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HomeMy WebLinkAbout1999-01-19 Municipal Operations Committee Minutes Municipal Operations Committee �\ Meeting Minutes January 19, 1999 Councilors Attending: John Rohman, Nichi Famham, Pat Blanchette, Gerry , Palmer,Joe Baldacci, Michael Crowley Staff Attending: Edward Barrett, Erik Stumpfel 1. FrontierVision Rate Increase Erik Stumpfel introduced Gary Crosby and Aaron Geisel from FrontierVision to address the issues Erik brought forward in a memo relating to the senior citizens discount, the basic cable rate increase, channel lineup changes, and customer downgrades. Erik explained that in the franchise agreement, FrontierVision is permitted, but not required to have a discount for customers in different income categories or based on age or disability. The previous franchise had a $1 per month discount for senior citizens. FrontierVision has announced that the discount will be eliminated. Mr. Geisel explained that they do not receive discounts from their programmers so they can not in turn ofFer a discount to customers. They do have a discounted level of service which is the basic cable service level consisting of channels 2 through 22 excluding any premium . services or pay per view channels. Erik gave the Committee background information on what cable rate regulation is. Prior to 1988, municipalities had the authority to regulate cable rates. In 1988, amendments to the Cable Act at the federal level took that authority away from the municipalities. As a result, rates increased dramatically. Based on consumer complaints, congress and the FCC imposed a rate freeze and then with passage of the 1992 Cable Act, there were formulas put in place that regulated rates for basic level service. The premium channels were not affected. FrontierVision offers two packages that are subject to rate regulations. One is the family basic and the other is the basic level service. The regulatory formulas tie the rates that can be charged for basic level service to a number of factors including flnancial factors relating to franchise holders, the number of channels that are offered, and the size of the system. The City of Bangor, as a municipality, has the authority to seek certification as a rate regulator under those factors. Bangor has not done this. The extent of Bangor's authority is the ability to check the math and that the rate increase was justified by the FCC formula. While Bangor has not sought that certification, Erik feels it may be appropriate to do so at some point since there are changes that will take afFect in March of this year which will cause the family basic service, which is regulated by the FCC, to no longer be regulated. The broadcast basic will continue to be subject to local regulation, but the FCC will be out of the direct regulation business for those types of service. If Bangor does seek to become certified, Erik's recommendation is that a local consortium that is set up as an inter-local franchising party seek to be certified as the rate regulator for this area and ' � that it not be done on a town by town basis. Some of the factors that go into the formula are complex financials relating to the status of the company itself. The City, through a franchise agreement with the Adams/Russell Company, regulated basic cable � rates. That franchise agreement ca!!ed for a monthly rate of$8.54 adjusted anr�ually by the rafie of inflation, for basic cabie service which consisted af 11 channels. By 1987, Bangar subscribers were paying $13.95 per month for bas�c cable service. Following the change in law, Cablevision drapped broadcast basic, The lowest tier you could purchase was family basic, which was 27 channels of pragramming which, in 1991, cost Bangar subscribers $20.95 per manth. With the adoption af the Cab1e Act, Cablevision reestablished broadcast basic at $9.95 per month. In September 1992, when final regulations took place, that rate was reduced to $4.14 per month. Councilor Rohman asked E�ik what areas the City has any say in? Erik answered fihat the City would have the ability to act as a rate regulator in respect to broadcast basic if we sought certification from the FCC; however, the FCC regulations include a farmuEa under which rate increases are justified or nat. If the farmuta were praperly applied, �Ili� '��i@ C��@ it1CC�aS� iS WtthtCl Wllc�� ��1@ fOCI'i'IUI� �IIOWS, then the mun�cipality cannot require a lower charge, One factor in this farmula is the number of channels ofFered. The recent increase in the number o€channels affered would aflow for a rate inerease of some amount. Erik has asked FrontierVision to pravide him with their calculation, but , has not received it yet. Mr. Geise! e>cplained that they don't have the fc�rm completed yet. Once they eamplete the form, they will provide it to the City. Cauncilar Baldacci asked if this were a form that the FCC could provide? Mr. Geisel answered that the form is an FCC form, but they have to provide the inf�armation to create the calculation to come up with the number. � FrontierVisian feels comfortable right now with the changes. If that comfort leve! changes, they w�ll go in and make the changes themselves. CounciEar Baldacci asked Erik what is the timetable? Erik answered thafi they had laoked into it a number of years ago, but not recentiy. Ne would suspect it would be 30-60 days. Mr. Geisel answered that there are several stages of the process, but the initial stage is simple. Ed Barrett commented the basic problem appears to be the increase from $6.19 to $10.30 per month. The reacfiion from citizens is that they are paying a Ec�t more but not getting anything extra. The channels that have been added are duplicates of current channels. Mr. Crosby explained th�t originalEy whert this channel lineup w�s developed, it was to serve customers that crossed ADI lines (both in the Portland and Bangar). FrontierUision was trying to standardize the channel lineup and rate structure throughout portians of the state, which meant affering additional channels. After ' announcing this, they didn't expect the amount of duplicated programming or syndicated programming that they would have ta b(ack aut fram the Portland statians. Since this has been launched, they have discavered that it makes more sense to offer different programming an thase three channefs that would have been duplicated (G Span IT, Ecalogy Netwark, Recovery Network, Home Shopping Network, and a locally produced channel from the Augusta region}. They are currently addressing this, and a decision should be Forthcaming. Cauncilor Crawley asked if there is a legal obligation to provid� written notice to their custamers before any changes are made? Will correspondence be mailed out fihe � customers ta indicate what the new lineup is before it actually takes place? Mr. Crosby _ 2 ;. ,; answered that yes, they wanted to put together a plan where they wouldn't have to do � the 30 day notice, instead they could put newspaper advertising to notify the customers of the changes, but still go into afFect on February 1, 1999. They are before this Committee to ask to waive the 30-day notice. Councilor Blanchette asked if they know how many residents in Bangor received the senior citizen discount? It was answered that approximately 1,000 residents in Bangor received the discount. Pat then asked if $1,000 per month was worth the bad public relations that FrontierVision is getting from this change? Councilor Baldacci agreed with Pat that the Council needs to look at those on a fixed income and because the increase is 60-70%, it is important to cushion the impact to people who will be affected significantly. 7oe suggested the Committee consider going through the process of certification as rate regulator. Councilor Rohman asked if the cable consortium has regulation only over rates? Erik answered that the consortium acts as the franchise authority. Basic decisions such as changes in franchise, cable ordinance, etc. have to be referred back to the towns. ]ohn asked if they have regulation over the lineups on the N stations. Erik answered the consortium can make their preferences known, but have no authority under the FCC regulations to dictate a channel lineup or the numbering of channels. Mr. Crosby answered that with regard to the senior citizen discount, the decision wasn't made easily. As FrontierVision moves forward they will reevaluate the decision. At this time, FrontierVision is requesting a waiver for the 30-day notice period to customers. . Erik Stumpfel asked if FrontierVision knows when they will have the lineup finalized? Mr. Crosby answered tomorrow aftemoon. Erik recommended that the cable consortium look at this schedule before waiving the 30-day notice. If the Committee does not waive the 30-day notice, the original lineup would go into efFect, but they would black out the material on the three Portland stations that need to be blacked out. Erik explained that � FrontierVision had given notice of the change in the lineup effective February 1, but they want to alter this lineup. If the 30-day period is not waived, they can not alter that lineup until March 1. The lineup already announced will go into affect February 1. Mr. Geisel answered that in looking at public perception,the $1,000 per month is probably not worth it. However, when you start multiplying all the other thousands of dollars over the entire system and see how it has an impact to the overall operation in a given year,then the dollars are significant. This is a financial decision that was made. Councilor Blanchette commented that they are imposing something on Bangor residents that the rest of the community has not been hit with and will not be for some time. Why not talk about the rate increases when all the communities will be getting rate increases? Mr. Geisel answered that they are doing the upgrades in conjunction with the rate increases instead of always changing things. Mr. Crosby commented again,that the decision to eliminate the senior citizen discount was not made lightly. All the questions were looked at. Is what they are doing the right thing for all of the customers in Bangor? Probably not, but it is right for the majority of the customers. The channels added were directly related to customer requests or � franchise commitments that were made. The senior citizen discount was based on the family cable of service, which was $1.00 off from that. They still have a lower level of 3 _ --- - .- -- - - -=" - service, which is the basic level of service. Customers need to purchase what they can � afford, which is why they have that lower tier of service. Mr. Geisel cammer�ted that th�y will make the commitment to revisit this decisian once things are back on an even ', keel. Councilor Palmer asked what the time frame is? Mr. Geisel answered approximately 12 months. Erik commented that the custamer downgrade issue was based on a single campfaint to his office. Mr. Crasby answered that he feels it was an isolated case. They will look into the complaint and make sure the custamer's complaint is addressed. , The Committee recammends reviewing the new channel lineup pfacing the issue af , waiving the 30-day notice on Monday's agenda for action from the Cauncil. 2. City Fundraising ' As a follow up to the adoption of fihe "DonorS' Bill of Rights and Responsibilities", the ', Board of Ethics approved the te� af proposed guidelines fior fundraising by outside organizations. These guidelines were presented to the Committee far review and , informatian. If acceptable, City staff will arrange far pubfication and distribution of a pamph(et. Cauncilor Baldacci suggested Erik provide the Council wifih a yearly briefing session to keep them up to date. Councilor Rohman asked Erik to bring a draf� brochure to the Cauncil. Committee approved the guidelines. , � r ���' � ¢ �