TO: Mayor and Town Council
SUBJECT: Response to Joe
Capowski Petition for Reopening Discussion with Time Warner Cable Regarding
Basic Tier of Service
DATE: May 22, 2000
Adoption of the attached
resolution would authorize the Manager to reopen discussions with Time Warner
to seek a lower-cost Basic Tier of cablevision service with fewer required
channels.
Mr. Capowski explained that one of the original goals of the cable
franchise was to seek a low-cost, basic level of service that included only the
FCC-required, local, over-the-air stations and the local access stations, such
as Channel 18, which broadcasts Town Council meetings. A basic service would help low-income
citizens purchase cable TV service and would minimize the “buy-through
expense.” The “buy-through expense”
requires that customers only buy basic service in order to get premium channels
such as HBO. Customers would therefore
not have to opt for “standard” service,
which is more expensive than the basic and offers more channels (Attachment 1).
Mr. Capowski’s petition further stated that there
were 13 channels in basic service in 1996, including nine, local, over-the-air
channels and four local access channels.
Capowski stated that Time Warner has increased the number of basic
channels to 23.
Capowski requested that the Council review the
Town’s cable franchise agreement and reopen talks with Time Warner to seek a
less-expensive, minimal basic level of cable TV service for Chapel Hill
subscribers.
According to Section 1.4(a) of the Town’s Cable Television Franchise Ordinance, the Town’s franchise with Time Warner, approved in 1996, is in effect for a period of 20 years. However, the franchise can be terminated. Section 1.4(c) states: “Notwithstanding the foregoing, any failure to comply with the terms and conditions of the Franchise which has been cured by the Grantee (Time Warner) shall not be used as a basis for a finding that Grantee has not substantially complied with the material terms and conditions of the Franchise.” (Attachment 2)
Buy-Through Expense
The current “buy-through” language of the 1984 Cable
Act stipulates that cable operators may not require a subscriber to take any
tier of service other than basic as a condition of access to higher-level
services. A cable customer, therefore,
may subscribe to only basic service and then subscribe to a premium channel
such as HBO – through a cable converter box. (Attachment 3)
Basic Service Levels
Basic Service in 1996 consisted of 13 channels,
including four local access channels.
Higher, or “A La Carte” services were available through a converter
box. These channels are outlined in
Exhibit E of the Franchise Ordinance (Attachment 4). Basic Service at that time did not include Turner Broadcasting
System or five other stations that are now part of Basic.
Basic Service in 2000 consists of 19 channels,
including the above-mentioned channels, the Home Buyers Channel, Turner
Broadcasting System, Black Entertainment Television, Prevue Guide, QVC, and WGN
for $8.28 per month in Chapel Hill and $10.40 for Durham County residents in
Chapel Hill’s jurisdiction. Standard
Service includes 37 additional channels for $21.60 per month in Chapel Hill and
$20.60 in Durham County. No converter
box is required at this level, but the subscriber must also subscribe to Basic
Service. Channels available beyond
Standard Service would require an additional expense and a cable converter box.
(Attachment 5)
Provisions for Reopening Discussions
The Town’s Cable Television Franchise Ordinance
provides a provision for reopening discussions with Time Warner. Under Section 3.10(a), the Town may, with 30
days’ notice, “request evaluation and review sessions at any time during the
term of this Agreement and Grantee (Time Warner) shall cooperate in such review
and evaluation; provided, however, there shall not be more than one (1)
evaluation and review session during any calendar year.” Under Sections 3.10(b) and 3.10(c), Time
Warner shall cooperate with such an evaluation and provide reasonable
documentation without cost to the Town.
(Attachment 6)
If the Town determines that a change in the system
is necessary, the Town may propose these changes, as provided in Section 3.10(e). Time Warner and the Town “shall, in good
faith, review the terms of the proposed change or any proposed amendment to
this Franchise and seek to reach agreement on such change or amendment.”
However, the Town may not stipulate that a
particular channel is available to local Time Warner subscribers. Section 4.1(a) grants Time Warner the
“right to add or delete services within its discretion, to change the mix and
level of the services listed on these tiers, and to move any or all of these
services to another tier and to offer the services either on an Addressable
(encrypted) or non-Addressable (without encryption) basis.” (Attachment 7)
In 1979, the U.S. Supreme Court ruled in FCC v.
Midwest Communications that cable operators are First Amendment speakers and,
as such, are not subject to common carrier regulations. Therefore, Time Warner can select the
“voices” – or channels – to be viewed by its subscribers. (Attachment 3)
Further, the 1984 Cable Act stipulates that: “A
cable operator may add additional video programming signals to the basic
service tier. Any such additional
signals or services provided on the basic service tier shall be provided to
subscribers at rates determined under the regulations prescribed by the
Commission under this subsection.” (Attachment 3)
Survey of Customers
Section 4.3(a) of the franchise agreement states,
“Commencing two years after the completion of the system upgrade and every two
(2) years thereafter, Grantee (Time Warner) shall conduct a random survey of a
sampling of its subscribers within Chapel Hill either by written questionnaire
or telephone interview. Each survey
shall be prepared by Grantee and furnished to the Town for review and comment
(within a ten-day period) and conducted in a statistically valid manner and
using generally recognized standards of objectivity, validity, and reliability
so as to present reasonably reliable measures of subscriber satisfaction with:
(1) signal quality; (2) response to subscriber complaints; (3) billing practices;
(4) regulated program services; and (5) installation practices.” Section 4.3(b) states: “Grantee shall
provide the Town with the results of any survey conducted within thirty (30)
days after the results are provided to Grantee or are tabulated for review.”
(Attachment 7). The system upgrade was
completed in April 1998, and it now is time for the first survey. We will request that Time Warner initiate
this work and will provide the results to the Council.
Negotiations
We propose that the Council direct the Manager to
reopen discussions with Time Warner to seek a less-expensive Basic Tier with
potentially fewer channels and to report the results to the Council upon
completion of the negotiations.
That the Council adopt the attached resolution, authorizing the Manager to reopen discussions with Time Warner for the purpose of seeking a less expensive Basic Tier of cable services.
1.
Petition from Joe Capowski , April 10, 2000
2.
Section 1.4, Ordinance Granting Cable Television Franchise
3.
“Action Audits” Memo from Robert Sepe, May 9, 2000
4.
Exhibit E from the Ordinance Granting Cable
Television Franchise
5.
Channel Lineup, 14 December 1999, and Rate Schedule,
January 2000
6.
Section 3.10, Ordinance Granting Cable Television
Franchise
7.
Section 4.1-4.3, Ordinance Granting Cable Television
Franchise
A RESOLUTION REQUESTING THAT THE CHAPEL HILL TOWN COUNCIL AUTHORIZE THE MANAGER TO REOPEN DISCUSSIONS WITH TIME WARNER CABLE FOR THE PURPOSE OF SEEKING A LESS-EXPENSIVE BASIC TIER OF CABLE SERVICES (2000-05-22/R-5)
WHEREAS, Time Warner Cable
provides cable television access to citizens of Chapel Hill; and,
WHEREAS, Time Warner
customers within the Town of Chapel Hill’s jurisdiction have expressed
dissatisfaction with some elements of Time Warner Cable programming; and
WHEREAS, Section 3.10 of
the Town’s Cable Television Franchise Ordinance provides a stipulation for
reopening talks annually with Time Warner, with 30 days’ notice, for review and
evaluation of the cable system;
NOW, THEREFORE, BE IT RESOLVED that the Council authorizes the Town Manager to reopen discussions with Time Warner for the purpose of seeking a less-expensive Basic Tier of Cable services.
This the 22nd
day of May, 2000.