2.0. SWCSR 12-19-2018
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rvose@kennedy-graven.com
CHARTERED
Affirmative Action Equal Opportunity Employer
M E M O R A N D U M
DATE: December 14, 2018
TO: Sherburne-Wright Counties Cable Commission
FROM: Bob Vose
RE: Franchise Renewal
By letters to the member cities in May, 2017, Charter requested renewal of its franchises. The
franchises were last renewed in 2004 and expire in early 2020.
The Commission discussed Charter’s renewal request in June, 2017. At that time, I reported that
cable operators were beginning to seek to reduce the availability of PEG channels, limit the
availability of high definition (HD) for PEG (because it uses valuable capacity), and reduce PEG
funding in franchise renewals. Based on this feedback, the Commission directed me to seek to
preserve the current arrangement to the extent possible. The Commission emphasized a desire to
protect the current community programming arrangement and its two PEG channels, provide for
the future delivery of PEG in HD, and preserve franchise fee and PEG fee funding.
Our negotiations with Charter have been productive. However, as I recently advised, many cable
operators have changed their bargaining positions in renewals due to a recent proposed FCC
rulemaking. The FCC has proposed rules that would allow cable operators to offset the “value”
of a variety of in-kind commitments from franchise fees. By proposing to allow cable operators
to reduce their franchise fee payments by the “value” of certain other franchise commitments, the
FCC has given cable operators added leverage in pending negotiations.
Notwithstanding, we have achieved the Commission’s primary goals. In turn, we have
compromised regarding the provision of “free” cable services and converters to city and
institutional sites, and regarding the addition of language to address the future potential for
competition.
I am comfortable having the Commission recommend approval and adoption of the negotiated
renewal to its member cities. A summary of the most significant changes to the franchise and
regulatory ordinance follows.
The Franchise(s) will be renewed again for 15 years even though the cable industry
generally is seeking shorter (often 10 year) renewals. We view this as beneficial.
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Two PEG channels continue to be required—one programmed areawide by the
Commission, and one narrowcast for individualized programming within each member
city. Existing live origination sites are retained.
Within 120 days, the areawide channel must be made available in HD. Thereafter, when
substantially all other channels are in HD, the city channels must be available in HD.
The Franchise Fee remains at 5% of gross revenues. The PEG Fee remains at $.85 per
sub/per mos. Even before the FCC proposed rulemaking, Charter has resisted PEG Fees
of this amount in renewals. Language has been added more clearly restricting PEG Fees
to capital costs consistent with GAAP, and requiring that the Commission and members
also support PEG access programming at an equivalent level (presumably from Franchise
Fees).
The existing service area/system extension requirements are retained. The system must
be extended wherever there are at least 9 homes per ¼ mile of new cable required to
provide service.
The existing system capacity and technical requirements are retained.
There are a number of revisions in both the Franchise and Regulatory Ordinance
reflecting the fact that the member cities have enacted comprehensive ROW regulatory
ordinances as required by state law. These changes reflect that such ROW ordinances
will control ROW management issues and that municipal authority over the ROW has not
been waived or limited. We believe all or nearly all member cities have enacted such
ROW ordinances.
The right to free cable service (and we have argued, free converters) has been limited to
specified sites listed in Ex. A-2 to the Franchise, and generally only one converter per site
will be provided. This is a compromise.
The existing $50,000 performance bond, insurance requirements, indemnification
obligations, and Franchise enforcement mechanisms remain essentially unchanged.
The existing customer service obligations have been streamlined, however we believe all
rights to address current, relevant customer concerns remain.
The renewal includes new “Equal Protection” language (Reg. Ord., Sec. 14.4). To
summarize, this language will require that any competitive cable provider be subjected to
essentially the same obligations and commitments and will give Charter more extensive
rights to enforce this requirement.
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