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Mediacom Cable Franchise ExtenMEMORANDUM June 11, 2002 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Mediacom Franchise Extension Cable Franchise Administrator Merrill Crawford is recommending an additional three- month extension of the existing Mediacom cable franchise under the same terms as the franchise extension currently in effect. This would extend the current agreement from June 30, 2002 to September 30, 2002. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Merrill Crawford, Cable Franchise Administrator CITY OF DUBUQUE, IOWA MEMORANDUM June 11, 2002 MEMO TO: Michael C. Van Milligen, City Manager FROM: Merrill Crawford, Cable Franchise Administrator SUBJECT: Mediacom Franchise Extension INTRODUCTION: The purpose of this memorandum is to recommend that the City Council grant an additional throe-month extension of the existing Mediacom cable franchise under the same terms as the franchise extension currently in effect. BACKGROUND: June 10, 2002 meeting, the City Council adopted a Resolution setting a public hearing for June 17, 2002, to consider an Ordinance approving and authorizing the City Manager to execute an agreement extending the current cable franchise with MCCIowa, LLC (Mediacom) to September 30, 2002. Attached are copies of the proposed Ordinance and of the proposed Agroement. Except for adjusted dates, the Agreement is virtually identical to the one enterod into by the City and Mediacom to extend the franchise to June 30, 2002. MCClowa, became the franchisee providing cable services within the Dubuque city limits in July, 2001. With the pending expiration of the franchise (September 30, 2001), the City Council approved the terms of an agreement extending the franchise term to June 30, 2002, to allow for a detailed ascertainment of the community's future cable-related needs, and to conduct franchise renewal negotiations in accordance with requirements of federal law. The temporary extension agreement also incorporated the extension of a number of related side agroements. At the time the extension was granted, we anticipated the completion of the ascertainment and negotiations as early as March, 2002. This estimate was not met, due to a number of local and nationwide factors: Futuro Cable-Related Needs Ascertainment The City rotained the services of CBG Communications, Inc. to conduct the needs ascertainment. In January and February, Tom Robinson of CBG Communications and Dr. Connie Book of EIon University, assisted by City staff, conducted a series of workshops, focus groups, surveys, interviews and firsthand inspections. They have continued to gather and refine data by telephone and e- mail, and are forming rocommendations supported by this information. They are in regular contact with our Washington attorneys and with myself rogarding issues and further questions indicated by the research. The written survey of a random selection of 4000 Dubuque households was initially delayed because of the unfortunate timing of a major increase in Basic Cable Service rates, implemented by Mediacom on February 1. As a result, we extended the return deadline to permit the initial public emotion to dissipate somewhat, and Dr. Book reports that the skewing effect of the rate increase on survey responses has been measured and the survey data is able to provide clear answers to many other questions. An impressive 39% return rate was realized from these mailed citizen surveys. Though generally cooperative at the local level, Mediacom has been rather slow in responding to a series of technical questions posed by CBC Communications. This is due, in part, to the heavy workload placed upon local engineering staff in February and March with the bankruptcy of the @Home broadband internet service and a number of significant channel changes and system upgrades. Also, as is typically the case, corporate attorneys and managers have taken time to review and respond to our questions, and in some cases to decline to offer answers. As a result, we are still refining and resubmitting clarifying technical questions to better evaluate the technical design and operating condition of the Dubuque cable system. A Change In The Ground Rules re: Cable Broadband Modem Service An important part of the technical advice being prepared by CBC Communications involves data-voice-video services under the renewed franchise, particularly as regards the design of the Institutional Network and the needs of the community for universally-available competitively priced broadband networking capabilities. The old "B-Cable" coaxial cable network is outdated and unreliable, and the needs to be met by its successor will be a major part of renewal negotiation. Aisc, the recent implementation of broadband modem services to residents and small businesses are an early step in meeting identified community broadband needs. Unfortunately, in March, the FCC issued a very troublesome declaratory ruling that cable modem services are not "cable services". Cable operators, including Mediacom, immediately pressed the issue by discontinuing their payment of franchise fees based upon the gross revenues from the cable modem portion of their services. Though not specifically voiced by Mediacom in Dubuque, some industry representatives are also trumpeting the theory that no aspect of cable-delivered broadband service is subject to regulation by local franchise authorities. This further complicates our negotiating position regarding broadband requirements and consumer protections in a renewed franchise. The City of Dubuque has joined other cities and national organizations in appealing the FCC's declaratory ruling and in commenting in the FCC's related rulemaking process. Illness On May 8, I was admitted to Mercy Medical Center for unexpected major surgery. I returned to work half-days beginning June 3 and will resume a full schedule June 17. As a combined result of these developments, it is clear we can not complete the ascertainment, negotiation, publication and public hearing processes of the franchise renewal by the June 30 expiration of the franchise extension agreement. Multiple franchise extensions are not unusual in a franchise renewal process, particularly where the franchise authority takes its responsibility seriously and works to get the best possible result under changing and sometimes unfavorable federal legal developments. Given the quality and strength of our existing franchise and side agreements, even after federal preemptions, we do not stand to lose any significant existing or potential benefits by granting an additional short-term extension. I am recommending such an extension to September 30, 2002. Mediacom has indicated it would agree to the extension of the franchise and side agreements on the same terms as the first extension. RECOMMENDED ACTION: The Recommended Action is that the City Council adopt the proposed Ordinance following the June 17, 2002 public hearing. Cc: Pauline Joyce, Administrative Services Manager Barry Lindahl, Corporation Counsel Tim O'Brien, Assistant City Attorney Cable TV Regulatory Commission Cable Community Teleprogramming Commission ORDINANCE NO 50-02 AN ORDINANCE EXTENDING THE TERM OF THE EXISTING CABLE FRANCHISE AGREEMENT AND HUB SITE LEASE OF MCCIOWA, L.LC. TO SEPTEMBER 30, 2002. Whereas, MCClowa, L.L.C. (Mediacom) is the current holder of a cable services franchise, embodied in Ordinance No. 42-81, as modified by a series of waivers and side agreements, and acquired from TCl of Iowa, Inc. via a transfer approved by the Dubuque City Council on June 18, 2001; and Whereas, one of the side agreements is a lease to Mediacom to build and maintain a network hub on City-owned property located at 1585 West Third Street in Dubuque; and Whereas, the terms of the franchise and of the lease will expire June 30, 2002; and Whereas, representatives of the City of Dubuque and of Mediacom have entered into good faith negotiation of terms and conditions for the renewal of the franchise and the lease. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. The term of the cable services franchise and the term of the lease are hereby extended to September 30, 2002, with all the rights, privileges and responsibilities appertaining thereunto; and Section 2. The City Manager is hereby authorized to sign and administer the extension agreement on behalf of the City of Dubuque. Passed, approved and adopted this 17th day of June, 2002. Terrance M. Duggan, Mayor Attest: Jeanne Schneider, City Clerk ArteC: Jeanne Schneider, City Clerk AGREEMENT EXTENDING THE TERM OF THE CABLE FRANCHISE GRANTED TO MCC IOWA LLC This Agreement, made this day of June, 2002, by and between the City of Dubuque, Iowa, an Iowa municipal corporation (hereinafter the "City"), and MCC Iowa LLC, a Delaware corporation (hereinafter "Mediacom"). WITNESSETH: WHEREAS, Mediacom currently holds a cable franchise (the "Franchise") from the City subject to Ordinance No. 42-81 ("Dubuque Cable Services Franchise"), Resolution No. 110-87, Resolution No. 284-88, Resolution No. 349-94, Resolution No. 521-98, Resolution No. 445-99, Resolution No. 108-00, and Resolution No. 275-01; and to Ordinance No. 69-93, all of which documents, as any of them may lawfully be or may have been amended from time to time, are collectively referred to as the Franchise Documents"; and and WHEREAS, the parties are currently negotiating the renewal of the Franchise; WHEREAS, the parties have agreed that an extension of the current Franchise, in order to complete negotiations, and to take such other actions as may be appropriate to resolve renewal issues, is to the benefit of both parties; WHEREAS, Mediacom has consented to the terms of this extension; NOW, THEREFORE, in consideration of the promises and undertakings herein, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: Section 1. The Franchise, which was scheduled to expire on June 30, 2002, is extended from that date until September 30, 2002 (the 'extens'on period'). Section 2. During the extension period, and any subsequent extension periods, if any, all the terms and conditions set forth in the Franchise Documents shall continue in full force and effect. .Section 3. This extension shall be without prejudice to any rights of either party under the Cable Communications Policy Act of 1984, as amended. For example, and by way of illustration and not limitation, any rights Mediacom may have already asserted properly under 47 U.S.C. § 546(a) need not be asserted again, and are not affected by the extension. Similarly, the extension will not be read to give Mediacom additional rights or opportunities to trigger the provisions of 47 U.S.C. § 546(a)-(g), or to require the City to reconduct hearings or other actions properly taken in conjunction with any renewal proceedings under either or both of the Franchises. No claim that either party may have against the other shall be released or otherwise affected by this extension. IN WITNESS WHEREOF, the parties hereto have set their respective hands and seals on the day first above written. CITY OF DUBUQUE, iOWA By Michael C. Van Milligen, City Manager MCC IOWA LLC 4253\05\FEE01991.DOC By 2 MEMORANDUM June 5, 2002 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Mediacom Franchise Extension Cable Franchise Administrator Merrill Crawford recommends an additional three-month extension to September 30, 2002, of the existing Mediacom cable franchise agreement under the same terms as the franchise extension currently in effect, and further recommends that a public hearing be set for June 17, 2002, I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Mana§er Merrill Crawford, Oable Franchise Administrator CITY OF DUBUQUE, IOWA MEMORANDUM June 5. 2002 MEMO TO: Michael C. Van Milligen, City Manager FROM: Merrill Crawford, Cable Franchise Administrator SUBJECT: Mediacom Franchise Extension INTRODUCTION: The purpose of this memorandum is to recommend that the City Council grant an additional three-month extension of the existing Mediacom cable franchise under the same terms as the franchise extension currently in effect. BACKGROUND: MCCIowa, L.L.C. (Mediacom) became the franchisee providing cable services within the Dubuque city limits in July, 2001. With the pending expiration of the franchise (September 30. 2001), the City Council approved the terms of an agreement extending the franchise term to June 30, 2002, to allow for a detailed ascertainment of the community's future cable- related needs, and to conduct franchise renewal negotiations in accordance with requirements of federal law. The temporary extension agreement also incorporated the extension of a number of related side agreements. At the time the extension was granted, we anticipated the completion of the ascertainment and negotiations as early as March, 2002. This estimate was not met, due to a number of local and nationwide factors: Future Cable-Related Needs Ascertainment The City retained the services of CBG Communications, Inc. to conduct the needs ascertainment. In January and February, Tom Robinson of CBG Communications and Dr. Connie Book of Elon University, assisted by City staff, conducted a series of workshops, focus groups, surveys, interviews and firsthand inspections. They have continued to gather and refine data by telephone and e- mail, and are forming recommendations supported by this information. They are in regular contact with our Washington attorneys and with myself regarding issues and further questions indicated by the research. The written survey of a random selection of 4000 Dubuque households was initially delayed because of the unfortunate timing of a major increase in Basic Cable Service rates, implemented by Mediacom on February 1. As a result, we extended the return deadline to permit the initial public emotion to dissipate somewhat, and Dr. Book reports that the skewing effect of the rate increase on survey responses has been measured and the survey data is able to provide clear answers to many other questions. An impressive 39% return rate was rea lized from these mailed citizen surveys. Though generally cooperative at the local level, Mediacom has been rather slow n responding to a series of technical questions posed by CBG Communications. This is due, in part, to the heavy workload placed upon local engineering staff in February and March with the bankruptcy of the @Home broadband internet service and a number of significant channel changes and system upgrades. Also. as is typically the case, corporate attorneys and managers have taken time to review and respond to our questions, and in some cases to decline to offer answers. As a result, we are still refining and resubmitting clarifying technical questions to better evaluate the technical design and operating condition of the Dubuque cable system A Chanqe In The Ground Rules re: Cable Broadband Modem Service An important part of ttie technical advice being prepared by CBG Communications involves data-voice-video services under the renewed franchise, particularly as regards the design of the Institutional Network and the needs of the community for universafly-available corn petitively priced broadband networking capabilities. The.old "B-Cable" coaxial cable network is outdated and unreliable, and the needs to be met by its successor will be a major par[ of renewal negotiation. Also, the recent implementation of broadband modem services to residents and small businesses are an early step in meeting identified community broadband needs. Unfortunately, in March, the FCC issued a very troublesome declaratory ruling that cable modem services are not "cable services". Cable operators including Mediacom, immediately pressed the issue by discontinuing their payment of franchise fees based upon the gross revenues from the cable modem portion of their services. Though not specifically voiced by Mediacom in Dubuque, some industry representatives are also trumpeting the theory that no aspect of cable-delivered broadband service is subject to regulation by local franchise authorities. This further complicates our negotiating position regarding broadband requirements and consumer protections in a renewed franchise. The City of Dubuque has joined other cities and national organizations in appealing the FCC's declaratory ruling and in commenting in the FCC's related rulemaking process. Illness On May 8. I was admitted to Mercy Medical Center for unexpected major surgery. I returned to work half-days beginning June 3 and will resume a full schedule June 17. As a combined result of these developments, it is clear we can not complete the ascertainment, negotiation, publication and public hearing processes of the franchise renewal by the June 30 expiration of the franchise extension agreement. Multiple franchise extensions are not unusual in a franchise renewal process, particularly where the franchise authority takes its responsibility seriously and works to get the best possible result under changing and sometimes unfavorable federal legal developments. Given the quality and strength of'our existing franchise and side agreements, even after federal preemptions, we do not stand to lose any significant existing or potential benefits by granting an additional short-term extension. I am recommending such an extension to September 30, 2002. Loqistics of an Additional Short-Term Franchise Extension The extending of the franchise for another three months would be accomplished in the same manner as the first extension, by adoption of an Ordinance authorizing the City Manager to sign the extension agreement. A public hearing is required Attorney Ric Ellrod of the Miller & Van Eaton law firm, is preparing the form of agreement as he did the previous one, and proposed resolutions setting the public hearing and approving the agreement are attached. Mediacom has indicated it would agree to the extension of the franchise and side agreements on the same terms as the first extension. RECOMMENDED ACTION: The Recommended Action is that the City Council adopt the proposed Resolution setting a public hearing for their June 17, 2002 regular meeting, and that the proposed Ordinance be adopted following the public hearing. Cc: Pauline Joyce. Administrative Services Manager Barry Lindahl, Corporation Counsel Tim O'Brien, Assistant City Attorney Cable TV Regulatory Commission Cable Community Teleprogramming Commission RESOLUTION -02 A RESOLUTION OF THE CITY'S INTENT TO GRANT A SHORT-TERM EXTENSION OF AN EXISTING CABLE SERVICES FRANCHISE AND AN EXISTING HUB SITE LEASE TO MCClOWA L.L.C. Whereas. MCClowa, L.L.C. (Mediacom) is the current holder of a cable services franchise, embodied in Ordinance No. 42-81, as modified by a series of waivers and side agreements, and acquired from TCI of Iowa, Inc. via a transfer approved by the Dubuque City Council on June 18, 2001: and Whereas. one of the side agreements is a lease to Med [acom to build and maintain a network hub on City-owned property located at 1585 West Third Street in Dubuque: and Whereas, the terms of the franchise and of the lease will expire June 30, 2002; and Whereas, representatives of the City of Dubuque and of Mediacom have entered into good faith negotiation of terms and conditions for the renewal of the franchise and the lease. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the City of Dubuque intends to extend the term of the cable services franchise and the term of the lease to September 30, 2002 under the same terms and conditions as currently in effect; and Section 2. That the City Clerk is hereby authorized and directed to cause notices to be published of the proposed extension in the manner prescribed by law. Passed, approved and adopted this day of .2002 Attest: Terrance M. Duggan, Mayor Jeanne Schneider City Clerk ORDINANCE NO - 02 AN ORDINANCE EXTENDING THE TERM OF THE EXISTING CABLE FRANCHISE AGREEMENT AND HUB SITE LEASE OF MCCIOWA. L.L.C. TO SEPTEMBER 30, 2002. Whereas, MCClowa, L.LC. (Mediacom) is,the current holder of a cable services franchise, embodied in Ordinance No. 42-81, as modified by a series of waivers and side agreements, and acquired from TCl of Iowa. Inc. via a transfer approved by the Dubuque City Council on June 18, 2001; and Whereas, one of the side agreements is a sase to Mediacom to build and maintain a network hub on City-owned property located at 1585 West Third Street in Dubuque; and Whereas. the terms of the franchise and of the lease will expire June 30, 2002; and Whereas, representatives of the City of Dubuque and of Mediacom have entered into good faith negotiation of terms and conditions for the renewal of the franchise and the lease. NOW, THEREFORE, BE IT O RDAI NED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. The term of the cable services franchise and the term of the lease are hereby extended to September 30, 2002, with all the rights, privileges and responsibilities appertaining thereunto; and Section 2. The City Manager is hereby authorized to sign and administer the extension agreement on behalf of the City of Dubuque. Passed. approved and adopted this day of 2002. Terrance M Duggan, Mayor Attest: Jeanne Schneider, City Clerk