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Cable Franchise Renew MCCiowaMEMORANDUM TO: February 10, 2004 The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Advancing the Formal Franchise Renewal Process Franchise renewal negotiations and informal meetings between representatives of the City of Dubuque and Mediacom have produced a variety of mixed signals, but as yet, no real progress. While willing to continue talks, Mediacom's offers have not advanced much beyond the initial "low-ball" stage. Promised financial and technical detail have been meager, such that even if their network engineering designs for system expansion and an Institutional Network should contain opportunities to address the community's needs, City staff can't detect them in the sparse data provided. It appears that Mediacom wants to remain in Dubuque, but believes they will be able to renew their lucrative franchise for another ten or fifteen years without needing to address some of the community's most important cable-related needs. Federal law provides for a specific formal franchise renewal process that can be employed at the discretion of either the local franchise authority or the cable operator in the event of an impasse. It is a more careful, detailed, expensive process for both parties, involving a precise request for renewal proposal issued only once by ~he franchise authority and a responding detailed renewal proposal offered only Once by the incumbent cable operator. It is important to note that the formal process does not close or supersede further informal negotiations. In fact, the greater value of the formal process may be that it offers real incentive to both parties to invest a more serious and earnest effort in the informal process. In neady all cases where the formal process is underway, the informal process continues as well, often leading to a solid agreement before the formal process has reached the courtroom. Dubuque's Future Cable-Related Needs Ascertainment by CBC Communications and Dr. Constance Book of Elon University will form one pillar of the City's foundation in the formal renewal process. Additional strength typically flows from franchise fee and technical audits and other elements. With the expert guidance of the Miller and Van Eaton law firm, CBG Communications, and an as-yet unnamed financial expert, the City is well-positioned to gather and set these additional pillars in place. Cable Franchise Administrator Merrill Crawford recommends City Council authorization to advance to the formal cable franchise renewal process, while continuing informal franchise renewal negotiations. Hopefully the Cable T.V. franchise renewal will have a negotiated settlement. If not, this formal process, as prescribed under federal law, could lead to a denial of renewal of the franchise. I concur with the recommendation and respectfully request Mayor and City Council approval. MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Merrill Crawford, Cable Franchise Administrator CITY OF DUBUQUE, IOWA MEMORANDUM January 30, 2004 MEMO TO: Michael C. Van Milligen, City Manager FROM: Merrill Cravvford, Cable Franchise Administrator SUBJECT: Advancing the Formal Franchise Renewal Process INTRODUCTION: The purpose of this memorandum is to recommend that the City move ahead with the formal renewal process as provided by federal Jaw for the Dubuque cable franchise of MCCIowa, Inc., d.b.a. Mediacom. BACKGROUND: As I have previously reported, franchise renewal negotiations and informal meetings between representatives of the City of Dubuque and Mediacom have produced a variety of mixed signals but as yet no real progress. While willing to continue talks, Mediacom's offers have not advanced much beyond the initial "low-ball" stage to date. Promised financial and technical detail have been meager, such that even if their network engineering designs for system expansion and an Institutional Network should contain opportunities to address the community's needs, we can't detect them in the sparse data provided. Still, we have seen indications of behind-the-scenes work by Mediacom employees, and the company continues to upgrade its subscriber network to a moderate degree absent the guarantee of a long-term renewal, as they offer new services and marketing strategies to target discount offers from direct-broadcast satellites and DSL service providers. It appears that Mediacom wants to remain in Dubuque but believes they will be able to renew their lucrative franchise for another ten or fifteen years without needing to address some of the community's most important cable-related needs. in recent history, the cable industry seems to be moving with unity of purpose or strategy typical of a cartel, to avoid meaningful negotiation and compromise in the informal renewal process. While we do not see a hard line drawn in the dirt, nor antagonistic behavior at the negotiating table, we do hear familiar stories from across the country of long delays, minor offers retracted at a later session, and minimal responses to information requests. This behavior is being observed on the part of virtually every major cable operator engaged in renewal negotiations in communities of all sizes. Federal law provides for a specific formal franchise renewal process that can be employed at the discretion of either the local franchise authority or the cable operator in the event of an impasse. It is a more careful, detailed, expensive process for both parties, involving a precise request for renewal proposal (RFRP) issued only once by the franchise authority, a responding detailed renewal proposal offered only once by the incumbent cable operator, a formal administrative hearing, a likely court appeal of any preliminary denial of renewal, and a definitive final resolution. Since the procedure was established in the 1984 Cable Act, statistically few franchise renewals have used the formal renewal process. Of those, a still smaller number have proceeded to latter stages of the process, and only a handful have carried the process through to completion. It is important to note that the formal process does not close or supersede further informal negotiations. In fact, the greater value of the formal process may be that it offers real incentive to both parties to invest a more serious and earnest effort in the informal process. In nearly all cases where the formal process is underway, the informal process continues as well, often leading to a solid agreement before the formal process has reached the courtroom. Dubuque's Future Cable-Related Needs Ascertainment by CBG Communications and Dr. Constance Book of EIon University will form one pillar of the City's foundation in the formal renewal process. Additional strength typically flows from franchise fee and technical audits and other elements. With the expert guidance of the Miller and Van Eaton law firm, CBG Communications, and an as-yet unnamed financial expert, the City is well-positioned to gather and set these additional pillars in place. As described by Attorney Rick EIIrod in recent briefings, the formal franchise renewal process is a steep pyramid that leads rather quickly to ratified air, few climbing companions, and, potentially, national attention. A franchise authority should not step onto this track half-heartedly or as a bluff. In authorizing the formal franchise renewal process, we must be of single resolve to pursue the rigorous trail to its end, striving to meet the community's needs and interests with benefits from the highly profitable web of technology that lives within our rights of way. RECOMMENDED ACTION: The Recommended Action is that the City Council authorize the advancement of the formal cable franchise renewal process to its ultimate conclusion, in tandem with continued informal franchise renewal negotiations, with expenses paid from cable franchise fee revenues and fund balances. cc: Cindy Steinhauser, Assistant City Manager Barry A. Lindahl, Corporation Counsel Tim O'Brien, Assistant City Attorney Cable Community Teleprogramming Commission Cable TV Regulatory Commission