I. Cable Renewal Process

A. Federal law allows two ways to work a cable renewal: through a formal process, or by negotiated agreement. But the two processes can and should work in tandem.

B. The first step in the formal process is to identify the community’s future cable-related needs and interests. This "needs assessment" also provides a community with the information needed to be successful at the bargaining table in the informal process, and if informal negotiations fail, the City is positioned to proceed with the formal process.

C. Federal law doesn’t allow a City to just kick its incumbent cable operator out in favor of a competitor. Under the federal Cable Act, the incumbent cable operator is protected against an arbitrary denial of renewal. A community has to go through the formal process, and administrative proceedings, before a renewal can be denied. The process is not "competitive." Renewal cannot be denied simply because someone else might be willing to offer more.

D. The Cable Act permits a community to deny renewal only under the following circumstances set forth in the statute: inadequate past performance; the operator is legally unqualified or is unwilling or unable to devote the necessary technical skills and financial resources to the community; or if the operator is unwilling to reasonably satisfy the future, cable-related needs and interests of the community (considering the cost of meeting those needs and interests).

E. Federal law provides that as part of the renewal process, a City can ensure that the cable system is properly upgraded; require the operator to set aside channels for public educational and government use of the cable system, and require certain support for those channels (studios and equipment, for example), and require the operator to provide an institutional network providing, for example, a modern telecommunications link for schools, libraries and government.

F. Additionally, the City can ensure that construction of the cable system proceeds in an orderly fashion, that all parts of the community can obtain service, and that the system is rebuilt in a reasonable period of time.

G. The franchise term can also be established through the renewal process – renewals do not have to be for 15 years, and often are far shorter.

H. In addition, as the renewal process proceeds, communities often will establish customer service standards; franchise fee requirements; procedures for reviewing operator performance and for ensuring that the operator continues to satisfy Community needs throughout the franchise term.

I. An operator can (but does not have to) pass through increases in its external costs as a result of an increase in obligations under a renewed franchise. Some franchise requirements, such as PEG and franchise fee requirements, are external costs, but not all are. However, the operator is only entitled to pass through the increase in those costs. The "pass through" of costs is only an issue in those communities that are regulating rates, and only on the basic programming.

II. Update On Open Access Debate

A. Portland v. AT&T: Oral argument at the Ninth Circuit was held in November, 1999. A decision from the Ninth Circuit on the City’s right to impose an open access condition on AT&T is expected during the first quarter, 2000.

B. AT&T-Mindspring Agreement: In December, 1999, AT&T and Mindspring Enterprises delivered a letter to the Chairman of the FCC outlining an agreement between the two companies whereby AT&T agreed to adhere to certain "principles" with respect to internet access, once its exclusive agreements with @Home expired (in 2002 and 2003). Basically, AT&T agreed to provide access to its network for ISP’s who reached a negotiated deal with AT&T for that access. Critics of the deal say that it falls well short of "open" access, because only ISP’s that reach agreement with AT&T on terms will have access. Other cable operators have not joined AT&T in this arrangement.

C. AOL/Time Warner merger: Recently, AOL announced the acquisition of Time

Warner, which is, among other things, a major operator of multiple cable systems. Time Warner had been offering internet access service through its Roadrunner cable modem platform. AOL, prior to this transaction, was a major force in the open access debate. AOL has issued statements representing that it still committed to the open access fight, and assuring that it will be offering open access on its newly acquired cable systems.

III. Recent AT&T Renewal

Recently, the City of Pittsburgh, PA had reached an agreement on a 10-year renewal with AT&T. Highlights of this package includes upgraded customer service standards, a "most favored nations" agreement on open access (similar to the agreement Oakland reached as part of the transfer); an upgrade to the cable system; capital support and funding for a public access channel; and an institutional network connecting 23 City sites.