AGENDA #5b
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Time Warner 2001 Annual Report
DATE: April 22, 2002
INTRODUCTION
This report summarizes the Time Warner Annual Report for the calendar year ended December 31, 2001, 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). Due to the length of the report, we have not attached copies of the full report with the Council’s packet. We believe that this summary will outline the key information. The full report is available for inspection in the Town Manager’s Office. Below are our comments related to each item in the report:
1. Rates and Charges (2001 list of rates and charges to cable subscribers for services).
We believe the rates and charges list provided by Time Warner is accurate. The 2001 Basic Service Tier rates were $9.50 per month for Chapel Hill customers and $13.70 per month for Durham customers. (The 2002 rates are $10.10 and $13.40 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 14, 2002, when the Council held a public hearing and adopted a resolution accepting the Town cable consultant’s report finding Time Warner’s proposed 2002 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 (2001 list of programs and channel line-ups offered by Time Warner).
We believe the programs and services list is accurate for calendar 2001 and includes 19 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.twc-nc.com/line_ups/durham_chapel_hill.php.
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 Peoples Channel provides public access television service through a performance agreement with the Town. The Council’s agenda tonight also includes the 2001 Annual Report from The Peoples Channel. The Council raised the public access fee from 69 cents to 70 cents per customer per month on November 26, 2001, to adjust for inflation.
4. Customer Service (Report on customer service from Time Warner to subscribers).
a. Summary of Complaints. In 2001, Time Warner received 100 registered service complaints that included the following categories:
· Problems with cable modem service (12 calls)
· Billing errors or rate questions (22 calls)
· Cut, disconnected, or unburied cable lines (11 calls)
· Cable outages or reception problems (18 calls)
· Installation problems or missed appointments (14)
· Other complaints or combination of above categories (23 calls)
As a general rule, Time Warner officials notified the Town of how these customer service issues were resolved.
b. System Outage Summary
The Annual Report describes no major outages requiring more than 24 hours of repair. The Year-to-Date average outage resolve time was 1.46 hours.
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. Time Warner conducted such a survey in June 2001, and the results are provided as Attachment 3. Time Warner conducted the survey after meeting with the Town Manager and Town Attorney to review questions to be asked. Telephone interviewers conducted the survey with 300 randomly-selected Chapel Hill Time Warner subscribers.
The cable franchise specifies that the survey may be conducted every two years, meaning that the next survey would be scheduled as early as June 2003.
5. Filings with the FCC (Report on filings to the Federal Communications Commission).
On January 14, 2002, the Council held a public hearing and adopted a resolution accepting the Town cable consultant’s report and finding Time Warner’s proposed 2002 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).
We believe that Time Warner’s statements regarding certification and performance of the cable television system are accurate.
7. 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 5% of Time Warner’s gross revenues, paid in quarterly installments. Per our request, these reports have included additional breakout information for revenues from Internet connection services since February 2000.
We believe that the reported revenues by Time Warner are accurate. Total Town revenues from cable franchise fees were:
· 2001: $404,141
· 2000: $317,444
· 1999: $282,077
· 1998: $276,561.
Increased revenues can be explained by increased customer subscriptions to Internet connection (Road Runner) service. As has been reported to the Council, Time Warner informed us on March 27 that it would “cease the collection and payment of franchise fees on revenues derived from the provision of cable modem service as soon as practicable” (Attachment 4). Time Warner reached this decision based on an FCC ruling that cable modem services are “interstate information service” and not a “cable service,” and not to be included in the gross revenue on which franchise fees are based.
However, we have challenged this conclusion. On April 8, we responded to Time Warner, stating our disagreement that the FCC’s decision is final and requiring Time Warner to continue payment of franchise fees from cable modem services (Attachment 5). We believe that the unilateral action to cease collection and payment of franchise fees is premature and contrary to the terms of the Franchise Agreement and did not allow for due process. We will continue to keep the Council informed regarding subsequent correspondence with Time Warner or decisions of the FCC.
8. Completion of Construction (Report on status of cable system upgrade as required by the cable franchise agreement).
Time Warner installed approximately 5.18 miles of new cable in 2001.
CONCLUSION
We believe that Time Warner’s 2001 Annual Report meets the requirements for such a report in the cable franchise agreement. We are also in the process of arranging an audit of the Time Warner service area.
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. July 10, 2001 Letter and Customer Survey Report from Highline Research Group (p. 7).
4. March 27, 2002 Letter from Brad Phillips (Time Warner) to Cal Horton (p. 21)
5. April 8, 2002 Letter from Cal Horton to Brad Phillips (p. 22).
From the Cablevision Franchise Agreement:
2.13 Annual Report.
In addition to the requirements of Section 10-107 of the Regulatory Ordinance, Grantee shall submit a written end-of-the-year report to Grantor utilizing the format outlined in the Annual Report to Town attached hereto as Exhibit D.
From the Cable Television Regulatory Ordinance (Article V, Chapter 10 of the Code of Ordinances):
SECTION 10-107. ANNUAL REPORTS.
Grantee shall submit a written end of the year report to Grantor with respect to the preceding calendar year in accordance with the provisions of the Franchise.
ATTACHMENT 2
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