Council PKT 11-19-2013 SpecialFederal Way
AGENDA
FEDERAL WAY CITY COUNCIL
SPECIAL MEETING
Council Chambers - City Hall
November 19, 2013
5:30 p.m.
www.cityoffederalway.com
1. CALL MEETING TO ORDER
2. RENEWAL OF THE COMCAST FRANCHISE AGREEMENT
• Council Action
3. ADJOURNMENT
COUNCIL MEETING DATE: November 19, 2013 ITEM #:
CITY OF FEDERAL WAY
CITY COUNCIL
AGENDA BILL
SUBdEm COMCAST FRANCHISE RENEWAL
POLICY QUESTION: Should the City Council authorize Staff to contract with consultants to obtain (1) an
assessment of community needs, (2) operator's performance and system assessment; and (3) financial review of
payments made to the City to prepare for negotiations to renew the franchise with Comcast?
COMMITTEE: N/A MEETING DATE:
CATEGORY:
❑ Consent ❑ Ordinance ❑ Public Hearing
El City Council Business ❑ Resolution M Other
STAFF REPORT BY: PAMELA 3 BERRY AND NANCY L. WERNER DEPT: Law
Attachments: Staff Report
Options Considered: 1. Authorize an assessment of community needs, an assessment of the performance
and the system, and an audit of payments as recommended.
2. Authorize the assessments as specifically identified.
3. Do not authorize the assessments.
MAYOR'S RECOMMENDATION: Authorize the recommended assessments and audit.
MAYOR APPROVAL: : /�
DIRECTOR APPROVAL: f) -
Committee Councilf Initial
COMMITTEE RECOMMENDATION: N /A.
Committee Chair Committee Member Committee Member
PROPOSED COUNCIL MOTION: "I move approval of Option
(BELOW TO BE COMPLETED BY CITY CLERKS OFFICE)
COUNCIL ACTION:
0 APPROVED
COUNCIL BILL #
❑ DENIED
IST reading
11 TABLED/DEFERRED/NO ACTION
Enactment reading
❑ MOVED TO SECOND READING (ordinances only)
ORDINANCE #
REVISED— 08/12/2010
RESOLUTION #
T" -T T Beery Elsner
171111
Hammond LLP
MEMORANDUM
TO: Members of the City Council
City of Federal Way
CC: Mayor Priest
1
FROM: Pamela J. Bee�Nancy L. Werner, Special Legal Counsel
SUBJECT: Comcast Franchise Renewal
DATE: November 13, 2013
This memorandum and the accompanying presentation are intended to provide the Council with
an overview of the upcoming process for renewal of the City's cable franchise with Comcast: As
you will see, we have options in terms of how to accomplish the renewal. As such, at the work
session Council will be considering two questions which are discussed more fully below:
(1) What cable - related community needs and interests should be considered in the renewal; and
(2) How Comcast has been performing under the current agreement.
Following is an overview of the negotiation process and a discussion of these two options.
Introduction
The City granted a non - exclusive franchise to Comcast authorizing operation of its cable system
in the City by Ordinance No. 06 -524 in May, 2006.' By its terms, the franchise was granted for a
period of five years, with an option for an additional five years subject to certain payment
obligations in favor of the City. Comcast and the City agreed to the additional five year term
consistent with the original agreement, and the City Council enacted Ordinance No. 09 -620
including the negotiated payment terms of the original agreement. The franchise is now set to
expire in May, 2016.
' Comcast was operating using two affiliated entities at that time: Comcast of Puget Sound, Inc., and Comcast of
Washington IV, Inc. For ease of reference, this memorandum will refer to the cable operator simply as "Comcast."
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November 13, 2013
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Comeast has initiated the renewal process for the franchise within the time limitations
established in federal law, by letter to the City dated July 10, 2013 (to be discussed more fully
below). Although it seems to be a long way off, the City needs to make certain policy
determinations relatively soon in order to put itself in the most advantageous position in
negotiations over the renewal. We are seeking Council direction on those issues you consider
important to address in this process, as outlined below.
The following is an overview of the legal framework of the renewal process as set forth in the
Cable Act and administrative rules adopted by the Federal Communications Commission.
Renewal Provisions of the Cable Act
The Cable Act provides two procedural options for renewing cable television franchises: formal
renewal procedures (47 USC § 546(a )-(g)); and the informal renewal provision (47 USC §
546(h)). The formal process is rarely used but is available if the more commonly used informal
process does not produce an agreement that both sides can support.
During the period between 30 and 36 months prior to the expiration of a franchise, the cable
operator is required to provide notice to the City of its intention to seek renewal of the franchise
agreement. As noted above, that notice has been provided to Federal Way. We have responded
acknowledging the notice, and reserving our rights to invoke the formal process in the event the
informal process does not result in an agreement.
The informal renewal process is, as the name implies, a process by which the parties negotiate
without following any of the specific procedures of the formal renewal process set forth in the
Cable Act. The vast majority of franchise renewals are completed through the informal renewal
process. Although this process is largely determined by the parties, there are steps that the City
may wish to take ahead of those negotiations even assuming we are able to successfully conclude
negotiations in this fashion.
The formal renewal process set forth in Sections 546(a) -(g) of the Cable Act includes specific
steps that must be followed in granting or denying a renewal franchise and the permitted bases
for any denial. Under this process, Comcast would submit its proposed franchise for Federal
Way's consideration, which proposal must include the material required by Federal Way. Once
the proposal is submitted, the City has four months to renew the franchise or issue a preliminary
assessment that the franchise should not be renewed.
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In the event the City determines the franchise should not be renewed, a public hearing is required
to consider four specific criteria related to Comcast's provision of services, discussed more
fully below. After the hearing, the City must either grant or deny the renewal proposal. If the
proposal is denied, Comcast may appeal to an appropriate state or federal court.
While the vast majority of renewals are accomplished informally, it is important to recognize
that the formal process option is available in the event we are unable to reach agreement. At
times, in difficult negotiations, the possibility of the City moving to the formal process may need
to be considered.
FCC Administrative Rules
In addition to the requirements of the Cable Act, the Federal Communications Commission
( "FCC ") has adopted administrative rules governing the scope of local franchising authority and
defining certain minimum requirements that must be met by the cable operator.2 The FCC
standards govern issues such as customer service, billing notice requirements, system technical
requirements, transfer of a franchise, and similar issues related to cable services.
To that end, the FCC has adopted formal Competitive Cable Franchising Orders, FCC 06-180,
FCC 07 -190, which took effect in 2007 ( "Orders "). In the first Order, the FCC interpreted
Section 621(x)(1) of the Cable Act to limit local government authority with respect to
requirements that could be imposed upon cable franchising of new market entrants, with the
objective of promoting competition. In the second Order, the FCC applied some of these
limitations to incumbent cable operators such as Comcast. We are not aware of a competitive
provider in Federal Way, though there are some in neighboring Puget Sound jurisdictions.
Nevertheless, we will need to comply with these requirements in this renewal, as the FCC
"clarified" several provisions in the Cable Act, which provisions apply to Comcast even in the
absence of competition.
We will be negotiating the renewal within the parameters of both federal law and these
administrative rules, and consistent with FCC Orders. In our experience, Comcast is
knowledgeable about these requirements and can at times invoke limitations on our authority.
To the extent any disagreements on these issues are material in nature, we or Staff will provide
an update for Council and opportunity to consider how to proceed.
2 47 CFR, Part 76.
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Options for Council Consideration
The commencement of the renewal period under federal law was Comcast's written request for
renewal, as mentioned above. Because Comcast provided this notice within the 30-36 month
window prior to expiration of the franchise, we have an opportunity to prepare for negotiations
by determining (1) what cable- related community needs and interests should be considered in the
renewal, and (2) how Comcast has been performing under the current agreement? Since the City
is the franchising authority, this work will be the opportunity for other interested parties
including both the public and other entities (i.e., schools) to weigh in on the renewal.
The specific options are as follows:
1. Obtain an assessment of community needs in the proposed renewal, including public,
educational and government channels, equipment and related benefits.
This effort involves working with City staff to identify stakeholders, and then — depending on the
scope of assessment the City determines it needs — either a consultant completes the needs
assessment or it can be performed by staff .4 If a consultant is ,retained, a methodology is
developed based on staff's identification of stakeholders, and the stakeholders are typically
contacted for focus groups, online surveys, community forums, and other means.
The needs assessment would provide an important framework for many of the provisions City
staff will be negotiating. It will be much more likely that staff can successfully negotiate terms
that address the findings of the needs assessment. Additionally, although Comcast's costs to
address the identified needs must be considered, it is reasonable to propose terms that meet the
needs recognized in the needs assessment, and such terms are more likely to be upheld by a court
in the very unlikely event that negotiations break down.
This approach is the most comprehensive, and is required if the City believes it may need to
invoke the formal renewal process. It also puts the City in the best position to negotiate a good
franchise agreement in terms of connectivity requirements and the most robust public,
educational and government obligations from the operator. We find in our negotiations with
Comcast on behalf of other jurisdictions that these obligations are targeted for reduction or
elimination. Another benefit of a needs assessment in today's environment is Comcast's national
policy of eliminating its obligations to provide networks to achieve maximum connectivity both
3 Comcast's July 10 notice did not include language requiring the City to commence its analysis, and as such the
options discussed herein are policy choices for the Council.
" During the last renewal, a consultant was retained to perform this assessment.
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November 13, 2013
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within the City and to neighboring jurisdictions. These networks, called "I -Net" or "institutional
network" typically serve not only City buildings but also serve schools and other local
governments.
In conclusion, and for these reasons, a formal needs assessment is recommended; however, it
will be costly if it is comprehensive and inclusive.5
2. Gather additional information as needed concerning the operator's performance, the
system's capabilities and technology advancements.
This second aspect of the City's effort prior to negotiations would be a technical assessment of
the system's operation, capacity, construction, maintenance and other aspects of the physical
plant.6 Comcast is typically willing to address documented deficiencies that are detected in this
review. As with the community needs assessment, this technical analysis is the second part of
the assessment contemplated by the Cable Act. It would need to be performed by a consultant on
the City's behalf 7
The development of a carefully documented assessment of community needs and interests and an
assessment of the system and of Comeast's operations is important from a legal standpoint
because Section 626 of the Cable Act (47 USC § 546(d)) provides that a cable operator's request
for renewal can be denied (as proposed by the cable operator) or subjected to conditions that
must be met in the renewal during the formal process (should negotiation not produce an
agreement) based on four criteria:
a. Whether the operator has substantially complied with the material terms of the
existing franchise and with applicable law;
b. Whether the quality of the operator's service, including signal quality, response to
consumer complaints, and billing practices, but without regard to the mix of quality
of cable services or other service provided over the system has been reasonable in
light of community needs 8;
c. Whether the operator has the financial, legal and technical ability to provide the
services, facilities and equipment as set forth in the proposed franchise; and
' The cost of these assessments is highly dependent upon the scope, but typically is $20,000 to $30,000.
6 During the last renewal, a consultant was also retained to perform this second assessment. The review identified a
significant number of defects in cables, pedestals, and other elements of the system.
7 This review is typically somewhat less costly than a needs assessment, but depends upon the condition of the
system and the extent of the I -Net and PEG facilities. A reasonable estimate would be $15,000.
8 Under this criterion, which is codified at 47 USC 546(0 )(1)(i3), we can consider the level of service (i.e., the
number of channels) but we cannot require that specific programming or channels be carried on the system.
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November 13, 2013
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d. Whether the proposed franchise is reasonable to meet the future cable- related
community needs and interests, taking into account the cost of meeting those needs
and interests. 9
These four criteria are directly addressed through the two assessments discussed above.
3. Consider a financial review of the history of franchise fee payments during the term of
the current agreement.
This issue is not addressed specifically in federal law, but in the event there have been errors in
calculation and payment of the appropriate fees due to the City, this issue can also be rectified
during negotiations.
In summary, then, Council needs to provide direction concerning what efforts should be
undertaken at this time, in order to prepare for the renewal process. Below is an overview of that
process.
Next Steps in the Renewal Process
1. Complete needs and technical assessments as discussed above, if authorized by
Council.
As noted above, these reviews are recommended but subject to Council approval. If Council
determines it does not wish to undertake either or both of the reviews, staff will need to obtain
the best information available on these two aspects of cable service within the City.
2. Draft a franchise agreement that meets the City's needs.
Concurrent with and following completion of the needs assessments, we should prepare a draft
proposed franchise agreement for approval by the City and submit the draft to Comcast. In many
cases, we recommend retaining the existing agreement as much as possible, especially if it was
thoroughly negotiated previously, as was Federal Way's franchise. We would go through the
current agreement and determine any needed updates based on current negotiating strategy,
changes in technical needs or performance (to be derived from the assessments discussed above),
or changes in law. In our experience, Comcast is attempting to achieve a "national model"
agreement as much as it can; this approach has in many cases resulted in more protracted
947 U.S.C. § 546(c)(1XA) -(D).
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negotiations. Nevertheless, we believe the best approach will likely be to begin with our
franchise agreement (changing it as needed, as noted above).
3. Review Comeast's response and negotiate toward a renewed agreement.
There are many issues that we anticipate will be raised in this renewal proceeding, based on our
experience working with Comcast. These include resistance to relocation requirements and
relocation costs; the desire to achieve renegotiation of the franchise if a competitor begins
serving Federal Way customers; and restriction of City authority with respect to work in the
rights of way. In addition, we anticipate stiff resistance with respect to the I -Net and public,
education and government support (both direct financial support and any "in kind" equipment or
services)..
Because we anticipate that negotiations may be lengthy, staff may also request in the future that
Council extend the current franchise for a defined period to enable negotiations to be concluded.
Conclusion
At this time, as noted earlier in this memorandum, Council needs to address the policy questions
presented above with respect to undertaking the needs and system assessments. Thereafter, we
will keep Council informed of developments in the negotiations for an agreement, and will seek
Council direction on key issues that arise during negotiations. We anticipate working closely
with your City Attorney and your Information Technology Manager throughout the process as
well.
We will be available at your November 19, 2013 meeting and will be happy to answer any
questions you may have.
Cc. Patricia Richardson, Esq., City Attorney
Thomas Fichtner, IT Manager
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