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Iowa Utilities Board_Petition for Amendment of Rule_Mediacom and fyreSTORMMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Petition Iowa Utilities Board for Amendment of Rule DATE: January 25, 2010 In November 2009, the City received notification of Mediacom's assertion that it had converted its municipal cable franchise with the City to a state certificate of franchise authority pursuant to the Iowa State Cable Franchise Law (SF 554) enacted in 2007. Mediacom claimed to have done this under provisions of SF 554 that allow an incumbent video provider to convert a municipal franchise to a state franchise when a competitive provider (fyreSTORM Fiber & Cable) applies for a state franchise. Because the City never received the required 30 days' notification of intent to provide service as required by SF 554, and because no competitive video service is currently being offered in the City, staff believes Mediacom's conversion of the municipal franchise to a state franchise and the granting of a state franchise to fyreSTORM are contrary to both the letter and the intent of the state law. Cable TV Coordinator Craig Nowack recommends City Council approval to file a petition before the Iowa Utilities Board in an attempt to restore the City's Municipal Cable Franchise with Mediacom. I concur with the recommendation and respectfully request Mayor and City Council approval. MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Craig Nowack, Cable TV Coordinator Michael C. Van Milligen Dubuque AI lady 2007 THE CITY OF DUB TE MEMORANDUM Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: Craig Nowack, Cable TV Coordinator ( I - DATE: January 25, 2010 RE: Petition Iowa Utilities Board for Amendment of Rule cc: Randy Gehl, Public Information Officer Barry Lindahl, City Attorney Tim O'Brien, Assistant City Attorney Teri Goodmann, Assistant City Manager Dubuque kiltri All- America City 2007 INTRODUCTION The purpose of this memorandum is to recommend that the City of Dubuque file the attached petition before the Iowa Utilities Board in an attempt to restore the City's municipal cable franchise with Mediacom. BACKGROUND In November 2009 the City received notification of Mediacom's assertion that it had converted its municipal cable franchise with the City to a state certificate of franchise authority pursuant to the Iowa state cable franchise law (SF 554) enacted in 2007. Mediacom claimed to have done this under provisions of SF 554 that allow an incumbent video provider to convert a municipal franchise to a state franchise when a competitive provider (fyreSTORM Fiber & Cable) applies for a state franchise. Because the City never received the required 30 days' notification of intent to provide service as required by SF 554, and because no competitive video service is currently being offered in the city, we believe Mediacom's conversion of the municipal franchise to a state franchise and the granting of a state franchise to fyreSTORM are contrary to both the letter and the intent of the state law. Assistant City Attorney Tim O'Brien has drafted the attached petition which seeks to have the IUB adopt a new rule which would create a remedy for our situation. We are requesting an amendment to Chapter 199 of Iowa Administrative Code under which the Iowa Utilities Board (IUB) enforces SF 554 (now Iowa Code chapter 477A). This new rule would give the IUB the authority to revoke a state franchise if the 30 day notice is not given or if video service is never offered and to restore our municipal franchise. RECOMMENDED ACTION I respectfully recommend that the City of Dubuque file the attached petition in an attempt to restore our municipal franchise and strengthen the rules by which the state franchise law is enforced. 1 In re: STATE OF IOWA DEPARTMENT OF COMMERCE BEFORE THE IOWA UTILITIES BOARD Requested Amendment to Rules Regarding the Issuance of Certificates of Franchise Authority for Cable and Video Service [199 IAC44] No. PETITION FOR AMENDMENT OF RULE AND REQUEST FOR EXPEDITED CONSIDERATION Pursuant to Iowa Code § 17A.7 (2009) and 199 IAC 3.3, the City of Dubuque, Iowa, petitions the Board to amend 199 IAC 44.4. This Petition is prompted by the issuance of a Certificate of Franchise Authority to Phalanx Technology Holdings, LLC, d /b /a fyreSTORM Cable & Fiber, Inc., on April 6, 2009 as Certificate No. VC -005, in Docket No. VCA- 2009 -0004 and the Notice of Service Area Revision granted to MCC Iowa d /b /a Mediacom on October 8, 2009 in Docket No. VCA- 2008 -0002. Previously, in Docket No. RMU -07 -5, the Board deferred consideration of rules regarding the enforcement of the provisions of Chapter 44 to such time as a material problem arises. This Petition requests that the Board revisit the issue of enforcement in light of the occurrence of just such a material problem resulting from the issuance of the Certificate of Franchise Authority and service area revision referred to above. The City of Dubuque believes that a material violation of Chapter 44 has occurred in that the Certificate of Franchise Authority and service area revision were issued despite the failure of the competitive service provider, Phalanx Technology Holdings, LLC, d /b /a fyreSTORM Cable & Fiber, Inc. to provide Dubuque with the 30 day notice of offering service as required by subrule 44.4. Following the service area revision granted to MCC Iowa, LLC, d /b /a Mediacom, the City of Dubuque was notified by letter dated November 20, 2009 from Mediacom that Mediacom's municipal franchise with the City of Dubuque had been terminated. Dubuque's existing 15 -year municipal franchise with Mediacom was approved in May 2005, following two years of negotiations. Compared to a state franchise, it is detailed in addressing the operation of Mediacom's Dubuque cable system. The franchise agreement contains many provisions not covered by the Iowa law, such as a 10 percent senior citizen discount, one free cable drop to local schools and municipal buildings, the requirement that cable service must be available to all city residents, reasonable provisions to extend service to newly annexed areas, a broader definition of gross revenues, requirements for Mediacom to operate two of the public access channels, annual requirements to upgrade the cable system, and specific penalties and remedies for violations. The state franchise will most likely mean less revenue to Dubuque from franchise fees. In Fiscal Year (FY) 2008, the City received $641,711 in franchise fees from Mediacom. In FY 2009, the amount was $679,800. Preliminary estimates place the loss in the range of $80,000.00. FyreSTORM's managing partner has been quoted in the press as saying the company plans to establish itself in the Cedar Rapids and Iowa City areas before moving into other areas. In summary, Dubuque's municipal franchise agreement is threatened, the level of supervision under the state franchise is minimal, and Dubuque residents have no realistic or foreseeable competitive options for cable service. The City believes that the attempted termination of its municipal franchise constitutes a material problem sufficient to cause the Board to revisit the issue of enforcement. Specifically, subrule 44.4(2) has been violated in that the competitive service provider has failed to file a copy of the required 30 day notice with the Board and subrule 44.4(1) has been violated due to the failure to give the 30 day notice to the City of Dubuque. In addition, subrule 44.4(3) appears to contemplate some further type of action by the competitive service provider and /or the Board if market entry is delayed. No such action has been taken. Furthermore, subrule 44.5 provides that the incumbent's application be effective on the same day as the competitive service provider files the 30 day notice required by subrule 44.4. Because no such notice was given or filed for Dubuque, the application by Mediacom for service area revision was improvidently granted and should be subject to revocation. Currently, no rules exist to address this issue and as a result, the City of Dubuque urges the adoption of an additional subrule 44.4(4) as follows: If the competitive cable service provider or competitive video service provider fails to notify a municipality as required pursuant to this subrule or if market entry is delayed for more than 30 days after the date service was expected to begin, the Board may revoke the previously issued Certificate of Franchise Authority with respect to that municipality and revoke any Certificate of Franchise Authority or service area revision for that same municipality issued to the incumbent cable provider in that municipality. Such revocation shall be deemed to place the incumbent cable provider and the municipality in the same position they were in prior to the issuance of such Certificate of Franchise Authority or service area revision, including reinstatement of the franchise agreement previously granted by the municipality. This amendment will give the Board the tools to enforce the law and correct a material problem which is now arisen. We believe it is an appropriate remedy for the particular situation. 2 The requested amendment merits expedited consideration. At the present time, it appears that no enforcement action can be taken by the Board to remedy a situation which is clearly in conflict with Iowa Code Chapter 477A and has left the relationship between the City of Dubuque and Mediacom with respect to cable service authority in Dubuque in a state of uncertainty. The City of Dubuque accordingly requests expedited consideration. The City of Dubuque does not request a rule- making proceeding pursuant to Iowa Code § 17A.4(2) (2009). JAO:tls Respectfully submitted, City of Dubuque, Iowa by: James A. O'Brien, Esq. Assistant City Attorney Suite 330, Harbor View Place 300 Main Street Dubuque, IA 52001 -6944 (563) 583 -4113