AGENDA #5i
to: Roger L. Stancil, Town Manager
from: Sabrina Oliver, Communications and Public Affairs Director
Catherine Lazorko, Public Information Officer
subject: Time Warner Cable 2007 Annual Report
date: June 9, 2008
This report summarizes the Time Warner Annual Report for the calendar year which ended December 31, 2007. The Time Warner Cable Annual Report is required by Section 2.13 of the cable franchise agreement and Section 10-107 of the Town’s Cable Television Regulatory Ordinance (Attachment 1). The purpose of this memorandum is to review and comment on that report.
The Annual Report is provided in the format required (Attachment 2) by the Cablevision Franchise Agreement and Ordinance. Because of the size of the report, we have provided a summary to outline the key information. The full report (Attachment 3) is available for inspection online or in the Communications and Public Affairs Department at Town Hall, 405 Martin Luther King Jr. Blvd.
Below are our comments related to each item in the report:
1. Rates and Charges (list of rates and charges to cable subscribers for services).
Comment: Time Warner provided the current (2008) list of rates and charges for the Chapel Hill-Durham area, and not the 2007 list, which we retrieved and supplied (Attachment 4).
The Federal Communications Commission (FCC) allows local governments to review basic cable rates, which the Town does on a contract basis and provides to the Council each January. For this time period, Council rate consideration was held on February 12, 2007, when the Council adopted a resolution accepting the Town cable consultant’s report finding Time Warner’s 2007 Basic Service Tier Rates to be accurately calculated according to FCC rules and regulations. Changes in regulated rates are permitted only once per year.
Basic Cable Service Tier rate for 2007 was set at $9.35 a month for Chapel Hill customers and $13.91 a month for Durham customers. Chapel Hill customers receiving Basic Cable Service, Tier 2 and Digital Tier paid $64.20 per month in 2007. Monthly rates for Durham customers receiving the same service level were set at $67.05 in 2007.
2. Programs and Services (list of programs and channel line-ups offered by Time Warner).
Comment: Time Warner provided the current (2008) list of channels for the Chapel Hill-Durham area, and not the 2007 list, which we have retrieved and provided (Attachment 5). In 2007, there were 22 Basic Tier channels and 52 Standard Tier channels. The Digital Tier currently consists of approximately 90 video channels. Subscribers of Basic and Standard service tiers do not require addressable converter boxes. The complete channel line-up is also available on-line at www.timewarnercable.com/NC/
Under federal law and as outlined in Section 4.1 of the franchise agreement, the Town does not have the authority to regulate the types or organization of programming offered by Time Warner.
3. Public, Governmental, and Educational Access (Description of public, government, and educational access activity on channels dedicated for each function).
Comment: Time Warner no longer operates governmental and educational access channels. The Peoples Channel provides public access television service through a performance agreement with the Town. On September 24, 2007, the Council received the 2006-07 Annual Report from The Peoples Channel. The Council raised the public access fee from 78 cents to 80 cents per customer per month on November 19, 2007, to adjust for inflation.
4. Customer Service (Report on customer service from Time Warner Cable to subscribers).
The Town’s practice is to follow-up with Time Warner Cable in the event that a customer service complaint is unresolved. Not all complaints have been resolved this year. One outstanding question and complaint from Dr. Harvey Krasny was not resolved to the citizen’s satisfaction. We have asked our Triangle J Cable Consultant Dr. Robert Sepe to examine this billing question in closer detail.
We recognize that Time Warner Cable receives more complaints than those which are listed in its Annual Report to the Town. We also note that customer complaints received by the Town appear to be increasing in 2008, as we have received cable complaints from the following citizens: Carolyn Harrell (January 25), Dr. Harvey Krasny (February 11), Marcia Decker (February 20), Dan Murphy (April 8), Daniel Carmichael (May 28), and John Menapace (May 29). We have brought their concerns to the attention of Cindy Ray Keene, Senior Manager of Government and Public Affairs for Time Warner Cable’s Eastern Division.
Time Warner reports that there were 51 “planned” (for repair or utility work) outages in the area and 549 “unplanned” outages in 2007. We do not dispute these figures. The average outage duration was in Chapel Hill was 2 hours and 26 minutes. In 2006, Time Warner reported that there were 21 “planned” outages and 303 “unplanned” outages.
Comment: We inquired about the increase in “unplanned outages,” and received the following response from Time Warner Cable Senior Manager of Government and Public Affairs Cindy Keene: “There was an increase in unplanned outages, but there has been a change in the way the information is gathered, from prior years. Outages numbers are now based on non-responding equipment triggering outages in nodes as well as the system manually triggering outages via our billing system. For example, an outage area may have five nodes in it. In the past, that was tracked as one outage. It is now tracked as five outages. When tracked by actual equipment, the numbers are much higher. It is not an “apples to apples” comparison to last year for that reason.”
Section 4.3 of the franchise agreement specifies that Time Warner “shall conduct a random survey of a sampling of its subscribers within Chapel Hill” upon the Town’s request every two years.
Comment: Time Warner conducted such a survey in June 2006, and a summary of its findings was presented to the Council on September 11, 2006. Time Warner representatives inform the Town that a new customer satisfaction survey is planned for June 2008.
5. Filings with the FCC (Report on filings to the Federal Communications Commission).
Time Warner Cable filed FCC Forms 1240 and FCC Form 1205 with the Town.
Comment: On February 12, 2007, the Council adopted a resolution accepting the Town cable consultant’s report and finding Time Warner’s 2007 Basic Service Tier Rates to be accurately calculated according to FCC rules and regulations.
6. Franchise Fee Payments (Report on cable franchise fees paid to the Town: 5% of Gross Revenues).
Section 2.2 of the franchise agreement and Section 10-98 of the cable ordinance require Time Warner to submit to the Town an amount equal to 5% of Time Warner’s gross revenues, paid in quarterly installments.
Comment: North Carolina State Session Law 2006-151 deregulated the video service provider industry in North Carolina. The law became applicable on January 1, 2007. SL2006-151 establishes the Office of the Secretary of Sate as the state’s sole authority to grant new video franchises to both new and current video providers. The Town of Chapel Hill’s current local franchise remains in effect until it either expires or an incumbent operator files a qualified application for and receives a state issued franchise.
A state-administered sales tax replaced franchise fee payments on January 1, 2007. The revenues that are forwarded by the state to municipalities are based on the revenue pool derived from applicable sales tax receipts.
Under the Act, percentages of the sales tax collections on telecommunications, sales tax collections on cable service and sales tax collections on home satellite television service are distributed to North Carolina on a proportional basis. Cities and counties share portions of these three state taxes to replace lost revenue from the local cable franchise fee.
When all cable payments were made to the Town from Time Warner Cable, the Town anticipated a percentage increase from year to year. In the future, we cannot predict whether cable revenues will remain the same, increase or decrease.
Cable Franchise Fees from Time Warner Cable:
Utility Franchise - Video Programming Fees from NC Dept. of Revenue:
($10,996 Supplemental PEG Support included in total)
($18,405 Supplemental PEG Support included in total)
The Utility Franchise - Video Programming Fees distribution detail summary from January 2007 to December 2007 to the Town of Chapel Hill is included in Attachment 6 (see column “Sales Tax on Video Programming”).
7. Completion of Construction (Report on status of cable system upgrade as required by the cable franchise agreement).
Time Warner completed no new construction of the system in the Chapel Hill town limits in 2007.
8. Performance Test in Franchise (Report on tests of the cable system).
Time Warner performs regular tests of the system at designated test locations and is required to provide certification to the FCC that the system meets FCC requirements. A recent review of the Time Warner test data and FCC filings indicate that Time Warner is meeting technical performance standards required by the FCC.
We believe that Time Warner’s 2007 Annual Report (Attachment 6) meets the requirements of the cable franchise agreement with the following exceptions:
No further action is required by the Council on these matters.