services tier rate complaint. an operator ma\ certify to the local franchising authority that it meets the criteria for qualification as a small cable operator. This certification shall be filed in accordance with the cable programming services rate complaint procedure set forth in § 76.1402. Absent a cable programming services rate complaint. the operator may request a declaration of CPST rate deregulation from the Commission pursuant to 76.7. (c) Transition from small cable operator status. If a small cable operator subsequently becomes ineligible for small operator status, the operator will become subject to regulation but maN maintain the rates it charged prior to losing small cable operator status if such rates (with an allowance for minor variations) were in effect for the three months preceding the loss of small cable operator status. Subsequent rate increases following the loss of small cable operator status will be subject to generally applicable regulations governing rate increases. Nom For rules governing small cable systems and small cable companies, see § 76.934 of this Subpart. 15. Section 76.1401 is amended by deleting paragraphs (a), (c), and (d) and by - renumbering paragraph (b) as paragraph (a). 16. Section 76.1403 is deleted. 88 Federal Communications Commission FCC QQ-5- DISSEN"TING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH Re: Implementation of Cable Act Reform Provisions of the Telecommunications Act. CS Docket No. 96-95 In implementing the "effective competition" provision of the 1996 Telecommunications Act. Part II of this Report and Order requires that a local exchange carrier's service area "substantially overlap" that of the incumbent cable operator in a franchise arca Because the plain language of the statute reveals no substantiality test. and because other statutory definitions of effective competition expressly include such tests, I respectfully dissent from Part Il. 1 start with the text of the statute. Section 623(lx I XD) states that "effective competition" exists when: a local exchange carrier or its affiliate(or any multichannel video programming distributor ["MVPD"] using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise arca, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. 47 U.S.C. section 543(Ix 1)(D)(emphases added). I now turn to the context of the provision. Section 623(I)(1xD) was not the first time that Congress defined the meaning of "effective competition" for deregulatory purposes. The subsections immediately pr.,ceding the LEC e::;ctive competition provision, which were enacted in 1992, also define that term. Significantly, each of these definitions includes some kind of a pass or penetration rate that a new entrant must meet before a finding of effective competition is made and deregulation follows. In particular, these definitions provide that effective competition exists when: fewer than 30 percent of the households in the franchise area subscribe to the service of a cable system, the franchise area is served by at least two unaffiliated MVPDs each of which offers comparable video programming to at least 50 percent of the households in the franchise arca . . . [and] the number of households subscribing to programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the households in the franchise area; [or] 89 Federal Communications Commission FCC 9y a MVPD operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area: Id. sections 623(1x1)(A)-(C) (emphases added). Two things about the above-quoted statutory language are salient. First. nothing in subsection(D) states that the LEC must provide video programming to substantially the same number of households. or in substantially the same geographic area. as does the incumbent cable operator. There is simple no textual basis for a"substantial overlap"test. In terms of geography, all the statute requires is that the LEC offer service "in the franchise area," not "in a substantial part of the franchise area" or "in most of tite franchise area." Notably, the definition is conditional — for instance, the delivery cannot be via direct satellite, and the services must be comparable — but a geographic coverage requirement within the franchise area is not one of the conditions set out by the statute. It is an extra condition that is entirely of the Commission's making and wholly extra-statutory.' Second, the absence of language in subsection (D) regarding a coverage test is particularly conspicuous when considered in the context of the surrounding provisions. The other subsections defining effective competition include — often immediately after the word "offer" — some kind of threshold test for the substantiality of the offering in question. But after the word "offer" in subsection (D), there is no such test. "[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Russello v. United States. 464 U.S. 16, 23 (1983) (internal quotation marks omitted). Congress clearly knew how to tack a numerical threshold onto the offering requirement, and it did not do so here. We cannot conveniently ignore the fact of this exclusion.= The Notice in this matter suggested that LEC competition cannot be "effective" when it is not offered to a significant number of households within the franchise area. Congress has not asked the Commission to define the term "effective competition" based on our understanding of what is and is not effective in terms of a market disciplining presence. Rather. Congress has alreadv defined the term. And, under that definition, if a LEC offers progratrming comparable to .nat of the local able company 'if there were any doubt about the clarity of the statute, the legislative history supports the view that subsection (D)contains no coverage, pass. or penetration test. "Offer" in subsection(D)was intended to mean the same thing as in 47 CFR section 76.905(e). See H.R. Conf. Rep. No. 458. 104th Cong.. 2d Sess. 170 (1996). That regulation includes no coverage, pass, or penetration rate. To be sure, the regulation establishes some requirements for an "offering"—e.g.. a reasonable awareness on the part of potential subscribers of the availability of the services— but it sets no threshold limit for the breadth or scope of the offering. 'The relevant question is not whether Congress meant the phrase "offers video programming directly to subscribers" to mean "offer to subscribers generally" or "offer to as few as two subscribers." This question is properly answered by first examining the statute — specifically, the object of the phrase "offer to," "subscribers." The plural indicates that Congress meant two or more; the statute states nothing more, and nothing less, than this. And that result is not an absurd one, given the broad deregulatory nature of the Telecommunications Act of 1996. Unfortunately, the majority's reading of section 623(1x1 XD) does not so much comport with Congressional intent as with their own policy judgments. 90 Federal Communications Commission FCC 44 "directly to subscribers . . . in the franchise area." by any means except direct-to-home satellite. each and every element of the definition is met. Cable rate deregulation then must follow as a matter of la%%. 91 g � Federal Communications Commission FCC 94 DISSENTING STATEMENT OF COMMISSIONER MICHAEL POWELL Re: Implementation of Cable Act Reform Provisions of the Telecommunications Act. CS Docket No. 96-95 During my confirmation, 1 was asked b}' a Senator whether 1 would implement communications law as written by Congress even if I personally disagreed with the outcome. I promised that 1 %%ould. for that was the duty of a regulator. Consistent with that promise. I respectfully dissent from Part Il of this Report and Order which requires that a local exchange carriers (LEC) service area must "substantially overlap" that of the incumbent cable operator in a franchise area before the LEC can be said to provide effective competition under Section 623(I)(ixD) of the Communications Act. As Commissioner Furchtgott-Roth persuasively argues in his dissenting statement,this result cannot be squared with the plain language of the statute. Having said this, I will note that I can appreciate the desire of the majority to read this provision more broadly. One can reasonably argue that it is not desirable to deregulate a monopole cable provider when it faces only minimal competition in its franchise area. I would also concede that if the other three effective competition" provisions of Section 623(1) did not specifically include pass or penetration tests, the Commission might have the latitude to assume that Congress intended some type of substantial overlap test. Given the context of the section 623(!)(1 XD), however, 1 see no such latitude. It is clear from the text of section 623(1) that where Congress intended the Commission to apply a pass or penetration test, it included the test in the statute. Congress.apparently, chose not to include a pass or penetration standard in the LEC effective competition test for whatever reason, and it is improper for the Commission to assume that Congress could not have intended what it wrote. Although we might think that some possible ramifications of interpreting the statute as written are extreme, this agency cannot substitute its judgement for that of Congress. 92 Federal Communications Commission FCC 94-4- SEPARATE STATEMENT OF COMMISSIONER GLORLA TRISTANI In the Matter of Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996 -- CS Docket No. 96-85 1 write separately to clarify my views on the technical standards section. First, I believe that the Order fails to adequately acknowledge the ambiguity of the term "transmission technology." As the comments reflect,that term can be interpreted in several different ways. each plausible on its face. Neither the Communications Act, the legislative history, nor Commission precedent (until today) provide any clear guidance for choosing one definition over another. Thus. while I do not disagree with the interpretation of"transmission technology" ultimately adopted in today's Order. it is not the only plausible interpretation of the term. Second, I would have made it clearer that parties should be protected from piecemeal abrogation of existing franchise agreements. As the Order notes. Section 624(e) was signed into law over three years ago. Since that time, the Commission failed to provide any guidance as to the meaning of Section 624(e), thereby forcing parties to enter into agreements based upon their own interpretation of the statute. Given Section 624(e)'s ambiguity, parties may have mistakenly drafted provisions that they believed were permissible regulation of facilities and equipment under Section 624(b). but which under todav's Order would constitute an impermissible regulation of transmission technology. These mistakes were mutual: as the item notes. we have not received a single formal complaint from any party claiming that its Section 624(e) rights have been violated. Moreover, these mistakes were avoidable. Had the Commission spoken earlier, parties could have phrased their agreements in a way that would have complied with today's Order. Thus, given the Commission's delay and the parties' mutually mistaken reading of an ambiguous statute. I believe it would be patently unfair for these provisions to simply be struck from existing franchise agreements while the remainder of the agreement is enforced. I express no opinion on whether suc'.. agreements should be found enforceable or rescinded in their entirety. or refor• :d pursuant to renegotiation between the parties. Indeed, I believe that simply striking contractual provisions that may now violate Section 624(e), without the opportunity for renegotiation, would violate the framework that Congress established in Section 624. Congress granted local authorities the right to regulate facilities and equipment in Section 624(b), so long as they did not step over the vague line into "transmission technology." For three years, the Commission provided no guidance regarding where that line was located. Now it appears that some local authorities and cable operators may have made incorrect -- albeit reasonable -- judgments about where Section 624(b) ended and Section 624(e) began. Had they had the benefit of today's Order, these mistakes could have been corrected in the drafting stage. Simply striking specific franchise provisions would deprive local communities of their legitimate rights to regulate facilities and equipment under Section 624(b). It would find that because they inadvertantly stepped over the line that divides Section 624(b) and Section 624(e), that they have lost all of their rights under Section 624(b) for the length of 93 a Federal Communications Commission FCC 91)--;- the Uthe franchise term. Local communities should not pad such a high price for the Commission', indefensible delay. Finally, I would be opposed to extending the definition of"transmission technolo:_-" beyond the specific examples cited in the Order.' For instance. I would be opposed to extending_ the definition to prohibit agreements that provide for a certain MHz level or a certain number of homes per fiber node. I believe we have done our statutory duty to fairly interpret the meaning of "transmission technology." Am, expansion of that definition. I believe, would tread on the legitimate rights of local authorities. 'Specifically, the Order states that the term "transmission technology" has been used to include both the transmission medium (i.e., microwave, satellite, coaxial cable, twisted pair copper telephone line, and fiber optic systems) and the specific modulation or communications format (i.e., analog or digital). 94 CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 i DEPARTMENT OF PLANNING AND DEVELOPMENT Poq�tEO H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: 607/274-6550 Fax: 607/274-6558 TO: Budget and Administration Committee FROM: Jeannie S. Lee Economic Development Planner DATE: April 21, 1999 RE: Request for Renewal Proposal for Time Warner Cable Attached for your review is the Request for Renewal Proposal (RFRP),prepared by Rice, Williams Associates, for Time Warner Cable. As you may know, the City of Ithaca in cooperation with other outlying municipalities is in the process of renewing Time Warner's cable franchise agreement. As part of this process Rice, Williams Associates, contracted by the Ithaca Area Cable Consortium', have been in the process of gathering and assessing the community's current and future needs of the cable system. The needs assessment process included two public hearings, two task force reports, a consumer survey, and an organizational survey. In addition, financial and technical audits were conducted of Time Warner's cable system. Please review the attached document for adequacy for the purpose of submission to Time Warner Cable for a proposal response. A resolution will be provided at the Budget and Administration Committee meeting on April 28, 1999. cc: Members of the Cable Re-franchise Negotiating Committee ' Ithaca Area Cable Consortium Members: 1. City of Ithaca 2. Town of Caroline 3. Town of Groton 4. Town of Ithaca 5. Town of Lansing 6. Town of Ulysses 7. Village of Cayuga Heights 8. Village of Dryden 9. Village of Freeville 10. Village of Lansing 11. Village of Trumansburg 'An Equal Opportunity Employer with a commitment to workforce diversification." �� REQUEST FOR CABLE FRANCHISE RENEWAL PROPOSAL FOR THE ITHACA AREA CABLE CONSORTIUM April 16, 1999 TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. Minimum Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Subscriber Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consumer Compatibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Consumer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Interconnection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Government Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Educational Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 BOCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Public Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Cooperative Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Public Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 PEG Access Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Current Video Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Institutions Needing to Provide Local Programming . . . . . . . . . . . . . . . . 16 Access Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Main Studio Needs Enlargement, Redesign . . . . . . . . . . . . . . . . . . . . . . 21 Access Center Must Be Centrally Located . . . . . . . . . . . . . . . . . . . . . . . 21 More Equipment is Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Equipment Must Be Maintained, and Replaced When Outdated . . . . . . . . . 22 Studio Hours and Staffing Need to Be Increased . . . . . . . . . . . . . . . . . . . 22 Additional Video Drops Are Needed . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Future PEG Equipment Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Institutional Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Potential Institutional Network Users . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Current Coaxial Network Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 System Description: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Operations and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 The Future: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Coaxial I-Net Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Fiber Optic Upgrade of Existing I-Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Fiber Optic I-Net Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Emergency Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Regulation of the Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Franchise Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Pilot and Experimental Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Franchise Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 i II. Evaluation Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section I Ownership, Experience and Financial Resources . . . . . . . . . . . . . . . . . . . . . 47 A. Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 B. Ownership Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 C. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 D. Financial Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section II Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 A. Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 B. Pro Forma Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Section III Construction and Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 A. Service Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 B. Construction Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section IV System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 A. Channel Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 B. System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section V Channel Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 A. Access Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 B. Radio Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 C. Summary of Channels by Tier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Section VI Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 A. Rates & Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section VII Local Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 A. PEG Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section VIII Institutional Network Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 A. Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 B. Institutional and Subscriber Drops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 C. Institutional Network Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section IX Equal Employment Opportunity and Equal Business Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 A. EEO and EBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 ii Section X Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 A. Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 B. Consumer Complaint and Repair Procedures . . . . . . . . . . . . . . . . . . . . . . . 96 C. Billing Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Section XI Innovative Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 A. Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Section XII Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 A. Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 iii INTRODUCTION In preparation for the cable television renewal process, the City of Ithaca, Town of Ithaca, Town of Caroline, Town of Groton, Town of Lansing, Town of Ulysses, Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, and the Village of Freeville, New York, (The Ithaca Area Cable Consortium) conducted in-depth analyses of the future cable-related needs and interests of Ithaca. As part of the needs assessment process, the Consortium retained Rice, Williams Associates (RWA), a consultant firm, to conduct a consumer market survey, a community needs analysis, and a technical evaluation. (See attached reports.) The Consortium also convened public hearings on the renewal of Time Warner's franchise. (Summary of minutes is attached and copy of audiotape of proceeds is available upon request.) The Consortium established two Task Forces: one on public education and government access (PEG Access Task Force) and one on institutional network (I-Net/Technical Task Force). The Task Forces submitted reports on current and future community needs. (Copies are attached.) The Tompkins County Intermunicipal Cable Commission, and numerous Consortium officials and staff participated in the cable franchise renewal needs assessment process. Based on the needs assessment, the Consortium has established minimum standards for cable service in Ithaca which are contained in this Request for Renewal Proposal (RFRP) document. In accordance with the provisions of the Cable Communications Policy Act of 1984, the Cable Television Consumer Protection and Competition Act of 1992, and the Telecommunications Act of 1996, this Request for Renewal Proposal is being issued to the current cable operator in Ithaca, Time Warner Cable. 1 The deadline for submitting , (_) copies of Time Warner's renewal proposal to the Consortium which responds to and has the information required by the Consortium's Request for Renewal Proposal is _, 1999. Any questions regarding the RFRP and the proposal response should be directed to Mr. Thys Van Cort, Planning & Development Director, City of Ithaca, 108 East Green Street, Ithaca, NY 14850, (607) 274-6550. 2 I. Minimum Requirements The Consortium franchising authorities have established a number of minimum requirements and specific priorities related to the cable communications franchise. The application by Time Warner Cable (Time Warner), for franchise renewal must meet each of the minimum requirements and reflect a commitment to the priorities outlined below and provide all information requested herein. Time Warner is encouraged to present proposals in the areas encouraged by the Consortium. In this Request for Renewal Proposal, the terms "Applicant" and "Company" are used to refer to Time Warner and the term "Franchisee" is utilized when referring to requirements that will be included in any new franchise. Subscriber Network The Consortium requires the Company to provide a cable network offering continuous, high quality service to residential subscribers. The Consortium places a high priority on plans to meet the current and future cable-related needs local residents. Time Warner has upgraded the cable television system to 750 MHz. Information on the upgrade is required herein. The Consortium makes the following subscriber network requirements: ■ That cable service be provided to all residential dwelling units within the Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, West Groton, and the Village of Freeville and to every dwelling unit and developed property in the City of Ithaca. In other areas of the Consortium, service shall be provided to all residential units with a minimum of fifteen (15) residential dwelling units per cable mile within the boundaries of other Consortium communities; to all residential dwelling units of other Consortium communities with a density lower than fifteen(15) based on a line extension formula; to a lower density as the term of the contract progresses. ■ That the Consortium seeks non-residential service line extension formula for the delivery of service to non-residential areas which will expand the number of non- 3 residential establishments that can receive cable for normal cost of installation and at cost. ■ That cable service be provided to any commercial development of 100,000 square feet and 100 jobs at the owner's request. The Company is strongly encouraged to provide service to industrial parks and office complexes. The current upgrade being constructed for Ithaca will be sufficient for a franchise of a short duration. If the Company seeks a longer term, the Consortium requires the Franchisee to have a proposal which provides for state-of-the-art system upgrades and services throughout the term of the Franchise. The Consortium finds the following state-of-the-art clause acceptable: "In the event the Company, its parent company, management firm or affiliates have installed state-of- the-art improvements in services, equipment, or facilities in at least twenty percent (20%) of its other cable systems of similar size owned by the Company, its parent company, management firm, or affiliates, which increases channel capacity, provides improvements in technological performance, provides for interactive services, provides for digital programming and/or other substantial improvements available, then Company shall make said improvements available to the Consortium subscribers within one (1) year. Or in the event that Company or other Franchisees within the sixty miles have a greater channel capacity, have improvements in technological performance, provides for digital programming and/or other substantial improvements, then Company shall install said improvements within one (1) year, unless for reasons beyond the control of the Company the improvements cannot be installed within one (1) year. The Consortium franchising authorities may hold hearings on state-of-the-art technology every third year of the franchise. Such hearing shall afford Company an opportunity to make a presentation 4 on the state-of-the-art and whether the conditions specified herein indicate that a state-of-the-art change is needed. The franchising authority may require Company to perform upgrades which meet the threshold specified herein. The Company's time table for providing digital video services should be provided. The Consortium also encourage the following facilities to provide: ■ Backup power supplies throughout the network ■ BTSC stereo pass-through for all broadcast and satellite stereo channels ■ Replacement of subscriber drops which do not meet specified tests or grounding requirements ■ Parental control devices and video and audio scrambling of primarily adult programming. The Company is encouraged to utilize status monitoring throughout the system. House drops are required to conform to code requirements. Proper grounding is of prime importance as a safety issue. The Consortium requires that service technicians check the service drop grounding whenever making a service call for proper grounding capability or that the Company institute a subscriber drop audit program. For drop installations, the service technicians program should include replacing drop splices whenever they are encountered, mounting ground blocks on the house, review of route of the drop from the block to the point of entrance into the house, check for acute bend in ground wire and sufficient service loops, conducting technical tests, and using weatherproofing material in wall penetrations where none exists. Compliance with maximum ground conductor length, as well as corrosion with the grounds when they are located within pedestals should also be reviewed. All drops which are found to have insufficient grounding should be brought up to Time Warner Cable's subscriber drop standard. Drop installations should also be checked for visual aesthetics and whether cable attachment to the 5 dwelling was missing or loose. The Company should provide a plan for logging such service technician checks so that the within a two year period, the Company can certify to Consortium communities that all drops in their boundaries conform to the requirements specified above. Access channels should be available for simultaneous programming throughout the Consortium unless otherwise specified by an individual municipality. The technical inspection performed by RWA found that the off-air channels for Syracuse should be improved and that the Company has plans to transport these signals over a fiber optic link. The Consortium requires that the Company use its best efforts to construct the link in an expedient manner. A proposal for the timing of the interconnect is requested. In addition, please provide a plan for investigating with Channel 57 the electrical interference problems they are having. During RWA's technical inspection, clearance violations were found between the cable plant and the utilities. These violations should be addressed and eliminated to bring the entire plant up to NEC and BellCore standards. In some places the cables actually touch one another. The Consortium requires that the Company conduct a system-wide audit of the aerial cable plant to identify any code violations and rectify them. It should be noted that many of the violations encountered appeared to be caused by other cable owners. Some subscribers indicate picture quality problems with Channel 8. Please provide a plan to improve the picture quality of Channel 8. 6 Consumer Com atibilitX The Consortium requires the Company to prepare a plan describing how the system will meet FCC consumer compatibility regulations, be consumer friendly and compatible with cable- ready television sets, stereo television, VCRs, remote control devices and other consumer products. The Company is required to indicate how high definition television and digital compression, when available, will be integrated into the system. The Consortium seeks a plan describing how the Company will keep the Consortium informed about developments in HDTV and other technological developments. Consumer Services The Consortium seeks a high level of consumer service. Outages were indicated to be a problem. Please provide the Company's rebate policy and a plan to reduce outages. Results of the Consumer Market Survey found that 22% of those requesting repair service during the past year made requests for more than two repair visits. Please provide a plan for minimizing the number of repeat repair calls. Only 41% of those requiring a repair call in the Consumer Market Survey reported that the repair service was scheduled within 24-hours or less. Please provide a plan for increasing the percentage of subscribers receiving a service call within 24-hours of a request. Some subscribers indicate interest in programmable remote controls. Please indicate the Company's plans or offerings in this area. 7 The Company is requested to provide a plan to decrease the amount of time subscribers have to wait for installation of cable service The Consortium requires the Company to provide a plan for decreasing the percent of subscribers calling the Company which receive a busy signal and decreasing the length of time subscribers are put on hold. The franchise will contain late charge standards. The Company is requested to provide information on current late charge practices. The Consortium requires the Company to provide a plan for promptly responding to citizen complaints forwarded by franchising authorities and providing a written summation of the action taken to the relevant franchise authority representative. The Consortium requires the Company to make reasonable accommodations, upon request, for people with disabilities, including being ADA compliant. The Consortium encourages the Company to provide user friendly subscriber technology upon request. Interconnection The Consortium requires interconnect to all Consortium institutional network locations (See Institutional Network section) and to interconnect the access channel(s)as requested by each franchising authority. The Company is required to provide interconnection to the access channels for institutions transmitting access programming on the institutional network. The Company is also required to interconnect and deliver the educational access channel(s) programmed by the Ithaca School System with the cable system in Enfield. 8 The Consortium seeks interconnection of the Consortium's access channels with surrounding jurisdictions on a full-time basis if agreed to by respective franchising authorities. The Company should provide a plan for such interconnection. Such a plan should specify channel capacity, technology (e.g., coax, fiber, microwave), estimated cost and cost sharing proposals, and time frame for activation, and any economic viability issues to be considered. Programming The Consortium seeks a diverse package of high quality cable services. The Company should specify which services it intends to provide as part of its basic cable service tier, other tiers of service, and pay offerings. Subscribers also indicated interest in programmable remote controls and additional channels offered on an a la carte basis. The Consortium has received a strong appeal from the community for a Spanish language channel (See attached request). The Consortium strongly encourages the Company to provide a full-time channel for this broad category of programming. The Consortium has received input on the basic tier of service such that the tier has been requested to include an all weather channel, a 24-hour news channel (e.g. CNN), and C-SPAN H. The Consortium encourages the Company to provide these channels on basic. In addition, at the public hearing, input was received that individuals would like to have the following channels on the network: SCOLA II; Descriptive Video Service for the Blind; additional NPR and PRI FM stations. Requests were also made for Canadian stations, a French language station and BET Jazz. 9 The Consortium encourages the Company to provide a universal access channel service tier which would include all access channels and be available to all subscribers solely for the cost of installation. Access The Consortium is pleased with access channel development over the term of the prior franchise and based on the Consortium's assessment of community needs finds that it will continue to flourish and to grow and that additional resources are needed. Government Access The PEG Access Task Force report summarizes the history of government access and resource needs as follows. "Programming for Time Warner's government access Channel 53 started in 1992. A Government Access Cable Commission (GACC) was established to set policy and direction for the use of the channel. The GACC, discontinued in 1995, had County-wide membership and set a precedent for intermunicipal coordination of cable issues. The bylaws that it formulated are still in place and because they anticipated more intensive use of government access channels than has yet materialized, will probably serve well in the future. "Channel 53 [new Channel 15], averages 30-35 hours a week of programming consisting mainly of live cablecasts and taped replays of City of Ithaca and Tompkins County meetings. Taped reports from NYS legislators, 10 teleconferences downloaded by Cooperative Extension, and some edited magazine-style programming are also broadcast. "City of Ithaca meetings (Common Council plus three committee meetings a month) are cablecast using equipment and staff supplied by Time Warner. County meetings are cablecast with equipment supplied by Time Warner and the County, but staff is paid for by the County, through a contract of around $24,000 annually with Cooperative Extension. The County maintains a control room/editing suite in the County Courthouse from which it originates live cablecasts, operates a video bulletin board, and operates all playback of taped programs for the channel. The bulk of the equipment used by the County is on loan from Time Warner, but other costs, for equipment repair or purchase, for example, are paid for by the County. "High-quality broadcasts are essential to building and maintaining viewership of government access programming. Tompkins County cablecasts are of noticeably superior quality to City of Ithaca cablecasts. City cablecasts are accomplished with inadequate equipment that hampers the Time Warner-supplied crews from doing a good job. The result is a lesser quality broadcast that reflects poorly on the government access channel as a whole. Several improvements are essential for upgrading City Hall broadcasts, including a separate control room and additional equipment. Staffing problems also need to be addressed. "Towns and Villages that request government access services must be provided with adequate equipment, connections, and provisions for staffing that 11 will assure a high standard for programming, or funding for that purpose. If technically possible, Time Warner should also supply government access programming to other cable companies serving Tompkins County residents." Educational Access The PEG Access Task Force report summarizes the use of access and the need for new resources by educational institutions as follows. "Ithaca College is, and will probably continue to be, the leading education cablecaster in the area. IC's video communications program has a strong partnership with the Time Warner system that it wants to maintain and expand. More video drops and more connectivity between buildings at the campus and the Time Warner hub would enhance the IC program and would also add more venues for community programming. "In addition to IC, the other colleges in the area need opportunities for access. In particular, TC-3 — which offers career-oriented video education— is very interested in tapping into services that could be provided by Time Warner. "BOCES: BOCES programs in Continuing and Adult Education, Special Ed, vocational training and other programs could greatly enhanced by the addition of Time Warner supplied resources. 12 "Public Schools: Ithaca High School has a thriving video program that trains both students and adults through classes, professional development workshops, and summer media camps. Trained individuals often go on to produce useful educational and community programming. Video equipment has also been placed by Time Warner at the Alternatives Community School and Boynton Middle School. The schools have a list of needs that includes regular maintenance of existing equipment, equipment upgrades, ability to relocate underutilized equipment, live cablecasting for Board of Education meetings, and new sets of equipment and video drops for all public schools that request it and will use it. "Cooperative Extension: Cooperative Extension, already on the I-net, is a major potential producer for relevant, locally-oriented, and useful educational programming. Extension needs adequate video production equipment and technical support by Time Warner." Public Access Public Access has been used extensively. PEG Access Programming Following is a summary of PEG access use indicated by respondents to the Communty Needs Assessment summary. 13 CURRENT>VIDEO PROGRAMhIING TYPE OF FORM OF FREQUENCY OF ORGANIZATION PROGRAMMING PRESENTATION* PRESENTATION ;.GOV@�T1[11eI1t Public Health Tapes from NYS DOH Local access Occasionally Administrator, Tompkins channel Co. Public Health Dept. Deputy Co. Administrator, Board meetings; Local access Daily Tompkins Co. Criminal Bulletin board channel Justice Services Acting Director, Tompkins Public meetings Local access Weekly County Info. Tech. Svcs. channel Commissioner of Workshops; public Local access Occasionally Planning, Tompkins hearings channels County Dept. of Planning City Clerk, City of Ithaca City Council & Government 2 or 3 times per Standing Committee access channel month meeting on rotation basis Economic Development City Common Council; Government Weekly Planner, City of Ithaca City Planning & access channel Economic Development Committee Educational Executive Director, County government Government & Weekly Cornell Cooperative meetings public access Extension Association of Tompkins County Principal, Boynton Middle Varies Local access Daily School channel; publicity Superintendent, Education Classrooms Occasionally Trumansburg Central School 14 ............ ............. CURRENT VmEa PROGRAMMING TYPE OF FORM OF FREQUENCY OF ORGANIZATION PROGRAMMING PRESENTATION` PRESENTATION Educational (Cont'd) High School Principal, Video conferencing Compressed video Daily Trumansburg Central ISDN line School District/Dickerson High School Director, Instructional Satellite downlink for Local access Occasionally Support Svcs., teleconferences; plays channel Tompkins-Seneca-Tioga B.O.C.E.S. Executive Director, The Opportunities for Weekly Learning Web youths and mentors Principal, Ithaca High "Lake Street News," Local cable access Weekly School 30-120 minutes of channel news, features, performance, lectures, etc. Dir of Info. & Instr. TV programs created Group meetings; Occasionally Technologies, Ithaca City by students educational access School District channel Principal, DeWitt Middle Videos of student/ Local access Occasionally School school events by channel students and staff Civic Or ariizations/Other Coordinator, Amnesty Amnesty International - Local access 3 times a week International USA, Group Ithaca channel #73 Program Director, Finger Current event show on Local access 4 times a year LakesIndependence Agency channel Center 15 F77 CURRENT VIDE(3 PROGRAMMING TYPE OF FORM OF FREQUENCY OF ORGANIZATION PROGRAMMING PRESENTATION* PRESENTATION .. ........... _..... . _ _ _ ...... ..._.. Civic;.OranizationslOther cwt7d) Dir. of Membership & Public forums Group meeting; Occasionally Public Relations, local access Tompkins Co. Chamber of channel Commerce American Red Cross Panel discussion& Unsure Occasionally videos from National Organization Vice Chair-Voter Svcs., Political candidate Group meetings; 2 or 3 times per League of Women Voters forum public TV; local year of Ithaca cable access channel Better Housing for Tape of first-time home Shown to first- Occasionally Tompkins County ownership time homeowner Institutions and organizations that reported, in response to the community needs assessment survey, that the attainment of their goals and outreach could be improved by programming provided or produced for and carried over cable access channels are as follows. INS"IMITIONS NEEDING TO:PROVIDE LOCAL PROGRAMMING ORGANIZATION Government Chief, Lansing Fire Department Commissioner of Public Works, Tompkins County Public Works Dept. 16 INSTITUTIONS NEEDING TO F o.'WI)E LOCAL PROGRAMMING ORGANIZATION Government 1C6nt7d1 Public Health Administrator, Tompkins Co. Public Health Dept. Supervisor, Town of Ithaca Deputy Co. Administrator, Tompkins Co. Criminal Justice Services The Honorable Mr. Phillip R. Rumsey, Supreme Court Justice of Tompkins Co. Planning Director, Tompkins County Economic Opportunity Corporation Library Director, Tompkins County Public Library Asst. Superintendent of DPW, City of Ithaca, Water & Sewer Division Superintendent of Highways, Village of Lansing Supervisor, Town of Ulysses Codes Officer, Village of Lansing Acting Director, Tompkins County Info. Tech. Svcs. Clerk/Treasurer, Village of Lansing Chair, Planning Board, Village of Lansing Commissioner of Planning, Tompkins County Dept. of Planning County Administrator, Tompkins Co. Administrator's Office Chief, Slaterville Springs Volunteer Fire Company, Inc. City Clerk City of Ithaca 17 INSTITUTIONS NEEDING TO PROVIDE LOCAL PROGRAMMING ORGANIZATION Government (Cont'd) Chair, Planning Board, Village of Dryden Building Commissioner, City of Ithaca, Building Dept. Asst. Superintendent of Public Works, City of Ithaca, Streets & Facilities Div. Mayor, Village of Cayuga Heights Superintendent of Highways, Town of Ithaca Commissioner, Tompkins Co. Mental Health Dept. Educakioni Executive Director, Cornell Cooperative Extension Association of Tompkins County Principal, Boynton Middle School Superintendent, Trumansburg Central School Director, CRESP, Cornell University High School Principal, Trumansburg Central School District/Dickerson High School Director, Instructional Support Svcs., Tom kins-Seneca-Tio a B.O.C.E.S. Executive Director, Community School of Music and Art Director, Media Services, Cornell University Principal, Ithaca High School Dir. of Info. & Instr. Technologies, Ithaca City School District Principal, DeWitt Middle School 18 INSTITUTIONS NEEDING TO PROVIDE LOCAL PROGRAMMING ORGANIZATION __. Civic Or anizationslOther CEO, YMCA of Ithaca & Tompkins Co. Coordinator, Amnesty International USA, Group #73 Director, Women's Community Building Executive Director, Finger Lakes Library System Dir. of Membership & Public Relations, Tompkins Co. Chamber of Commerce Director, Paleontological Research Institute Executive Director, Hospicare of Tompkins Count Gadabout Transportation, Inc., Ithaca/Tompkins Transit Center American Red Cross Development Associate, Family and Children's Services of Ithaca Vice Chair-Voter Svcs., League of Women Voters of Ithaca Resource Developer, Day Care & Child Development Council of Tompkins County Better Housing for Tompkins County Access Requirements The Consortium places a high priority on the continued development of access. The following describes the minimum requirements for access. 19 ■ The Franchisee shall allocate the following channels for access: • No less than nine (9) access channels for government, education, and public access with the Consortium franchising authorities designating the type of access to be provided on each channel • No less than six (6) audio channels for cable radio • Capability for an access channel to provide pay per view programming, with the Company to scramble and address the recipients. ■ The access channels shall be placed on the basic tier of service and available to all subscribers upon the request of Consortium franchising authorities, including those in multi-family dwelling units (unless otherwise agreed to by the Company and Consortium franchising authorities). The Consortium expects to request the activation of an additional government access channel within six (6) months. ■ The Franchisee shall permit the educational and government access channels to be utilized for closed-circuit programming. Such institutional programming will be scrambled by the Company and viewable at selected public sector sites. The Franchisee shall provide converters to free drop sites for the reception of the closed-circuit programming. ■ At such time as the Franchisee expands the system channel capacity through digital or other means, up to five percent (5%) of the channel capacity or equal HDTV capacity shall be reserved for future access use. Equipment and facilities are an integral component of access operations. Following is a description of the Consortium's access equipment and facilities requirements. The Consortium requires the following professional quality equipment and facilities for government and educational access in Appendix A, Government and Educational Access Equipment. 20 Public Access Equipment Requirements: The Consortium adopts the following findings of the PEG Access Task Force for public access facilities and equipment. "Main Studio Needs Enlargement. Redesign The small size and proportion of the main[Primary]access studio severely limit the types of programming that can be produced. The long, narrow shape cannot accommodate desired community programming such as dance performances, choral concerts, drama, live theater, telethons, public meetings, etc. "Access Center Must Be Centrally Located: The studio site must: be located in downtown near the Time Warner physical plant hub, have ample off-street parking, be on the city bus lines, and handicapped accessible. "More Equipment is Needed: The Task Force recommends that production equipment donated by Time Warner include full equipment for two large and one small studios, several automated studios, and at least two easy-to-use portable studios. With minimal expense and training, the automated studios will make access available to many more individuals and organizations. 21 "Equipment Must Be Maintained, and Replaced When Outdated: All donated or loaned equipment must be maintained by Time Warner. Timely maintenance, replacement, and technology updates (such as digital replacing analog) for all access studio equipment during the course of the franchise must be assured. "Studio Hours and Staffing Need to Be Increased: The current 60 hours of operation (3-11:30 p.m., seven days a week) do not allow maximum use of access facilities or encourage daytime use by not-for- profits. To serve a broader population, studio hours and staffing should be significantly increased. "Additional Video Drops Are Needed: Video drops are needed at key locations around the City as well as in the surrounding municipalities so that portable studios can be used by not-for-profits and the public." The Consortium seeks to have the Company increase access studio hours earlier or later to do public access. The Consortium encourages the Company to address capabilities it could offer for consumer choice regarding access channels as discussed in the Task Force report. " Task Force recommends the following policies to accommodate both free speech rights and informed customer-viewing choices: 22 1) Instituting some County-wide community-controlled channels. Producers must agree to abide by standards determined by a County-wide community advisory board. 2) Time Warner Cable should be required to provide to any customer, free of charge, up to-date timed, channel-blocking filters. 3) Time Warner should cablecast and also post on the Internet up-to- date schedules with program descriptions. 4) Instituting some single-community controlled channels-which would be cablecast only to specific municipalities and available only to customers living in that community. 5) Maintain separate County-wide free speech channels. 6) Requiring that Time Warner cablecast appropriate electronic v-chip ratings if supplied by the producer/provider at the time of program submission." Future PEG Equipment Requirements The PEG Access Task Force indicates that new technologies should be integrated into equipment replacement and improvement plans. "Training and equipment to match new technologies must be made available in the future. Franchise language should include the possibility of municipal uses for new cable technologies, such as video return (reverse channels), and video compressing or video streaming. Municipalities should automatically be included in, or offered opportunities to piggyback on, new or upgraded technologies- including those which have not yet emerged—when it can be shown a public need will be served." The Consortium requires sufficient funding for PEG access equipment and facilities to utilize new technologies for production as they become available. The Consortium requires the Company to maintain and replace all public, educational, and government access equipment and to provide all necessary headend equipment for public, 23 educational, and government access. The equipment shall be replaced based upon wear and tear and the normal useful life of each type of equipment. Replacement purchases shall take into account new technological improvements The Company is required to provide access origination capability (including transmission or modulation equipment) via fiber optics from sites currently capable of cablecasting (e.g. Ithaca City Hall) and from the following sites: ■ All Consortium Government Offices ■ All Studios ■ Fire Regional/Training Center. The following sites are required to be provided with free drops, free converters, and free non-premium service: ■ Public Schools ■ Institutions of Higher Education ■ Public Libraries ■ Buildings of Consortium governments ■ Additional sites at Ithaca College. Such drops shall be capable of supporting multiple reception points. The Company is encouraged to provide multiple drops to educational buildings and government buildings and provide a proposal for internally wiring government buildings and school buildings. Just as the Company is expected to commit substantial resources to operate, maintain and promote use and viewership of basic and premium entertainment services, so the Company is expected to commit resources adequate to operate, maintain and promote use and viewership of channels devoted to access. The Consortium therefore encourages the Company to agree to: ■ Continue to provide public access staff and services ■ Continue to provide production services for City of Ithaca meetings 24 ■ Providing services for programming by other Consortium government ■ Providing training for school personnel ■ Providing publicity services for public, educational, and government access (e.g. bill stuffers, ad avails for PSA's, bi-annual promotional mailer to subscribers). The Consortium will place great emphasis on meeting government, educational, and public access needs. Institutional Network The Community Needs Assessment survey found the following needs for an institutional network. POTENTIAL INSTITUTIONAL NETWORK VSERS ORGANIZATION LINKS TO SERVICE* tsove�rnment Chief, Lansing Fire Department Central Station LDT; IVT All Stations VS Commissioner of Public Works, Airport (Brown Rd); LDT Tompkins County Public Works Dept. Highway Div. (Bostwick Rd); SW Recycling Center Commons Rd. Public Health Administrator, All County buildings LDT; VT; IVT; I Tompkins Co. Public Health Dept. and educational facilities Supervisor, Town of Ithaca * IVT = Interactive Video Transmission; IST = In-Service Training; LDT = Local Data Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections 25 POTENTUL INSTITUTIONAL NETWORK USERS ORGANIZATION LINKS TO SERVICE* _ ............. Goveriurient (ConVd) Deputy Co. Administrator, Tompkins Public safety sites; IST; IVT; LAN; LDT; Co. Criminal Justice Services courts VT; I The Honorable Mr. Phillip R. Ithaca City; All Rumsey, Supreme Court Justice of Tompkins County Tompkins Co. Municipal Building Library Director, Tompkins County Main library & Internet access Public Library readin centers Supervisor, Town of Ulysses Town Hall IST Justice; Public Works I Codes Officer, Village of Lansing Village Officer IST; IVT Hwy. Building LDT Other Municipalities I Acting Director, Tompkins County County agencies LDT; I; IVT; VT Info. Tech. Svcs. Chair, Planning Board, Village of Wastewater plant; VS; IVT; I; VT; VS; Dryden fire stations; CFR LAN Bldg. City Clerk, City of Ithaca City Hall & other IST; I; LAN; VS; LDT sites City of Ithaca, Engineering Dept., Traffic signalization; LDT Department of Public Works parking lots VS Mayor, Village of Freeville County Building; LDT Universities; IVT; LAN Town of Dryden to Village of Dryden & Dry den Schools Mayor, Village of Cayuga Heights Schools IVT * IVT = Interactive Video Transmission; IST = In-Service Training; LDT = Local Data Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections 26 P©TENTIAL INSTITUTIONAL NETWORK USERS ORGANIZATION LINKS To SERVICE* Government (Cant'd) Asst. Superintendent of DPW, City of Water Facilities: Ithaca, Water & Sewer Division 525 Third St. IST; VT 510 First St. LDT; I 202 Water St. VS City Hall IVT Educationat. Program Director, Finger Lakes Various IST; IVT; I; LDT; VT; Independence Center LAN High School Principal, Lansing High LCSD; other IST; VT; LDT; I; IVT School schools; BOCES High School Principal, Trumansburg Local school district IST; LDT; IVT; I Central School District/Dickerson High School Director, Instructional Support Svcs., Local schools LDT; I; IVT; LAN Tom kins-Seneca-Tio a B.O.C.E.S. Superintendent of Highways, Town of Current sites plus LDT; I Ithaca Cherry Street Ind. VS; IVT Park; State Theatre Director, Media Services, Cornell Students/employees IVT; LDT University Connect to the satellite uplink of Media & Technology Svcs. of Cornell Dir. of Info. & Instr. Technologies, All 19 School sites IST; LDT; IVT; I; LAN Ithaca City School District Elementary Principal, Trumansburg Library; designated IVT; LAN; I Elementary School classroom * IVT = Interactive Video Transmission; IST = In-Service Training; LDT = Local Data Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections 27 P©TENTIAL INSTITUTIONAL NETWORK USERS ORGANIZATION LINKS TO SERVICE'S Civic Or anizations/Other Director, Women's Community Various LDT; VS; IVT; VT; I Building Development Associate, Family and Cayuga & Seneca LDT; LAN; I Children's Services of Ithaca Street locations * IVT = Interactive Video Transmission; IST = In-Service Training; LDT = Local Data Transmission; VS = Video Surveillance; I = Internet; VT = Voice Transmission; LAN = LAN Connections The Consortium requires the Company to provide an institutional network. In certain instances, the Consortium will review institutional network options. In general, the Consortium requires: ■ Existing Coaxial Cable Network. The continued use of the existing coaxial cable institutional network with: increased capacity available for use on the network; a reliable inventory of amplifiers and passives; response time requirements; testing requirements; operational protocols ■ Fiber Optic Upgrade of Existing Coaxial Cable Network. Fiber optic upgrade of the coaxial cable network within three years. ■ Fiber Optic Extensions. A fiber optic connection to identified locations in the Town of Ithaca, Town of Caroline, Town of Groton, Town of Lansing, Town of Ulysses, Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, the Village of Freeville, and the City of Ithaca. The Consortium will also review any Company proposals to provide dedicated capacity through the cable modem service ■ Upstream Bandwidth. The Consortium requires 6 MHz of upstream institutional network capacity available on the subscriber network for remote video origination, telemetry, and other purposes 28 ■ Closed-circuit. Closed-circuit programming ability for sites not on the institutional network. ■ Internet. The Consortium strongly encourages the Company to continue to provide free Internet service and modems to educational facilities and to provide Internet service to libraries, and volunteer fire department sites. Current Coaxial Network Background The Consortium requires that all institutional network(I-net)capacity will be provided free of charge to users of the system. The current coaxial cable fiber network connects the following locations: 1. Alternative Community School 2. Belle Sherman School 3. Beverly J. Martin School 4. Boynton Middle School 5. Cooperative Extensions of Tompkins County 6. Cornell University (McFadden Hall) 7. Dewitt Building 8. Dewitt Middle School 9. Fall Creek School 10. Fire Central 11. GIAC 12. Ithaca City Bus Garage 13. Ithaca City Hall 14. Ithaca City Youth Bureau 15. Ithaca City Police Headquarters 16. Ithaca City Streets and Facilities 17. Ithaca City Water & Sewer 18. Ithaca College (Roy Park Building) 19. Ithaca High School 20. Northeast School 21. Science Center 22. South Hill School 23. Southside Community Center 24. Tompkins County Courthouse 25. Tompkins County Library 26. TST BOCES. 29 The I-Net/Technical Task Force provides the following description of the existing institutional networks use, operations and needs for the future. "System Description: The I-net system is a separate coaxial cable system that runs to a different set of locations than the regular entertainment cable system, though some of the locations are common between the systems. Unlike the subscriber entertainment system which has been upgraded to a hybrid fiber coax system and had its frequency range extended, the I-net is coax with the exception of the one leg up to BOCES, which has been converted to fiber. "The I-net is a midsplit 450 MHz system, with the path inbound to the headend covering frequencies ranging from 5.75 to 173.75 MHz (28 channels), a guard band from 174 to 216 MHz for cross over filtering, and a path outbound from the headend ranging from 216 to 450 MHz. (39 channels). "Currently two channels in each direction are used to support the RF modems used by the PEFnet with translators for inbound to outbound located at the headend. Based on recent readings there are currently 6 video signals, 2 data signals, and two unknown signals on the inbound spectrum occupying 10 of the possible 28 channels. There are 4 video signals, 2 data signals and 3 unknown signals on the outbound frequency spectrum, occupying 9 channels of the possible 39 channels. Other channels may be in use for video when portable equipment is moved to various locations on the I-net. 30 "The PEFnet currently uses 4 mbit/sec modems at the user sites that are owned by the individual participants in the PEFnet. The translators for the inbound to outbound paths that are in place at the headend are also owned by PEF. "Operations and Management: The current I-net operation is maintained through a cooperative approach between Time Warner and the I-net users/PEF. Collective expertise is needed to operate a network of this topographic scale, heterogeneous technology and size. The many differing pieces of equipment and hardware and software infrastructure are owned and operated by different institutions of the PEF. "The PEF, Partnership for an Electronic Future, was created in 1997 after the County urged the development of a Consortium as a mechanism to share services and costs, which were being borne entirely by the County and ICSD at the time. The PEF Consortium is made up of public, educational, and not-for-profit institutions. The charter members are as follows: Cayuga Medical Center, City of Ithaca, Cornell University, Tompkins County, Ithaca City School District, Ithaca, College, Lansing Central School District, Newfield Central School, South Central Regional Library Council, and the TST BOCES. The goal of PEF is to provide connectivity, to assure quality of service at the most cost-effective price available and to share expertise and approaches to common problems faced by all members. There are many areas where collaboration and cost savings are possible, including: 31 local communications links, Internet services, software licensing, equipment procurement, outsourcing, training, and voice telephone service. "To gain focus one must recognize that there are two worlds involved in the current I-net. The world of data transfer and digital system and the world for radio frequency video. To the data world the I-net appears as long cable that one plugs the Ethernet into, and to the video world it appears as a pair of TV channels. Both views are in fact correct and both are needed to maintain a functioning I-net in the current system. "There is currently no fixed performance standard. It is not clear what standard would make sense. For instance, the Consortium members continuously run a number of performance monitors that can detect and record any outage within a matter of seconds. Such "outages" can be merely routine data bottleneck, a problem or routine interruptions on a member's equipment, or problem upstream of the I-net at the ISP or even much further beyond. The current franchise requires that Time Warner respond to I-net repair calls within two hours. "To further complicate the matter, some locations require continuous access to other locations in order to perform specific network operations. An outage at one site (most often due to maintenance of hosts or power failures) can cause users at one or many other sites to have the perception that the I-net or some other service is down without any ability to perceive the true root problem. Examples of this include: 1) Library patrons' inability to browse, perceiving the I-net/Internet is down, when the County domain name server in the Courthouse is in fact off-line, 32 2) Many ICSD computers receive boot-up information (DHCP) from the District Office causing them to believe the network is entirely down when in fact a server at the District Office is off-line. Unfortunately the list of interdependencies like this are numerous, as this is the very basis by which resource sharing over networks and among member institutions can be most effective. "Maintenance is currently conducted by a combination of automated monitoring tools, network diagnostic tools, and problem escalation. "The Future: There are several issues in the future which will have an impact on the I-net and its use by the educational and governmental community participants in Ithaca: ■ As electronic technologies become more ubiquitous and networking in general more prevalent, use by the community will only increase. There will be ever increasing traffic on the I-net both in volume and in bandwidth. ■ At the same time as we must think globally, the importance having a networked local community will increase; local educational, governmental, and not-for-profit agencies will enhance services, decrease costs, and improve the skills and knowledge base of the local community. ■ The amount of information in electronic form will increase dramatically - data, written material, narrative, images, video, audio. This electronic content will be one reason for the increased traffic noted above. ■ Multimedia will be an increasingly important form of electronic content both in education and in government. ■ New technologies in hardware, software, and networking will require parallel developments in the I-net. Computers will be bigger and faster in terms of capability; institutions will increasingly use 33 sophisticated applications and data, applications will use integrated technologies such as the multi-media noted above. ■ There will be increasing connectivity of multiple networks; the I-net must have the capability to be an integral part of such a sophisticated global network. ■ There will be increased need for authentication and security on networks and computer systems to make sure that those who should have access will have it, and those who should not, do not." "Based on the experience of I-net users, the existing use of the I-net, and the Task Force report, the Consortium requires the following for the institutional network for current applications and the future." Coaxial I-Net Requirements The Consortium requires the continued operation of the current coaxial institutional network. The Company is required to provide the following capacity at a minimum: 30 MHz contiguous bandwidth in each path, such as 11.75-41.75 MHz inbound and 246-276 MHz outbound with no restrictions on how the bandwidth is utilized. The Company is encouraged to provide additional capacity on the existing institutional network for users. The Consortium requires the institutional network to be maintained by the Company and to improve reliability and stability. The Consortium requires the Company to respond to requests for repairs from subscribers within two hours between the hours of 8:00 a.m. and 5:00 p.m. and within four hours thereafter. A protocol plan is required to be prepared by the Company to follow when there are problems on the system. This plan should indicate how to alleviate past problems with access to 34 the headend. The Franchisee will be required to keep a trouble call and response log and to have the log available to I-net users and their organizational representatives. The Consortium requires that the I-net be allowed to connect with any service of use, any protocol selected by individual user of the I-net for public, educational, and governmental purposes. The Task Force addressed this issue as follows. "Currently an IP packet protocol is used on the links to support email, ftp, html, and various other services. It is difficult to project what may develop over the 10-year course of the next franchise period. Five years ago most people had never heard of the World Wide Web or HTML, now nearly every TV advertisement includes a URL. "With that in mind, we must be careful not to be limited in the services we can provide using the bandwidth provided to I-net and PEF. We must have the freedom to change protocols and services at will to provide the best service to our organizations. Certainly we expect growth in multimedia communications, including video, high resolution still pictures, and audio. Games and simulations currently in use on the net use force feedback joysticks to provide the beginnings of tactile communication. In ten years, standard course work in our schools may involve participating in Virtual Reality scenarios with stereo video, stereo audio, tactile and possibly even olfactory information passed across the network. "Another example might be to extend the current Pegasys model, where a tape is made and played four times and then archived, unavailable to be watched without scheduling the total use of a VCR and an analog video channel for its 35 duration. If those tapes could be digitized and stored on a server, they could be called up over streaming video technologies for view on a shared channel at any time, with no human intervention required. They would be available to the local audience for a more extended period than is now possible, and they would also be available to the world via the Internet. "We must be careful to avoid language in the agreement that confines us to a model of bandwidth use that precludes our ability to move forward with the technology and pioneer or embrace new services. "Likewise, we must have the freedom to interconnect the I-net with other networks that support the community's goals. Currently we are connected to the Internet and to the Cornell backbone. In the future we may need to be connected to various other networks, such as a clump of schools in the country linked with their own wireless network, or to a County-wide network of Town Halls on whatever infrastructure they can afford, to allow them to stream digital video in support of county meetings. We must have language that clearly affords us the ability to link to whatever networks we see fit to join." The actives and passives utilized in the institutional network were installed in 1989. The models used in the I-net may currently not be produced nor supported by the original or any other manufacturer. An ample supply of spare parts should help prevent a situation where the I-net would not be operational for a long period of time due to the failure of a device which must be shipped-out for repair. 36 A typical number of spare units needed to support continual operation of an outdoor communications network is to have 10% to 15% of the total amount of each unit used in the network. This number makes the assumption that the equipment can be repaired in a timely manner at a supporting service center, either at the manufacturer's location or a location recommended by the manufacturer. If repair cannot be supported by an off-site company, spare levels are recommended to be closer to 50%of installed base. The Company is required to stockpile sufficient units of each device to cover any failures which might occur during the franchise term. If the system operator cannot guarantee a supply of spare units and a reliable transmission path, a migration plan will need to be created for the transfer of current and future operations to a new, most likely, fiber cable-based type network. The migration plan should include performance parameters which must be met and failure to meet these criteria would trigger the construction and implementation of the new network. During the technical analysis, it was found that: ■ The I-net amplifiers and outside plant have not been checked in some time. No one at the cable company, nor the I-net users met, with could remember when the system was checked for proper alignment. ■ The system should be checked on at least a yearly basis. Fiber Optic Upgrade of Existing I-Net The Company is required to upgrade the existing institutional network within three years. The Company is required to provide the cost of upgrading its institutional network. 37 Fiber Optic I-Net Extensions The Consortium requires the institutional network to be extended by four fibers to each of the locations in Appendix B. The Company is required to provide a detail cost breakdown of the cost for each site. As an alternative for the Consortium to review, the Company is required to indicate how much bandwidth on the subscriber network would be provided for those sites outside of the City. Please provide all costs associated with this alternative. In addition, the Consortium believes that community needs would be served by extending the I-net or upstream bandwidth to the priority two sites dependent on cost as indicated in Appendix C. The Company is required to provide the cost to all potential fiber optic I-net sites with a site-by-site breakdown. Upstream I-Net Requirements The Consortium requires 6 MHz of upstream capacity for the institutional network. The PEG Access Task force indicated the following uses for this capacity. "Provide capability for remote monitoring. Telemetry from remote sites is very important, as the City, County, and other public institutions, such as Bolton Point, upgrade or increase the number of remotely monitored sites, e.g. pumping stations, landfills, and water tanks. Officials planning for these remote installations also stress the need for send-and-receive capabilities for these sites. County officials have expressed strong interest, and would like to be consulted about, a 38 data transmission system that would allow for monitoring of data generated from closed landfills, pavement temperature systems, building operations systems, and interactive traffic control information systems. City traffic planners would like to improve the monitoring and flexibility of traffic signals in the downtown area by piggybacking on the cable infrastructure in that area. Send-and-receive capability is required, and overhead installations, except in areas of Collegetown where overhead lines prevent fire department access, are acceptable. City engineers have also requested additional drops in the downtown area to handle traffic signal sensing devices. Remote monitoring services should be made available to other municipalities that request it. Local transportation planners would also like to be consulted about a need for connections to bus shelters and parking garages for security and communications purposes." In addition, the Consortium requires the Company to provide fiber optic extension for the actual cost of construction by site. Internet The Consortium encourages the Company to continue to provide services and to expand such service to all public buildings. Closed-Circuit Equipment The Consortium requires the Company to provide closed-circuit equipment, including end user equipment and pilot projects for Consortium applications. 39 The closed-circuit institutional access channels provide a means to transmit training and information programs to buildings of public institutions, libraries and schools. To support this activity and non closed-circuit access, the Consortium requires: ■ The provision of the equipment necessary to provide closed-circuit programs ■ Free drops and converters to schools, libraries, buildings of public institutions. (The converters at these locations shall be capable of receiving the closed-circuit programs.) ■ Free closed-circuit service to schools, libraries, and buildings of public institutions ■ A significant number of converters which can be used in the home by students, teachers, and government employees taking telecourses. Emergency Management The Consortium places a high priority on supporting emergency management needs and requires the Company to meet relevant FCC standards. The Franchisee will be required to keep emergency management informed of new features and capabilities as they become available and keep emergency management updated on relevant FCC rules and regulations. The Consortium municipalities require the Company to provide for local messages of a touch-tone or similar equipment. Regulation of the Franchise The Consortium will be updating the model cable franchise to use as a basis for negotiation. The Consortium is preparing a draft amendment to the City of Ithaca Cable Communications Ordinance and will seek the Company's comments upon the draft document. On 40 any provisions which the Company would like to comment, the Company will be instructed to note the suggested language on the document or on a corresponding page. The Consortium will require, among other items: performance bonds; consumer protection provisions; state-of-the-art implementation provision; annual performance audits; annual technical audits to assess compliance with safety codes, technical requirements and reliability; EEO provisions; and requirements for a updated and integrated 911 database, if telephone service is contemplated to be offered. The Consortium reserves the right to specify the type of organization to operate access equipment and facilities. Franchise Fee The Consortium will require a franchise fee of five percent (5%) or the maximum allowable by law of total gross annual revenues, both subscriber and nonsubscriber revenue, to be paid on a monthly basis. The Consortium will require the Company to provide an annual independent audited statement of gross revenues in the Consortium area. Pilot and Experimental Projects The Consortium considers development of the telecommunications infrastructure as one of the keys to overall educational and economic development. The Consortium encourages Time Warner to develop its joint venture with AT&T and any other unique pilot and/or experimental projects in the Consortium area which build upon the Consortium communities existing resources. 41 Franchise Term The Consortium will extend the business terms of the current Ithaca franchise for five years with specific modifications and extension to the Consortium communities. If the Consortium's franchising authorities believe the Company's proposal meets community needs, the Consortium will consider a longer term. Indicate the term, in years, which applicant seeks for this franchise. 42 II. Evaluation Criteria The Consortium will conduct a complete and thorough analysis of the proposal. Qualitative and quantitative considerations will be important factors in the Consortium's overall evaluation. A strong commitment to serving all residents of the City and meeting line extension requirements of the other Consortium communities, to providing high quality customer service, to the continuation of a state-of-the-art cable system, and to meeting the Consortium's access and institutional requirements, will serve as major considerations. The key factors described below represent guidelines for the evaluation of the proposal. These guidelines will serve as a basis to analyze the relative merits of the proposal. The specified criteria are not listed in order of priority. 1. Benefits to the Consortium and its Citizens. • Provision of service to all residents in the City of Ithaca and the Villages in the Consortium, and meeting the line extension standards for the other Consortium communities. • Provision of high quality equipment, facilities and services for public, educational, and government access. • Provision of the institutional network: existing coaxial cable network and expansion; fiber optic rebuild of existing I-net; fiber optic extensions; 6 MHz upstream; Internet; and closed-circuit. • Commitment to consumer services. • Provision of upgraded basic programming as specified herein. • Commitment to pay five percent (5%) franchise fee or maximum allowable by law on total gross revenues. • Commitment to emergency management. • Best quality service for consumer. 43 2. Access. • Commitment to provide access channels. • Demonstrated commitment to provide initial access equipment and facilities. • Demonstrated commitment to provide maintenance and replacement of access equipment. • Commitment to provide access services. • Commitment to interconnection. • Commitment to provide program origination sites. 3. Institutional Network. • Acceptability of I-net plan. • Quantity of I-net capacity on the coaxial cable and design of the fiber optic network. • Acceptability of replacement plan for coaxial I-net and construction timetable for fiber based I-net. • Quality of reliability and response standards and operating protocol. • Commitment to closed-circuit and Internet for the public sector. 4. Financial. • Demonstrated financial resources and capability. • Feasibility and viability of financial projections and underlying assumptions. 44 5. Technical and Operations. • Acceptability of state-of-the-art plans. • Acceptability of ongoing maintenance and testing plans. • Acceptability of plan to certify drops. • Acceptability of plans to improve picture quality of specified stations. • Acceptability of providing continuous, uninterrupted service during the rebuild to all Consortium subscribers. • Commitment to provide required facilities. • Reasonableness of consumer service plans. • Commitment to parental control and "adult" programming scrambling. • Reasonableness of operations policies. • Reasonableness of plans to improve in identified consumer areas. • Reasonableness of plan to reduce busy signals. 6. Compliance with Minimum Requirements of the Consortium. 7. Pilot and Experimental Project Development. 8. Meeting the present and future cable communications needs of the community. 9. General Qualifications. • General reputation of applicant, as indicated by character qualifications and fitness of the applicant and its officers. • Ownership structure of the applicant. • Stability of franchises currently held by applicant and satisfaction of Consortium officials and subscribers. • Legal qualifications. 45 • Prior performance in meeting contractual promises. • Prior performance in Consortium areas • Compliance with FCC regulations. • Compliance with Consortium ordinances and/or franchises. 46 Section I Ownership, Experience and Financial Resources Part Applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Ownership Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Financial Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D 47 A. Applicant 1. A1212lican Name Address 2. Principal to whom inquiries should be made: Name Title: Address: Telephone: 3. Representation: This application is submitted in response to the invitation issued by the Ithaca Area Cable Consortium, New York, by the undersigned who has been duly authorized to make the representations within on behalf of the applicant. Applicant recognizes that all representations are truthful and that failure to adhere to any such representation may result in revocation of any franchise that may be granted, in consequence of this application. Consent is hereby given to the Consortium and its representatives to make inquiry into the applicant's legal, character, technical, financial and other qualifications by contacting any persons or organizations named herein as references, or by any other appropriate means. Name Applicant's Signature Official Position Date AFFIX CORPORATE SEAL 48 B. Ownership Information 1. Please provide a family tree for Time Warner Cable. 2. List all officers and directors (whether or not they own stock) and stockholders who own one percent (1%) or more of the voting stock of the corporation. If an ownership interest exists, record this to the nearest whole percent based on the total number of outstanding shares of voting stock in the corporation, exclusive of treasury stock. Where stock is held by a stockholder in a street name, this fact should be noted, but no further information concerning such stockholder need be furnished. 3. If any of the persons, corporations, or other business entities named in the family tree is a stockholder owning five percent(5%)or more of the voting stock of any communications entity (e.g. broadcast television station, other cable systems, manufacturers, common carriers, newspapers, programming service) described below, or is an officer, director, partner, or individual owner of such an entity, fill in the appropriate information. If the interest is a fiduciary one, e.g., trustee, please note. Record ownership interests to the nearest whole percent (based on the total number of outstanding shares of voting stock, exclusive of treasury stock, in the case of corporations). Name of individual/ Name of entity having Communications Nature of % Voting ownership interest entity Location Interest Interest 49 4. Please describe Time Warner's joint venture with AT&T and how it will affect the cable system serving the Consortium area. Also, please provide related public documents. 5. For Time Warner, list the outstanding indebtedness as of the date of this application: Name of Creditor % of total holding Amount outstanding indebtedness in $ indebtedness Term (a) Bonds (b) Loans (c) Notes (d) Mortgages (e) Other (Specify) 6. If any ownership interest in the applicant, including but not limited to, shares of stock or partnership interests has been or is expected to be sold or otherwise distributed, attach copies of all documents relating to such sale or distribution, including, but not limited to, stockholder agreements, restrictions on transfer of ownership interests and any provisions for re-acquisition of any ownership interest by the applicant or its affiliates. If any agreement provides for re-acquisition of ownership interests, estimate the amount which will be paid for such re-acquisition. If any agreements, formal or informal, have been or will be entered into whereby the consideration used to acquire an ownership interest in the applicant is supplied, directly or indirectly, by the applicant or its affiliates, such agreements shall be disclosed. Please provide the Consortium with copies of such agreements. 50 7. Please answer the following character qualification questions. (a) Has the applicant (including parent corporation if applicable) or any principal) or officer ever been convicted in a criminal proceeding (felonies) in which any of the following offenses were charged? Yes No Fraud Embezzlement Tax evasion Bribery Extortion Jury tampering Obstruction of justice (or other misconduct affecting public or judicial officers' performance of their official duties) False/misleading advertising Perjury Anti-trust violations (state and federal) Violations of FCC regulations Discrimination in hiring or promotion practices Conspiracy to commit any of the foregoing offenses _ Violation of Securities Law _ Any other felony ' For purposes of this form, "principal" means any officer or director of the applicant and any person, firm, corporation, partnership, joint venture or other entity, who or which owns or controls, directly or indirectly, any of the voting stock (or any equivalent voting interest of a partnership of joint venture) of the applicant. 51 If"yes," attach separate statement providing specifics such as date, court, sentence or fine, etc. (b) Has the applicant or any principal ever been a party to a civil proceeding in which it was held liable for any of the following or is now a party to the proceeding? Yes No Unfair or anticompetitive business practices Anti-trust violations (state and federal) including instances in which consent decrees were entered into Violations of securities laws (state and federal) False/misleading advertising _ Violations of FCC regulations Discrimination in hiring or promotion practices _ If"yes," attach statement providing specifies. (c) Has applicant or any principal ever had a business license (defined to include FCC licenses, alcoholic beverage and restaurant licenses, etc.) revoked, suspended or the renewal thereof denied or is a party to a proceeding that may result in same? Yes_ No_ If"yes," attach statement providing specifics. 52 C. Experience 1. Please list all cable systems renewed or rebuilt in the last four years in which applicant or any principal owns three percent (3%) or more of equity interest. Location of system Date of most recent franchise award and expiration date Plant miles of system: (a) Aerial (b) Underground Amount committed for: (a) Local origination equipment (b) Public, educational and government access equipment (c) Annual local origination operating budget (d) Annual public, educational and government access operating budget (e) Institutional network Miles of rebuilt plant Channel Capacity Percent of fiber in rebuild Households per fiber node Franchisee of system and percentage of system ownership held 53 Number of subscribers Pay units sold Basic subscribers Homes passed by cable Current subscriber rates: (a) Basic (Tier 1) (b) Expanded Basic (Tier 2) Hours of local programming per week (a) Local origination (b) Public, education and government access channels Name and address and telephone number of local government officials responsible for cable operations 2. Please list all franchises held in New York and indicate the number of subscribers, date of franchise award, and name, address and telephone number of local government official responsible for cable operations. 54 D. Financial Commitment 1. Please provide a narrative description of all sources of funds flowing into the cable system serving the Consortium for future capital investments and to cover any operating deficits. Please indicate what funds are specifically earmarked for the Consortium area cable system. 2. Documentation: For each person or entity who has agreed to furnish funds, property, credit, loans, assurances and other things of value, submit assurances from the entity or persons providing funding. 3. The Consortium reserves the right to require additional information or assurances with respect to any person or entity who has agreed to furnish funds, property, credit, loans, assurances or other things of value. 55 Section II Financial Experience and Projections Bad Financial Experience and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Pro Forma Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 56 A. Financial Experience and Projections Directions 1. When preparing the ten (10) year financial projections, the applicant is required to use 1999 prices and assume an annual inflation rate of three percent (3%) thereafter. The ten (10)year projection period requested is for evaluation purposes only and in no way reflects the term of any franchise which may be granted. The financial projections should be prepared for the system serving the Consortium only. 2. For comparison purposes, the applicant is required to include the latest fiscal year's experience in the proforma. 3. All capital expenditures and the date of rebuild should be reflected on proforma financial statements. 4. The applicant is required to specify the assumptions used to develop the proforma financial statements by referring to the explanatory notes following the financial statement forms and completing in detail the information requested. Please enumerate any other significant assumptions that would assist in understanding how the proforma were developed. 5. Please note that the proforma formats which follow contain the information that is required. However, if the applicant desires the Consortium to consider a different ordering or format, the applicant can send in a copy of the revised format to the Consortium for review to see if it is acceptable to the Consortium. 6. The applicant's forecasted financial statements and related schedules and working papers must be prepared in accordance with the principles set forth in the American Institute of Certified Public Accountants (AICPA). All data provided should be regarding the system serving the Consortium, only. 57 TEN-YEAR PROJECTIONS 58 FISCAL YEAR YEAR Previous Fiscal Year 1 2 3 4 5 6 7 8 9 10 LOCAL CHARACTERISTICS Homes Passed(1) Aerial Miles Constructed Underground Miles Constructed Aerial Miles Rebuilt Underground Miles Rebuilt Year-End Basic Subscribers (2) Average Basic Subscribers(2) Additional Outlets Sold Number of Pay Units Sold FM Subs Remote Units Rented Pay-Per-View Units Sold Other Services (specify) SUBSCRIBER REVENUE Basic Tier A La Carte Channels Additional Outlets Converter Rental(3) Remote Control Units Pay Service Revenue FM Service Pay-Per-View Installation Other Services NON-SUBSCRIBER REVENUE Advertising Channel Leasing Facilities and Equipment Rental Other Non-Subscriber Revenue TOTAL REVENUE 59 FISCAL YEAR YEAR Previous Fiscal Year 1 2 3 4 5 6 7 8 9 10 OPERATING EXPENSES Plant: Plant Salaries&Benefits (4) Plant Maintenance&Repair Converter Maintenance(5) Pole&Site Rental(6) System Power(7) Vehicle Expense(8) Other Plant(specify) Programming and Origination: Satellite Fees(9) Pay Service Fees Copyright Fee(10) Community Programming Salaries(11) Studio Supplies&Expenses General, Selling&Administration: Salaries&Benefits(G&A) Salaries&Benefits(Marketing) Advertising&Promotion Bad Debt Expense Billing&Mailing Rent, Heat&Lights Telephone&Office Expense Insurance Professional Services(specify) Allocation of Corp. Overhead(12) Services Purchased from Parent(specify) State&Local Taxes Franchise Fee Other G, S&A Expense TOTAL OPERATING EXPENSES CAPITAL EXPENDITURES Land Buildings Tower and Antennas Earth Stations&Foundations Headend Equipment Distribution(13) Coaxial Aerial(including pole make ready) Underground Fiber Optics Aerial(including pole make ready) Underground Subscriber Drops (14) Converters(15) Local Origination Equipment Vehicles (16) Tools/Spares Office Furniture&Equipment Other(specify) TOTAL CAPITAL EXPENDITURES 60 FISCAL YEAR YEAR-i Previous Fiscal Year 1 2 3 4 5 6 7 8 9 10 PROFIT AND LOSS STATEMENT Total Revenue Direct Operating Expenses Operating Income(Loss) Depreciation/Amortization(17) Interest Expense(18) Federal/State Income Taxes Net Income(Loss) SOURCES OF FUNDS Net Income + Depreciation Advances from Parent Other Sources(specify) Total Sources USES OF FUNDS Additions to Operating Assets Additions to Other Assets Payments to Parent Company Total Uses Net Increase(Decrease)in Cash BALANCESHEET Cash Accounts Receivable Allowance for Doubtful Accounts Other Total Current Assets Gross Property, Plant&Equipment Less: Accumulated Depreciation Net P, P&E Intangible Assets Other(specify) Total Assets Total Current Liabilities Due to Affiliated Companies Equity(specify) Total Liabilities and Equity Commitments and Contingent Liabilities(19) 61 B. Pro Forma Assumptions 1. What is the source of the estimate for the projected annual growth in the number of homes passed? 2. Indicate the current and projected number of employees for Years 1-10 in each of the following areas: ■ Plant ■ Community Programming ■ General & Administration ■ Marketing (full-time equivalent) 3. What is the assumption behind converter maintenance expense projections? 4. Assumed charge for pole rental per pole per year? 5. Assumed system power expense per plant mile? 6. Average annual expense per vehicle? Assumed number of vehicles? 7. Assumed satellite fees per subscriber, per year? 8. Projected copyright fees are based on how many "distant signal equivalents," and are what percent of basic and second set revenue? 62 9. If separate funding is provided for local origination, public access, educational access, and/or governmental access, provide individual breakdowns for salaries and benefits, studio supplies and expenses, and other. 10. Management fee is assumed at what percent of total revenue? What services, if any, will be purchased from the parent Company that are not covered by the management fee? Explain. 11. What is the projected cost per aerial mile upgrade? What is the projected cost per underground mile upgrade? What was the overall cost of the system upgrade by Municipality in the Consortium? 12. What is the average projected cost per subscriber drop? 13. What is the average projected cost per converter? Explain the assumptions behind the converter replacement schedule. 14. What is the anticipated number and type of vehicles (cars, light trucks, bucket trucks, etc.) that will be purchased and the estimated cost for each type of vehicle? 63 15. Specify the estimated useful lives for the various asset categories listed below. Use the straight-line method of depreciation. ■ Buildings ■ Tower and Antennas ■ Earth Stations&Foundations ■ Headend Equipment ■ Distribution System ■ Subscriber Drops ■ Converters ■ Local Origination Equipment ■ Vehicles ■ Tools/Spares ■ Office Furniture & Equipment ■ Other (specify) 16. Assumed rate of interest? Amount of debt on which interest is computed? 17. Please state whether the applicant has any other commitments and/or contingent liabilities. If yes, explain. 18. Indicate how expenses and revenues generated on a system-wide basis have been allocated to the Consortium system. 19. The net present value of expected annual cash flows generated from this project over the ten year period will be calculated. Please provide the following: ■ An estimate of the net investment to date. Describe fully the basis for the estimate. ■ An estimate of cost of capital. Describe fully the basis for the estimate. ■ Discount rate used. 64 Section III Construction and Service Part Service Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Construction Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 65 A. Service Area 1. If any areas are not currently served within the corporate boundaries of the Consortium communities, please provide a map targeting these areas and explanations for the exclusion of these areas must be provided. (a) For those areas not served, specify the sequence and timetable for completing the construction of those portions of the system. (b) For areas not served, please indicate the number of homes per mile. 2. Please indicate if the system upgrade to 750 MHz is complete throughout the system. If not, please indicate when construction will be completed. 3. Will the Company provide cable service to every dwelling unit and developed property in the City of Ithaca? 4. Will the Company provide service to all dwelling units in the Village of Lansing, Village of Trumansburg, Village of Dryden, Village of Cayuga Heights, West Groton, and the Village of Freeville? 5. Will the Company provide service to all dwelling units in the Town of Ithaca, Town of Caroline, Town of Groton, Town of Lansing, and Town of Ulysses with a minimum density of fifteen dwelling units per mile? (a) Please describe the line extension formula that the Company will abide by for areas with less than fifteen dwelling units per mile. Also, please describe how the minimum density requirements will decline during the term of the franchise. 6. Will the Company provide service to any commercial development of 100,000 square feet and 100 jobs at the owner's request? 7. Please describe the Company's policy for commercial service and service to industrial parks and office complexes. 8. List the location of Company offices, facilities and payment stations. 66 B. Construction Practices 1. Describe in detail the safety practices which the Company will use to protect the public during ongoing operations. 2. Indicate how subcontractors are used and how supervision of subcontractors will be handled. 3. Provide a description of the practices the Company will use for undertaking construction on private property and procedures for dealing with complaints by property owners. 4. Provide a description of the methods and practices for minimizing service interruptions and property damage the Company will use. 5. List construction codes and licensing requirements which will be followed. 6. Attach a copy of the construction practices manual being followed by construction crews for construction in the future. 7. For the upgrade, in areas where the existing cable was used, did the Company test all cable to ensure that it meets manufacturers standards? 67 8. Will the Company have house drops checked for grounding during normal service calls and have any drops not meeting specification been replaced? 9. When will the Company certify to Consortium communities that all house drops within their boundaries are in compliance with NEC regulations? 10. Provide a plan that the technical staff will follow prior to entering a subscribers home (e.g., I.D. badges, proper authorization). 11. Indicate how long temporary underground drops will be left above ground. 12. What steps will the Company take to ensure that homeowners and builders have the proper technical specifications available for internal wiring. 68 Section IV System Design Part Channel Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A System Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B 69 A. Channel Capaci 1. What are the number of downstream channels? MHz Channels 2. What are the number of activated upstream channels? MHz Channels 3. What capacity has been reserved for future applications? MHz Channels 4. When will the fiber optic link be completed that will improve the cable systems' reception of off-air channels from Syracuse? 5. Please provide the Company's plans to investigate a remedy to electrical interference on Channel 57. 6. Will the Company upgrade the cable system equipment, facilities, and services as specified in the Introduction if a longer than five year franchise term is sought? 7. When will digital video services be provided? Please describe what digital tiers will be deployed. 70 B. System Design 1. Provide the following system mileage figures by Consortium community. Consortium Communit Aerial Miles Under ound 1Vliles City of Ithaca: ■ Cable Distribution Plant Town of Ithaca: ■ Cable Distribution Plant Town of Caroline: ■ Cable Distribution Plant Village of Lansing: ■ Cable Distribution Plant Village of Trumansburg: ■ Cable Distribution Plant Village of Dryden: ■ Cable Distribution Plant Village of Cayuga Heights: ■ Cable Distribution Plant Village of Freeville: ■ Cable Distribution Plant Town of Groton: ■ Cable Distribution Plant Town of Ulysses: ■ Cable Distribution Plant 2. Describe the technical standards that the system will comply with. 3. Describe in detail the preventive maintenance program the Company will follow which will ensure the maintenance, upkeep, and signal quality of the rebuilt system. Include Company plans for assuring proper installation and periodic testing. 71 4. Describe the emergency alert system that will be provided, how the Company will keep the Consortium communities informed of changes, and how the Consortium franchising authorities will provide local emergency message (e.g. touch-tone telephone with access number). 5. Will BTSC stereo be provided for all broadcast and satellite programming services that offer it? 6. Describe in detail plans for radio frequency non-interference including compliance with all applicable FCC technical rules. 7. Describe how the cable system will provide antenna switches to subscribers. 8. The applicant should establish mechanisms to provide access to the system by disabled and elderly users and viewers. In the case of hearing-impaired subscribers, this should include, at a minimum, equipment which facilitates the reception of basic cable service by such subscribers, as well as TDD equipment. Describe the technology which will be available from the applicant for disabled and elderly users and viewers. 9. Describe the parental control features that will be offered. 10. Indicate how the Company will keep the Consortium informed about HDTV, and other technological developments and factors the Company will consider prior to offering these new technologies. Indicate how HDTV signals will be provided on the system. 11. Describe the applicant's plan for minimizing outages. 72 12. Please describe how institutions transmitting access programming on the institutional network will be interconnected with the access channels on the subscriber network. 13. Will all access channels be available throughout the Consortium area if requested by the individual franchising authorities? 14. Please provide a plan to conduct a system-wide audit of the aerial plant and what steps will be taken to bring the Company's plant or other parties plant into compliance with the NEC and Bellcore standards. 15. Please provide a plan for improving the picture quality of Channel 8. 73 Section V Channel Allocation P.&d Access Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Radio Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Summary of Channels by Tier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 74 A. Access Channels 1. Describe the number of channels that will be set aside for the following: Number of Channels Leased Access Video PEG Access Channels* Audio PEG Access Channels Local Origination 2. Please indicate if the channel designation for existing access channels will remain the same when digital tiers are introduced on the system. If there will be any changes, will the Company use all commercially reasonable efforts to maintain the access channels in the same position? If an access channel is to be changed, what assistance will the Company provide for informing viewers and assisting with logo and stationary changes? 3. Please indicate the percent of digital capacity that will be provided for access. * Indicate if there is any restriction on which channel can be designated for pay-per-view access. 75 B. Radio Services 1. Describe what broadcast and digital audio services are and will be offered, and how this is or will be technically implemented. 76 C. Summary of Channels by Tier 1. Provide a listing of cable channels and corresponding services that will be provided by tier of service. 2. Describe any additional service features. 3. What Spanish language channel will be provided? 77 Section VI Rates Rates & Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 78 A. Rates & Chargcs 1. Please provide a complete listing of current system rates, including any charges that are assessed to subscribers (e.g. late fees). 2. Describe additional rates for leased channels. 3. Describe any and all special rates or discounts (e.g., senior citizen and disabled discounts, private school rates.) 4. Describe if all rates will be provided on a non-discriminatory basis, except for any discounts as described in 2. above. 5. Describe the Company policy (existing or future) for lost or willfully damaged convertors and other equipment. 6. Will subscribers be able to purchase converters, remote controls and other consumer electronic equipment from the Company and/or other vendors? Please describe. 7. Will you continue to provide disconnection free of charge? 8. Will the Company agree not to offset property tax from the franchise fee? 79 Section VII Local Programming Part PEGAccess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 80 A. PEG Access 1. Describe the new equipment and the new studio equipment and facilities that will be provided by the Company for public, educational, and government access programming. Provide an overall budget for such equipment and facilities. State manufacturers, model numbers, and costs. In responding to this question, please refer to the minimum requirements for access specified in the Introduction. Studio: Editing: Character Generation: Lighting: Portable Equipment: Mobile Multi-camera Production Van: Master Control/Playback: Audio Equipment: Description of Facilities: Other: Total Cost: 81 2. Identify and describe the additional PEG studio site and whether the space will be built, leased or purchased. Describe the equipment that will be provided for the four outlying studios. 3. How does the applicant propose to maintain the PEG access equipment and facilities? Indicate the annual maintenance budget. 4. What technical support services does the applicant propose for PEG access users? 5. Indicate the level of funding that will be committed for the initial equipment and replacement of equipment for PEG access programming for each year of the projected ten years. 6. Indicate the level of funding for staff support that will be committed for PEG access services for each year of the projected ten years. 7. List additional publicity support and services the Company would provide for PEG access. 8. Describe the current locations that PEG access programming can originate from, and how and when the required origination sites would be available to cablecast. Indicate if the Company proposes any additional public access origination sites. Also, indicate whether origination sites will be provided via fiber optics or coaxial cable. 9. Describe which services the Company will provide to assist in the development and production of PEG access programming. 82 10. Please provide a plan to meet PEG Access Task Force concerns regarding viewers choices regarding access programming as specified in the Introduction. 11. What hours of operation will the studios be open? Please see the studio hours respondents to the community needs assessment survey indicated would be times their organization could utilize the studio. 12. Indicate the assistance the Company will provide in scrambling signals and switching for closed-circuit educational programming to be provided to schools. 13. State the number of converters capable of receiving the above-mentioned closed-circuit programming which will be provided. 14. Describe the educational programming services to be provided. Also, discuss any specialized services that may be provided for I-net distribution (e.g., SCOLA, NASA SELECT). 15. The Company will continue production of City of Ithaca meetings (Common Council plus three committee meetings). Please provide details on the robotics facilities that will be provided to the City. 16. Will the Company provide production services to other members of the Consortium? 17. Regarding access proposals, please indicate whether the Company will provide at its own expense, if all or a portion is already in the rate base, if all or portion will be passed through to subscribers as an additional fee. 83 Section VIII Institutional Network Services Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Institutional and Subscriber Drops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Institutional Network Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 84 A. Experience The Consortium is interested in Applicant's and the parent company's experience in providing institutional networks. 1. Is applicant providing institutional networks of any type in other communities (e.g., coaxial cable, Internet, upstream bandwidth)? [ ] Yes [ ] No 2. If yes, provide the following information: (a) Name and location; (b) Types of institutional network provided; (c) Type of end user equipment provided; (d) Contact person for the institutional networks described above. 85 B. Institutional and Subscriber Drops 1. Please provide a list of the type of buildings the Company will provide free subscriber drops and service at no cost. What is the maximum length of new drops to such buildings? Indicate what tiers of service will be provided free of charge. Indicate which type of building will receive multiple drops. 2. Please provide'the Company's proposal regarding providing internal wiring of educational and government buildings and any additional connectivity for the Ithaca College campus. 86 C. Institutional Network Design 1. Please indicate if the Company will conduct annual tests of the existing coaxial cable I-net. 2. Will the Company provide 6 MHz upstream throughout the cable system for video, telemetry, and other institutional network purposes? 3. What inventory of passives and amplifiers will the Company maintain for the coaxial cable institutional network? 4. When does the Company believe the useful life of the existing coaxial network will end? 5. Please provide the response time and test procedure proposal the Company will provide. 6. Will the Company replace the coaxial cable network with fiber optics as specified in the Introduction? 7. Please provide a detailed breakdown of costs for: the existing coaxial I-net to be replaced by fiber; the required extension sites; priority two sites. (Breakdown should be provided by site.) 87 8. Will the Company provide free Internet service to schools, libraries and government buildings capable of 100 simultaneous users or other capability? (a) For each of these locations, how many free cable modems will be provided? 9. Requirements for the institutional network are included in the Introduction to the RFRP. Describe the design and capacity of the proposed institutional network. Submit maps that provide an overview of the following information. See the Introduction for a listing of identified institutional network sites. (a) The proposed routing of the fiber backbone network. (b) Individual fiber drops to public institutions (e.g. schools, government buildings). (c) Program feeds from public, educational, and government access locations to the subscriber network. 10. Provide information on the fiber optic construction institutional network plant. 11. Provide a technical description on the interface equipment that will be supplied to support digital transmission on the fiber optic networks. (a) Manufacturer and model (if selected) (b) Bandwidth of the optic transmitter equipment (c) Emitter wavelength (d) Applications to be supported (example) 1. Point-to-point/multiplex (9.6 Kbps to 1.54 Mbps link) 2. Local area network bridges (FDDI, Token Ring, Ethernet, etc.) 3. Telemetry (alarms, monitor, control) 88 Also, provide description of the equipment which will be supplied to support the video transmission on the fiber optic network. 12. Description of the I-net control center. (a) What equipment will be provided to support switching of video signals? (b) What test equipment will be available to monitor and diagnose problems with the video and data transmission networks? 13. Does the Company agree to have the public sector use of the upstream/downstream institutional capacity coordinated and managed by the Consortium or PER 14. What equipment will be provided to enable a connected institution to use the network for various purposes (e.g., monitors, internal wiring, modems, modulators, etc.)? 15. Will all transmission capability be provided for free, noncommercial use for the Consortium government and educational and public institutions? If not, please explain. 16. Provide a construction timetable for the institutional network extension and any rebuild of the coaxial network. 17. Describe how switching between the locations on the institutional network, providing access programming, and the access channels on the subscriber network will be handled. 89 18. Describe any institutional network services that the Company will offer. 19. Describe the applicant's plans to maintain the coaxial cable and fiber optic institutional network over the term of the franchise. 20. Indicate how calls for service or repairs on the fiber optic institutional network will be handled and the response time. Indicate the reliability standards that will be met by the Company. 21. Regarding I-net proposals, please indicate whether the Company will provide at its own expense, if all or a portion is already in the rate base, if all or portion will be passed through to subscribers as an additional fee. 90 Section IX Equal Employment Opportunity and Equal Business Opportunity Part EEO and EBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 91 A. EEO and EBO 1. Describe in detail your equal employment opportunity policy. Include job classifications, duties, and salary ranges for positions at the supervisory, management, and professional levels and identify the total number of each job classification and the number of minorities and women currently in each job classification. 2. Have any complaints of discrimination in employment practices been lodged against the applicant? If so, please specify the complaints and resolutions. 3. Identify any training programs that are or will be made available to employees. 92 4. The Franchisee will be required to comply with the Cable Television Consumer Protection and Competition Act of 1992 and regularly file with the Consortium a copy of the annual statistical report required therein. The Consortium encourages the good faith effort by contractors, suppliers and vendors to subcontract and procure with MBEs and WBEs. (a) Consistent with the requirements of Section 634, describe how the applicant will establish, maintain and execute a positive continuing program of specific practices designed to ensure equal opportunity in every aspect of its employment policies and practices. (b) Describe specifically the following aspects of applicant's EEO program: 1. The recruitment, publicity and promotional program for minority and female employees; 2. The training and employment policies and practices in all segments of Company operations, as well as in the selection of contractors, subcontractors, and vendors, with emphasis on opportunities for local, minority and female owned enterprises; and 3. The ongoing evaluation of its EEO program. 5. Indicate the specific commitment to utilizing women and minority business subcontractors and suppliers in the proposed construction or continued maintenance of the system. 6. Indicate the makeup of the current Time Warner personnel serving the Consortium system using the job categories provided by the FCC for EEO reporting. 93 Section X Consumer Part Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Consumer Complaints and Repair Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B Billing Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C 94 A.. Privacy 1. Provide the applicant's .privacy policy and clearly delineate between "voluntary information" and "voluntary uses," "essential information," and "essential uses." "Essential information" is that information which Company must collect in order to provide service (e.g., billing information). "Voluntary information" is all other information which the operator may seek to collect. "Essential uses" refers to those uses of essential information which are required in order to provide service (e.g., billing uses). "Voluntary uses" are all other uses of information collected, whether that information be considered "essential" or "voluntary." The cable system policy is expected to at least guarantee the subscriber that no voluntary information will be collected without prior consent; and no voluntary use will be made of information collected without prior consent. Thus, by agreeing to receive service after they fully read and understand the pricing document provided by the Company, a subscriber will be deemed to have given prior consent that "essential information" may be collected for "essential uses." In addition, the applicant's privacy policy should include: (a) Affirmative written consent is required if billing for particular services will require the operator or a third party to monitor the programs of channel viewers, the fact must be clearly explained and the services requiring such monitoring specified; and (b) Affirmative written consent is required for third parties to collect information using the cable system. 2. Identify all present and projected uses of the cable communications system where questions of subscriber privacy can be expected to arise, and describe in detail the policies and procedures designed to protect subscriber privacy. 3. Describe in detail what measures will be taken on an ongoing basis to protect subscriber privacy and to inform subscribers as to how subscriber information is to be collected, retained, used and disseminated. 4. Describe the remedies for breach of subscriber privacy which the applicant will make available to subscribers. Detail procedures or privacy complaint resolution. 95 B. Consumer Complaint and Repair Procedures 1. Describe in detail your policy for handling consumer complaints, inquiries and repair requests. Describe how this policy is or will be implemented including the role of the Consortium. Indicate the number of days in which complaints will be resolved. 2. Describe how you will notify subscribers on an ongoing basis of your complaint, service and maintenance procedures, providing a sample of such notification. 3. Provide a copy of the system's consumer handbook or information packet and indicate how often it is provided to the subscribers. 4. Hours of office(s) operation will be: Monday - Fridays: a.m. to p.m. Saturdays: a.m. to p.m. Sundays & Holidays: a.m. to p.m. 5. How soon after a trouble call is received will a service employee be required to correct the problem either by telephone contact with subscriber or by a visit to the premises, or by a doorknob hanger if no one is home? Within 24-hours: ( ) Same day: ( ) Close of next business day: ( ) Within five hours: ( ) Other: ( ) 96 6. Provide the percent of service calls that are corrected on one or more service calls. One Visit % Three Visits % Two Visits % Four or More Visits % 7. Please provide your plan for how the number of multiple repair service calls for the same subscribers will be reduced and what percentage will be met. 8. What will be the Company's policy for missed appointments? 9. List the addresses of the Company's offices and payment stations. 10. Where will telephone calls be received? 11. How will trouble calls be received outside normal business hours and how will technicians be informed? 12. How soon will individual trouble calls outside normal hours be given to a repair or service person? 13. Describe how subscribers will be notified of routine maintenance and when such maintenance will be scheduled. 97 14. Describe when technicians will respond to system outages and when subscribers will receive rebates. 15. Indicate the proposed number of active phone lines by which customers may reach office personnel. Also, indicate: (a) The percent of all customer service calls that will be answered within one minute; (b) The percent of all customer service calls that will be answered within two minutes; (c) The percent of calls that will be lost; (d) The percent receiving a busy signal; (e) The amount of time customers are placed on hold; (f) How information will be provided to the Consortium to monitor these standards. 16. Indicate the percent of repair calls that will be answered satisfactorily within a 24-hour period on an annual basis and what steps will be taken if this level of service is not obtained. 17. Indicate if appointments are scheduled with subscribers on a two-hour or other basis. 18. Describe in detail how the system will be compatible with consumer electronics. 98 19. Describe what the Company's policy regarding subscriber requests for underground drops will be in areas served aerially. 20. What type of equipment will be provided to subscribers or franchise areas that do not wish to receive specific access channels? 21. Indicate if the Company meets the FCC customer service standards and provide relevant quarterly management data for the last year. 22. Please provide the Company's plan for minimizing the number of repeat repair calls. 23. Please provide the Company's plan for increasing the percent of subscribers receiving a service call within twenty-four hours of a request. 24. Please provide the Company's plan for decreasing the amount of time subscribers wait for installation of cable service. 25. Please provide the Company's plan for decreasing the amount of time subscribers are put on hold and decreasing the percent of time subscribers receive a busy signal. 99 26. Please provide the Company's plan for promptly responding to citizen complaints forwarded by Consortium communities and for providing a written description of the Company's response to the effected Consortium communities. 27. Will the Company comply with the NCTA customer service guidelines? 100 C. Billing Practices 1. Describe in detail the Company's billing, payment and collection procedures and policies (e.g., form and type of billing, system outages). Indicate the number of days in which complaints will be resolved. Also attach a sample billing form. Indicate if the subscriber will not be required to pay the disputed portion of the bill until the complaint procedures have been followed. 2. Currently, cable subscribers call the Office of the City Clerk for cable problems since that number is on Time Warner Cable's bills. Please state how the bill will be clarified to indicate that subscribers should only call the City Clerk for franchise matters, not cable service or cable service questions. 3. Describe the Company's policy for handling billing complaints and describe how this policy is or will be implemented. 4. Provide the name of the collection agency being utilized by the Company and guidelines used for the collection of past due accounts. 5. Describe the Company's policy regarding late fees, the amount of the late fee, and what the direct costs are to the Company for late fee collection. 101 Section XI Innovative Projects Part Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 102 A. Description 1. Briefly describe any pilot, experimental, or innovative project(s) that the applicant and/or the parent and AT&T or other joint venture partner intends to develop in the Consortium. Examples of such project(s) may include, but are not limited to, services to be provided for education, business or institutional services, and joint ventures with private entities, local public or educational institutions. Indicate whether the project(s) currently is operational, being developed, or is a proposed new project and the projected timetable(s). 2. Provide related contracts with third party entities. 3. Please provide a timetable for implementation. 4. Describe any joint ventures, contracts, or relationships with other telecommunications entities to conduct innovative projects in the Consortium area. 103 Section XII Term of Franchise Pad Term of Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A 104 A. Term of Franchise 1. The Consortium will extend the business terms of the current Ithaca franchise for five years with specific modifications for Consortium communities, but if the Consortium's franchising authorities believe the Company's proposal meets community needs, the Consortium will consider a longer term. Indicate the term, in years, which applicant seeks for this franchise. 105 APPENDIX A GOVERNMENT AND EDUCATIONAL ACCESS EQUIPMENT Appendix A Government and Educational Access Equipment City of Ithaca - Government Access Robotics equipment for the Council Chambers All equipment should be industrial quality 4 robotics cameras and associated equipment off-site switcher audio equipment character generator monitors dubbing and editing equipment ancillary equipment Consortium Communities - Government and Educational Equipment All equipment should be industrial quality Equipment for four small studios (Consortium communities to provide buildings for studios). Each studio should include: • 3 cameras • control room equipment • audio equipment • lighting equipment • playback and editing equipment • one portable eng/video unit • associated equipment Equipment to allow mobile use of studio cameras for multi-camera shoots (e.g. Council meetings or hearings) Renovation funds Public Schools- Educational Access Equipment Equipment replacement and upgrade APPENDIX B I-NET EXTENSIONS Appendix B I-Net Extensions City of Ithaca 1. City of Ithaca, Police Satellite Offices: • Northside Office, 526 Madison Street • Commons Office, 171 East State Street (Southside Office, 305 South Plain Street is already connected through Southside Community Center) 2. Water Treatment Center, Bolton Point 1402 East Shore Drive 3. County Mental Health Building 201 East Green Street 4. County Human Services 120 West State Street 5. Fire Training 200 Pier Road 6. Waste Water Treatment Plant 525 Third Street Extension Town & Village of Groton 1. Groton Town Hall, Highway Dept. & Justice Court 101 Conger Blvd. 2. Groton Village Municipal Building & Fire Department 108 E. Cortland St. 3. Groton High School & Middle School 400 Peru Road Town & Village of Groton (Cont'd) 4. Groton Elementary School 516 Elm Street 5. McLean Central School 20 School Street (McLean) 6. McLean Fire Department 2 The Square (McLean) 7. Groton Community Health Care Center & Residential Care Facility 120 Sykes Street 8. Groton Intermediate Care Facility 705 Elm Street 9. Groton Housing Authority (Senior Citizen Housing) 200 West South Street 10. Schoolhouse Gardens Apartments 177 Main Street Trumansburg/Ulysses 1. Trumansburg Central Schools (Five Buildings) 100 Whig St. Distance learning, video production (video) 2. Town Hall Elm Street Data for communication with County, etc. Video for court video arraignments and broadcast of Town Board meetings (data, video) 3. Trumansburg Village Hall/Police 56 East Main St. Data for communication w/County, sheriff, other police depts., etc. Video for broadcast of Board meetings. Note: Town and Village Halls are across the street from each other, could share one set of portable video equipment (data, video) Trumansburg/Ulysses (Cont'd) 4. Trumanburg Fire Hall West Main Street Distance education, PEG origination (video) 5. Trumanburg Historical Society 39 South Street Distance education (video) 6. Trumanburg Conservatory Congress Street Distance education, concert broadcasts (video) 7. Ulysses Library East Main Street Public access, FLLS catalog (data) 8. Trumanburg Village DPW Corey Street Telemetry (data) 9. Village Sewer Plant Lake Street Telemetry (data) 10. Town DPW Colegrove Road Telemetry (data) Town of Caroline 1. Brooktondale Community Center Valley Road 14817 Data & 2-way video 2. Brooktondale Fire Hall Valley Road 14817 Data & 1-way video Interested in free or discounted RoadRunner & Cable Town of Caroline (Cont'd) 3. Caroline School 2439 Slaterville Road 14881 Data & 2-way video Classrooms internally wired 4. Caroline Town Barns/Highway Dept. 852 Valley Road 14817 Internet 5. Caroline Town Hall/Court/Library 2670 Slaterville Road 14881 Data & 2-way video Computer available for library Internet; video arraignment desired for Court cablecast for town meetings 6. Fountain Manor Retirement Home 9 Midline Road 14881 (next to Slaterville Town Hall Two 1-way video connections for public areas (upstairs & downstairs) Haven't been notified of senior discounts 7. Slaterville Fire Hall 2681 Slaterville Road 14881 2-way video & Internet, Roadrunner for NYDOS training 8. Speedsville Fire Hall 40 Mill Road 13736 2-way video & Internet Have satellite connection for EMS 9. Speedsville Community Center 13 Speedsville Commons 13736 Building not in use at this time Village of Freeville 1. Village of Freeville/Police, Clerk, and Justice Office 5 Factory Street 2. Freeville Fire Station 21 Union Street Village of Freeville (Cont'd) Other options: 3. Freeville Elementary School 4. Post Office Village of Lansing 1. Village Office 2405 North Triphammer Road 2-way full motion video & data 2. Public Works Garage 2405 North Triphammer Road Data only 3. Lansing Fire Station#5 Oakcrest Road 4. Convenient Care Center 10 Arrowwood Drive 5. County Airport Business & Technology Park 72 Brown Road Village of Cayuga Heights 1. Cayuga Heights Village Hall 836 Hanshaw Road Cable hook-up for public access & additional video hook-up & data 2. Cayuga Heights Fire House 194 Pleasant Grove Road Cable hook-up for public access & additional video hook-up & data 3. Cayuga Heights School 110 E. Upland Road Cable hook-up for public access & additional video hook-up Village of Dryden 1. Dryden Village Hall & DPW Building 2. Dryden Fire Department (Neptune Hose) 3. Dryden Elementary School 4. Dryden Historical Society 5. Southworth Library 6. TC3 (School) 170 North Street Town of Ithaca 1. Town of Ithaca Highway Department 106 Seven Mile Drive Video/data 2. Town of Ithaca Town Hall 213 N. Tioga Street Video/data 3. Hospital/Cayuga Medical Center 101 Dates Drive Town of Lansing 1. Lansing Town Hall 29 Ridge Road P.O. Box 186 2. Town Office & Justice Court 29 Auburn Road 3. Lansing Town Highway Department 10 Town Barn Road P.O. Box 186 4. Lansing Central School District (3 buildings) 264 Ridge Road 5. Lansing Fire District 80 Ridge Road P.O. Box 249 6. Lansing Residential Center 270 Auburn Road 7. Gossett Center 250 Auburn Road Ithaca School District All 19 facilities (many facilities included elsewhere in this Appendix) Libraries 1. Tompkins County Public Library New Location at 115 E. Green Street 2. Danby Reading Center 3. Caroline Reading Center 3. Finger Lakes Library System APPENDIX C PRIORITY TWO I-NET SITES Appendix C Priority Two I-Net Sites Cass Park Ice Rink Chamber of Commerce County Public Health - Biggs B County Solid Waste & Recycling Center CSMA (Community School of Music and Art) ICSD Bus Garage Red Cross Building Cornell University, Performing Arts Center (video) The State Theater Stewart Park Hangar Theatre (video).