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Home My WebLink About08/11/1993 BAKERSFIELD Patricia M. Smith, Chair Patricia J. DeMond Lynn Edwards Staff.' Trudy Slater Larry Lunardini AGENDA LEGISLATIVE AND LITIGATION COMMITTEE Wednesday, August 11, 1993 4:45 p.m. City Manager's Conference Room 1. City Cable Television Franchise Agreements 2. Set Next Meeting BAKERSFIELD MEMORANDUM August 9, 1993 TO: LEGISLATIVE AND LITIGATION COMMITTEE ~ ~ FROM: TRUDY SLATER, ADMINISTRATIVE ANALYST II SUBJECT: INFORMATION FOR LEGISLATIVE AND LITIGATION COMMITTEE MEETING OF AUGUST 11, 1993 The impacts of the 1992 Cable Act upon the local community have recently become high profile as certain deadlines for compliance are approaching and cable customers are or will become more aware of its impacts upon them as actual changes in services are realized. The two issues receiving the most attention now are "must carry" and "retransmission." These are "options" which broadcasters have under the 1992 Cable Act. The "must carry" option provides that cable companies must carry non-commercial educational (NCE) stations within essentially a 50-mile radius and commercial stations within a cable company's ADI (area of dominant influence). Those qualified commercial broadcasters who elect "must carry" get to be carried on the station's FCC assigned channel, or the station's cable channel as of either July 19, 1985, or January 1, 1992. All "must carry" signals must be provided to all cable subscribers on the basic tier. Bakersfield has four commercial stations in Bakersfield which currently qualify for "must carry" (KERO, KGET, KBAK, and KUZZ), plus KVPT, a non-commercial educational station licensed to the City of Fresno. A Porterville station is petitioning to have Bakersfield cable companies carry them under the "must carry" regulations. The "retransmission" option applies to all local commercial television stations that do not elect "must carry" and all distant commercial television stations (i.e., Los Angeles), except superstations. Cable operators must obtain "retransmission" consent from eligible stations to carry their signals. The "retransmission" option is the issue which is generating the most "interest." Cable companies and broadcasters are in the midst of negotiations for cable's use of broadcast signals. Until now, cable could transmit broadcast signals without charge. Compensation for the broadcast signals can be in either dollars or other mutually-agreed-upon terms. Negotiations have not been smooth, and hence newspaper and television media spots have appeared. (Commercial stations had until June 17 to choose between "must carry" and "retransmission." Those who did not choose, defaulted to "must carry.") Legislative & Litigation Committee Page 2 August 9, 1993 This affects the City of Bakersfield when City cable consumers turn on their televisions and find they no longer have the same programming on the same channel and at the same time. To this you must add changes that have taken place in cable "tiering" {in compliance with the Cable Act) and the addition of a 2% City franchise fee increase added to the total bill. The issue which most directly affects the City as a franchising authority is cable rate regulation. The City (as franchising authority} can regulate basic tier rates only where "effective competition" does not exist. "Multichannel video programming distributors" used to determine effective competition include: cable operators, multichannel multipoint distribution services (Valley Wireless}, direct broadcast satellite services, and television receive-only satellite program distributors. Per Section 623 {1} of the 1992 Cable Act, the term "effective competition" means that-- (A) Fewer than 30 percent of the households in the franchise area (Bakersfield) subscribe to the cable service of a cable system; Bakersfield has approximately 69,000 dwelling units. Cox has approximately 21,000 customers/subscribers (30%); Warner has approximately 26,000 customers/subscribers {38%); Valley Wireless has approximately 1,700 customers/subscribers within City boundaries (2.5%). It is estimated that there are approximately 2,000 satellite dishes within Bakersfield as well. {B)' The franchise area (Bakersfield) is-- (i) served by at least two unaffiliated multichannel video programming distributors each of which offers co,~=arable video progra, m, ing to at least 50 percent of the households in the franchise area; and For Paragraph B (i),'Warner, Cox and Valley Wireless are unaffiliated with each other, and together they reach more than 50% of the dwelling units in Bakersfield. (B) (ii) the number of households subscribing to program.ring services offered by multichannel video progranmring distributors other than the largest multichannel video programming distributor exceeds 15 percent of the households in the franchise area; or Paragraph B (ii) applies to subscribers after removing Warner (which is the largest provider). Cox has approximately 21,000 customers, and Valley Wireless has approximately 1,700 customers. These 28,700 customers exceed 15% of the households in the franchise area {or 15% of 69,000 = 10,350}. (C) A multichannel video programming distributor operated by the franchising authority for that franchise area offers video progranmning to at least 50 percent of the households in that franchise area. Legislative & Litigation Committee Page 3 August 9, 1993 Paragraph C does not apply since the City is not a "multichannel video programming distributor." Cox offers programming to nearly 39,000 of the dwelling units {56%); Warner offers programming to nearly 41,000 (59%); Valley Wireless can reach approximately 98% (68,000) of the units. All three of the major providers can reach more than 50%. {There are a few sections in new areas where Cox and Warner have "overbuilt"--are wired to the same homes, which affects approximately 3,000 units). Per legal counsel opinion, if a cable company meets the conditions of either subparagraph (A) or (B) or (C), then there is effective competition in the franchise area and the municipality cannot rate regulate. Given the figures above, conditions set forth in Paragraph B are met and the City has no basis for rate regulation. If subscribers request their local elected officials to file a request with the FCC for rate regulation, the elected officials or City staff must be prepared to explain that the City is only allowed to regulate the franchise area if there is ineffective competition. Since Bakersfield area currently has effective competition, the FCC would deny the City its request to regulate. It is important, however, that the City continue to monitor the cable situation. As the City grows and possible agents in the cable equation' change, the conditions which currently make Bakersfield "effectively competitive" may also change. The above information is provided to keep you apprized of current cable issues and to give you an inkling of the cable issues which are currently alive and well in the community. The County of Kern is holding a cable information workshop at the County Administrative Center at 9:00 a.m. on Monday, August 16 in the Multipurpose Room on the third floor. I have been asked and have agreed to be a member of the panel at that workshop. (m0809931) cc: Honorable Mayor and Members of the City Council Alan Tandy, City Manager Larry Lunardini, City Attorney Allen Shaw, Deputy City Attorney