AGENDA #5a
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Time Warner Cable 2005 Annual Report
DATE: April 24, 2006
INTRODUCTION
This report summarizes the Time Warner Annual Report for the calendar year ended December 31, 2005, as 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 the report.
BACKGROUND AND DISCUSSION
The Annual Report is provided in the format required by the Cablevision Franchise Agreement and Ordinance (Attachment 2). Because of the size of the report, we have attached copies of the full report with the Council’s packet only. We believe that this summary outlines the key information. The full report is available for inspection in the Town Clerk’s Office, Chapel Hill Library and Town website at: www.townofchapelhill.org
Below are our comments related to each item in the report:
1. Rates and Charges (2005 list of rates and charges to cable subscribers for services).
The Annual Report included its 2006 list of rates and charges, but not its 2005 list of rates and charges. The 2005 list was acquired (Attachment 3). The 2005 Basic Service Tier Rates were $10.60 per month for Chapel Hill customers and $14.50 per month for Durham customers. (The 2006 rates are unchanged from a year ago; however, there were rate increases in 2006 in the Tier 2 and Digital Tier, both of which are unregulated.)
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. The most recent Council rate consideration was on January 9, 2006, when the Council adopted a resolution accepting the Town cable consultant’s report finding Time Warner’s proposed 2006 Basic Service Tier Rates to be accurately calculated according to FCC rules and regulations. Changes in regulated rates are permitted only once per year.
2. Programs and Services (2005 list of programs and channel line-ups offered by Time Warner).
Time Warner has provided the current (2006) list of channels for the Chapel Hill-Durham area, and not the 2005 list. We have requested the 2005 list for inclusion in the document (Attachment 3). There are 20 Basic Tier channels and 51 Standard Tier 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).
Time Warner no longer operates governmental and educational access channels. The People’s Channel provides public access television service through a performance agreement with the Town. On February 27, 2006, the Council received the 2004-05 Annual Report from The People’s Channel. The Council raised the public access fee from 74 cents to 76 cents per customer per month on November 21, 2005, to adjust for inflation.
4. Customer Service (report on customer service from Time Warner to subscribers).
a. Summary of Complaints. In 2005, the Town recorded eight service complaints, which we forwarded to Time Warner and also discussed with the customer. Complaints included the following categories:
The Town keeps a computerized spreadsheet record of complaints. It is our practice to follow up with Time Warner in the event that a customer service complaint is unresolved.
b. System Outage Summary
Time Warner reports that there were 103 “planned” (for repair or utility work) outages in the area, and 390 “unplanned” outages in 2005, with an average repair response time of 57 minutes. We do not dispute these figures. In 2004, Time Warner reported that there were 208 “planned” outages in the area and 422 “unplanned” outages in 2004, with an average repair response time of 1 hour and 15 minutes.
c. Subscriber Survey
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. Time Warner conducted such a survey in September 2003 and another was due in 2005. We have requested the survey and Cindy Ray Keene, public affairs manager for Time Warner Cable, said the company apologizes for its tardiness and intends to complete the survey as soon as possible in 2006. Once completed, it will forward the results to the Town.
5. Filings with the FCC (report on filings to the Federal Communications Commission).
Time Warner Cable filed two FCC Forms 1240 and one FCC Form 1205. On January 9, 2006, the Council adopted a resolution accepting the Town cable consultant’s report and finding Time Warner’s proposed 2006 Basic Service Tier Rates to be accurately calculated according to FCC rules and regulations.
6. Performance Test in Franchise (report on performance 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.
7. Franchise Fee Payments (report on cable franchise fees paid to the Town: 5 percent 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 percent of Time Warner’s gross revenues, paid in quarterly installments.
On October 24, 2005, the Town Council passed a resolution supporting continuing authority of local governments regarding cable television services. There have been a number of bills introduced in Congress based on the telephone industry’s lobbying efforts to change the federal Cable Law applicable to the requirements of local franchise. The telephone industry is seeking to get into the video business in competition with the cable companies and do not want to have the burden of obtaining local franchises. In addition, the North Carolina Revenue Laws Committee, a non-standing joint committee of the North Carolina General Assembly, this month is reviewing the first draft of a bill to change cable regulation through a proposed statewide franchise. The Town continues to inform its U.S. Congressional Delegation and N.C. Legislative Delegation of its viewpoint that there is substantial community value in maintaining the rights of local government to obtain franchise and public access fees. Under the worst outcomes, the proposed legislation would remove the Town’s ability to require the payment of franchise fees for use of its rights-of-way.
Total Town revenues from cable franchise fees were:
8. Completion of Construction (report on status of cable system upgrade as required by the cable franchise agreement).
Time Warner installed 4.01 miles of new cable in 2005, including some work in these areas:
CONCLUSION
We believe that Time Warner’s 2005 Annual Report meets the requirements of the cable franchise agreement with the following exceptions:
No further action is required by the Council on these matters.
ATTACHMENTS
1. Section 2.13 of the Cable Franchise Agreement and Section 10-107 of the Cable Television Regulatory Ordinance (Article V, Chapter 10 of the Code of Ordinances) (p. 5).
2. Exhibit D: Annual Report to Town (from the Franchise Agreement) (p. 6).
3. Time Warner Cable 2005 Channel Lineup and Rates (p. 7).
4. Time Warner Cable 2005 Annual Report (separate cover).