AGENDA #5a
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Time Warner 2002 Annual Report
DATE: April 28, 2003
INTRODUCTION
This report summarizes the Time Warner Annual Report for the calendar year ended December 31, 2002, 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 (2002 list of rates and charges to cable subscribers for services).
We believe the rates and charges list provided by Time Warner is accurate. The 2002 Basic Service Tier rates were $10.10 per month for Chapel Hill customers and $13.40 per month for Durham customers. (The 2003 rates are $11.00 and $14.25 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 13, 2003, when the Council held a public hearing and adopted a resolution accepting the Town cable consultant’s report finding Time Warner’s proposed 2003 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 (2002 list of programs and channel line-ups offered by Time Warner).
We believe the programs and services list is accurate for calendar 2002 and includes 23 Basic Tier channels and 50 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. In May, the Council will receive the 2002 Annual Report from The Peoples Channel. The Council raised the public access fee from 70 cents to 71 cents per customer per month on December 9, 2002, to adjust for inflation.
4. Customer Service (Report on customer service from Time Warner to subscribers).
a. Summary of Complaints. In 2002, the Town received 60 service complaints, which we forwarded to Time Warner and also discussed with the customer. (We also cross-reference our complaint list with that provided by Time Warner in the Annual Report.) Complaints included the following categories:
· Billing errors or rate questions (18 complaints)
· Cable outages or reception problems (9 complaints)
· Installation problems or missed appointments (8 complaints)
· Problems with cable modem service (7 complaints)
· Cut, disconnected, or unburied cable lines (7 complaints)
· Other complaints or combination of above categories (11 complaints)
Time Warner officials notified the Town of how these customer service issues were resolved. Our practice is also to verify with customers that these complaints have been resolved, and we keep a computerized spreadsheet record of complaints.
b. System Outage Summary
During the ice storm of December 2002, Time Warner estimated approximately 1,300 downed lines for the Chapel Hill/Orange County area, which resulted in a loss of cable service. Time Warner began work on December 5, following the path of the ice storm, to determine the extent of damage to the cable systems, and proceeded to initiate the service restoration effort. Crews focused on the hardest hit areas, including Chapel Hill, where many customers were also without electrical service. Time Warner’s call center in Morrisville averaged approximately 15,000 calls a day throughout the restoration efforts. Time Warner used its data systems to determine which of its customers experienced a loss of service, and credited them for the time their service was down.
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 June 2001 and is scheduled to conduct a similar survey in 2003, with results reported to the Town. We also will request in writing that this survey be conducted.
5. Filings with the FCC (Report on filings to the Federal Communications Commission).
On January 13, 2003, the Council held a public hearing and adopted a resolution accepting the Town cable consultant’s report and finding Time Warner’s proposed 2003 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% 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 included additional breakout information for revenues from Internet connection services from February 2000 until April 2002. However, in April 2002, Time Warner began withholding franchise fees on cable modem (RoadRunner) service. Time Warner reached this decision based on an FCC ruling that cable modem services are “a interstate information service” and not a “cable service,” and not to be included in the gross revenue on which franchise fees are based. We estimate that the Town lost approximately $70,000 in franchise fee receipts in calendar year 2002 because of this withholding of payment.
We continue to 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 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 are not aware of any recent actions by the FCC in this matter.
We believe that the reported revenues by Time Warner are accurate, except as noted above. Total Town revenues from cable franchise fees were:
· 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 3.89 miles of new cable in 2002, including some work in Southern Village and Meadowmont.
CONCLUSION
We believe that Time Warner’s 2002 Annual Report meets the requirements for such a report in the cable franchise agreement. We will pursue the follow-up on the customer service survey, expected to be conducted in June 2003.
2. Exhibit D: Annual Report to Town (from the Franchise Agreement) (p. 6).
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.
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