AGENDA #5a
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Time Warner Cable 2004 Annual Report
DATE: May 23, 2005
INTRODUCTION
This report summarizes the Time Warner Annual Report for the calendar year ended December 31, 2004, 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 will outline 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 2005 list of rates and charges, but not its 2004 list of rates and charges. The 2004 list was acquired (Attachment 3). The 2004 Basic Service Tier rates were $11.25 per month for Chapel Hill customers and $14.30 per month for Durham customers. (The 2005 rates are $10.60 and $14.50 respectively).
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 10, 2005, when the Council adopted a resolution accepting the Town cable consultant’s report finding Time Warner’s proposed 2005 Basic Service Tier Rates to be accurately calculated according to FCC rules and regulations. Changes in regulated rates are permitted only once per year.
Time Warner has provided the current (2005) list of channels for the Chapel Hill-Durham area, and not the 2004 list. We have requested the 2004 list for inclusion in the document. 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.
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 June 14, 2004, the Council received the 2003 Annual Report from The Peoples Channel. The Council raised the public access fee from 72 cents to 74 cents per customer per month on November 22, 2004, to adjust for inflation.
4. Customer Service (Report on customer service from Time Warner to subscribers).
a. Summary of Complaints. In 2004, the Town recorded 10 service complaints, which we forwarded to Time Warner and also discussed with the customers. Complaints included the following categories:
· Cut, disconnected, or unburied cable lines – 5
· Billing errors or rate questions – 4
· Damage to property by cable installers – 1
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 208 “planned” outages in the area (for repair or utility work), 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 reported the results to the Town. Time Warner reports that it plans to complete another survey of this type in 2005. Once completed, it will forward the results to the Town.
5. Filings with the FCC (Report on filings to the Federal Communications Commission).
On January 10, 2005, the Council adopted a resolution accepting the Town cable consultant’s report and finding Time Warner’s proposed 2005 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 5percent of Time Warner’s gross revenues, paid in quarterly installments. Per our request, Time Warner reported additional breakout information for revenues from Internet connection services. However, in April 2002, Time Warner began withholding franchise fees on cable modem (RoadRunner) service, and has continued to do so. Time Warner reached this decision based on an FCC ruling that cable modem services are “an interstate information service” and not a “cable service,” and not to be included in the gross revenue on which franchise fees are based.
We continue to believe that the unilateral action to cease collection and payment of franchise fees is contrary to the terms of the Franchise Agreement and did not allow for due process. We have challenged the Time Warner decision and will continue to keep the Council informed regarding subsequent correspondence with Time Warner or decisions of the FCC.
We believe that the reported revenues by Time Warner are accurate, except as noted above. Total Town revenues from cable franchise fees were:
· 2004: $484,741
· 2003: $419,124
· 2002: $430,202
· 2001: $404,141
· 2000: $317,444
· 1999: $282,077
· 1998: $276,561.
8. Completion of Construction (Report on status of cable system upgrade as required by the cable franchise agreement).
Time Warner installed approximately 3.82 miles of new cable in 2004, including some work in these areas:
· Vineyard Square
· Hilltop Town Homes
· Coolidge Street
· Vance Villas
· Meadowmont Extension
· Old Larkspur
· Providence Glen
CONCLUSION
We believe that Time Warner’s 2004 Annual Report meets the requirements of the cable franchise agreement with two exceptions:
We retrieved the 2004 versions of these documents for inclusion in the 2004 Annual Report from Time Warner’s 2003 annual report. In that year, the forward year’s lists for Rates and Charges, as well as for Programs and Services, were included. No further action is required by the Council on these matters.
ATTACHMENTS
o Contents
EXHIBIT D
ANNUAL REPORT TO TOWN
1. Rates and Charges
• Current Price List
2. Programs and Services
• Current Channel Line Up
3. Public, Governmental and Educational Access
(If operated by Time Warner)
• Current Policies and Procedures
(If no longer operated by Time Warner - no reporting requirement)
4. Customer Service
• Summary of Complaints
• System Outage Summary
• Results of most recent Subscriber Survey
5. Filings with FCC
• Summary of Filings with FCC
(Directly related to the provision of cable television service within the Town of Chapel Hill)
6. Performance Test in Franchise
• Summary of Latest Technical Performance Test
7. Franchise Fee Payments
• Summary of Payments
8. Completion of Construction
• Upgrade/Rebuild Summary