HomeMy WebLinkAboutCC 1998-07-07 MinutesCITY OF MIAMI
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COMMISSION
MINUTES
OF MEETING HELD ON JULY 7, 1999 (Workshop)
PREPARED BY THE OFFICE OF THE CITY CLERK/CITY HALL
Walter J. Foeman/City Clerk
INDEX
MINUTES OF WORKSHOP
JULY 791998
ITEM NO. SUBJECT LEGISLATION
1. CABLE TELEVISION FRANCHISE. 7/7/98
DISCUSSION
2-22
MINUTES OF WORKSHOP MEETING OF THE
CITY COMMISSION OF MIAMI, FLORIDA
On the 7'h day of July, 1998, the City Commission of Miami, Florida met at its
regular meeting place in the City Hall, 3500 Pan American Drive, Miami, Florida in
workshop session.
The workshop was called to order at 2:14 p.m., by Commissioner Tomas
Regalado, with the following members of the Commission found to be present:
ALSO PRESENT:
ABSENT:
Commissioner Tomas Regalado
Commissioner Joe Sanchez
Donald H. Warshaw, Interim City Manager
Alejandro Vilarello, City Attorney
Walter J. Foeman, City Clerk
Maria J. Argudin, Assistant City Clerk
Commissioner Wifredo (Willy) Gort
Commissioner Arthur E. Teele, Jr.
Vice Chairman J. L. Plummer, Jr.
July 7, 1998
. CA13LE TV FRANCHISE.
Commissioner Regalado: ... to begin the workshop. For the benefit of the
people watching Channel 9, this is a workshop. This is not a regular session of the City
of Miami Commission, but it is important that the people of Miami, members of the
Commission, the staff will be informed of what is the City planning, what kind of
information the City is getting towards the date of September in which the City
Commission will decide what to do with the Cable TV franchise of the City of Miami.
Members of the Commission are not here yet, but their staff are, and we feel that it's
important that we all get that information. So, Mr. Manager, if you can tell us what we
are going to do here this afternoon.
Mr. Donald Warshaw (Interim City Manager): Thank you, Commissioner. I am going
to introduce Matt Leibowitz, and he will tell you a little bit about where we're at, make a
presentation, then be available to answer all of your questions.
Mr. Leibowitz: Thank you, Mr. Manager. For the record, my name is Matthew
Leibowitz, counsel to the City of Miami on telecommunications, and specifically in this
context with respect to the re -negotiation of the cable television franchise. What I am
going to be doing this afternoon is starting off on a generic level as to what the law
provides and the procedures and then going down to a more concrete level as what are the
issues facing the City of Miami in this renewal process. For this purpose... For this
purpose, I am going to be...
Commissioner Regalado: Matthew, if I can just interrupt you? Commissioner Gort is on
his way, so if we can probably for the benefit of Commissioner Gort, I don't know if
Vice Chairman Plummer is going to be with us, but Commissioner Gort says that he will
be here in a few minutes. So if you want to go ahead and give us...
Mr. Warshaw: Would you like us to wait a couple minutes?
Commissioner Regalado: I think, yeah.
Mr. Warshaw: OK.
Commissioner Regalado: If we can wait for the benefit of Commissioner Gort.
Mr. Leibowitz: Sure.
Mr. Warshaw: OK, we'll wait.
Vice Chairman Plummer: And I am not Vice Chairman. Is the recorder on?
2 July 7, 1998
Mr. Walter J. Foeman (City Clerk): Yes.
Vice Chairman Plummer: To my colleagues on the Commission, there was a preliminary
meeting in the COW (Committee as a Whole) room prior to this, at which time I had the
opportunity to go in and express my opinions in reference to the negotiation with TCI
(Tele-Communications, Inc.). I have stated it before, and I want to state it for the record,
I am not going to waste my time sitting here today to accompany who in my estimation is
arrogant, who does not want to make any kind of control of the City to please the people
who are paying the fees. I will not sit here and vote for a company who takes away three
of my channels and charges me more money. And as far as I am concerned, TCI is not
the best thing for the City of Miami. So, I am not going to sit here... As I said earlier, I'll
say again. I am being told that there are Federal laws that mandate certain things, and
that's what I'll do, and anything outside of that Federal law, I will not do. As far as I am
concerned, we can do whatever we've got to do. Let's go to court. Let's take it. So, you
all didn't have the opportunity that I did, so I'll leave the three of you, and have a good
time, and anybody can be Vice Chairman.
Commissioner Sanchez: I guess we will do it by seniority.
Vice Chairman Plummer: That's Willy. That's Willy.
Commissioner Regalado: Willy.
Commissioner Gort: Let me ask a question. First of all, I apologize for being late, but
unfortunately, I had a previous commitment. Commitment in my business before this
was called. I feel the three of us, since we were not here when this contract originally
was signed by the City of Miami should be here and listen to it. I, personally was...
listened a lot of presentations that was made, maybe 20 years. Was it 20 years ago?
Commissioner Regalado: Sixteen.
Commissioner Gort: Oh 16, 20 years ago. My understanding at that time there was a
lot of commitment made by the company that was awarded the contract. Unfortunately, a
lot of those commitments were never lived up to. So personally, I can tell you I have
received a lot of complaints from the constituents about the service and I have one
individual., a couple of individuals, they have talked to me about when they called to
complaint, they were never listened to. And one of the individuals is very close to me
which I have got to listen to every... now which is my wife, so I can tell you, I have got a
lot of reservations about this contract.
Commissioner Regalado: Well I am like Commissioner Gort, I wasn't here when that
contract was approved. When we were in the middle of the crisis and TCI asked for
another... some more time, I said on the record that we should not do it. That we had a
lot of complaints about this company. I feel that now we will have time, and I really
3 July 7, 1998
would like to hear Mr. Leibowitz, because I think that the City chose the right person for
this issue, in the person of Matthew Leibowitz.. And I would just tell you that I think that
as we approach the September... the date we need to have more input from the people of
Miami. There are many complaints. Complaints that had been unheard. Complaints that
have not received any response from the cable system. And like J.L., I complained about
three channels. But I will tell you, I have more complaints than also the three channels.
And by the way Matthew, I don't know if you were given the boxes of complaints that I
saw in the pink building about three or four months ago. I think that the Manager is
looking for, I guess. I'll send you a memo. One of the thousands of memos that I sent
you had to do with the boxes in the pink building. All complaints from TCI dated 1984
and 1985. It should be there right now, if we go look for it. But having said that, I... I
think that it is important that the members of this City Commission that have a
tremendous visibility in the news media, from now until September, every time that we
have some kind of radio or TV program, we should ask the people of Miami to give us
their input because it will help us a lot.
Commissioner Gort: Commissioner, my understanding is today the workshop is to put us
up-to-date to the Federal laws and the things we need to do in the future, so if we don't
have any more statements or questions I would like to hear from staff and...
Commissioner Sanchez: Well, I have got something to say. Concerning the cable issue,
and a lot of the complaints from the constituents throughout the community and looking
at just the last couple of days people really calling concerned about the increases, the lack
of service. The... the all and general complaint pertaining to TCI itself. You know, I
think that people are willing to pay for... for a good service on whatever they do in life
whether it be TCI or... or any Internet whatever, pertaining to their home or
entertainment. But one of the biggest concern is that, you know, the lack of
understanding when the bills go up, and you know it's funny how these people that most
of the ones that are complaining to my office are people that are on a fixed income type
of lifestyle. So when they see the increases and they are not being told why they are
being added a few cents or a few dollars to their bills, it really... it bothers them. And
that's one of the biggest concerns that I have. The other complain, and I am sure that
every... all my colleagues here have gotten complaints throughout months, years that you
have been here, I am sure. When did this...? When did you get the contract? When did it
start? What year?
Mr. Leibowitz: This contract started 16 years ago.
Commissioner Sanchez: Sixteen years ago. That's a long time. And, and during those
16 years of course, you know the rates have almost what, multiplied?
Mr. Leibowitz: Many times.
Commissioner Sanchez: Many times. So that's just one concern. I mean people are
upset that the service is not there for one, the complaints. They are being increased on
4 July 7, 1998
their fees and they are not being told why. And after studying some of these bills that I
have here, I mean, there is such a conflict of numbers that I've... I can't understand
them. The only thing that I could understand on these bills are simple, it's just a basic
service. It's the same. But everything else, I mean, I couldn't figure them out, to be
honest with you. Like me, I just get the bill and I pay it. But there are a lot of people out
there that are counting pennies and they have every right to do that, and their concern
towards that, and that's the concern that I have and I am sure every Commissioner up
here has on that issue.
Mr. Leibowitz: What I would like to start doing is to put a framework around this entire
conversation by starting with Federal law and going back and setting the framework that
we find ourselves in and then bringing it to the more specific issues that are facing the
City of Miami. And that way, we will understand what flexibility and what authority you
have, and how... you know, what... how we have to proceed to go forward. The
framework for cable television is set forth in Federal law. I hope you can read these.
Essentially, the 1984 Federal Communications Act established...
Commissioner Gort: Excuse me. Why don't you move it this way a little bit more?
Not, not the... the document itself.
Mr. Leibowitz: Oh, the document itself.
Commissioner Gort: The other way. That's it.
Mr. Leibowitz: That's it?
Commissioner Gort: Thank you.
Mr. Leibowitz: The 1984 Telecommunications Act set forth the general framework from
which local municipalities, franchise an individual cable operator. First and foremost,
and important to understand is that franchises are not issued pursuant to Federal law on
an exclusive basis. So therefore any local and franchise authority this City, for an
example, could any time invite and franchise a second cable provider. The problem all
along has been that the economics have not supported that overbuilt process. As a result
of the successful lobbying by the... of the cable industry in Washington, they have
essentially created a straight jacket in the renewal process which has until very recently,
tied the hands of local government. Let me just give you a beginning overview and then
we will get further into this so you will understand the straight jacket, but then we will
explain to you some of the flexibility and the opportunities that we do have. Generally,
the act contemplates two parallel processes. An informal and formal one. Thirty six
months before the termination date of the franchise, the cable company can request the
initiation of the formal process by fling a letter with the franchise authority, and that's the
commencement of the proceedings. And in fact, TCI did that in this case. On a formal
process, the first thing that the City has to do is establish ascertainment proceedings. And
the purpose of this is to try to figure out what are the... the real needs and interests of the
5 July 7, 1998
community in terms of cable television. And in fact, has the cable provider lived up to
those provisions and those agreements within the franchise that it agreed to earlier on.
These things are formal... These findings are formalized in an ascertainment report. And
that's as far as we have gone so far. This City has issued an ascertainment report which
sets forth the needs and interests of the community and what the future interests and
needs of the community is supposed to be... require. Following along for the moment
just to develop some continuity The next thing that is supposed to happen along this
process is that on July I Wh, the franchisee in this case, TCI is required to provide a formal
proposal taking into consideration those issues that this City and its staff have raised in
the ascertainment report. Once we receive that on July I Od , and I'll come back to that at
the end of the day, the City then has a choice. It can accept that proposal and renew the
franchise, and if that's the case... you know, if that's the decision of the Commission,
that's the end of the process and TCI goes on. On the other hand if they find that the
proposal is lacking, we then go to a preliminary denial. Now that, this step right here is
what is scheduled for this City to consider on September 22"d. So at least on the time
frame as we established so far, July 10 h, we will receive the formal report and proposal
from TCI. And on September 22nd, the City will convene to compare the ascertainment
report and needs and interests that the staff and City have decided or required, and
compare that to the TCI proposal. If in fact at that time, it is the judgment of the City
Commission that the franchise proposal does not meet the needs and interests of the City,
they can then issue a preliminary denial. And again, that's the... that's the stage for
September 22"d. In the event that occurs, you then have 120 days to hold an
administrative hearing, and that's what we have right here. The administrative hearing is
essentially a trial before an administrative officer designated by the City. And that trial
has all the attributes of a trial as if it was downtown in the court, in the sense of the
discovery document production and live witnesses and cross-examination. It is a very
time consuming process. But under the Federal statute, you have 120 days to complete
that process. At the end of that trial... administrative hearing, it again comes back to the
Commission, and the Commission can either renew based upon the record that was
developed in the administrative hearing, or issue a final denial. In the event of a final
denial, the franchising in this case TCI, has the ability to go to court to seek review of the
City's actions. The court's ability at that point is to remand the proceedings to the City to
start again, or correct some errors, grant the renewal, or deny the renewal. That's
essentially, the Federal process. Until recently, the Cities have uniformly been
unsuccessful in asserting its rights in this process. Approximately, one year and a half
ago there was one case called the Sturgess case where a court for the first time said that if
the City in the ascertainment report makes findings that there are needs and interests, that
the franchisee in its proposal has not met, and there are substantial evidence at the
administrative hearing to support those needs and interests and taking into consideration
the cost of those issues, then the court will up the City's jurisdiction. That's the first
time. So, essentially, we are relatively speaking in the terms of jurisdictional issues and
Federal law in a new ball game. Now in real world at the same time this formal process
goes on, in every negotiation... in every renewal there is the informal process.
Overwhelmingly, overwhelmingly the informal process is successful. Notwithstanding
the fact that most cities do have issues with their cable provider and they do seem to iron
6 July 7, 1998
them out in their informal negotiations. In the context of our proceedings, we have had
informal negotiations for approximately two years, and unfortunately have not been
successful. And that's why this City initiated the formal process to try to keep the
process... the TCI focused on what the issues are and try to get a formal proposal. In the
event at the September 22"a meeting that there is a... a preliminary denial, the denial has
to be based on these four factors. First, that the cable operator has not substantially
complied with the material terms of the existing franchise and with applicable law.
Second, that the franchisee has not provided sufficient quality of service including signal
quality, response to the consumer complaints, and billing practices without regard to the
mix quality or level of the cable services or other services provided by the system, and
that has been reasonable in light of the community needs. Now these two issues are
critical in this process, because the cable operator has to be given notice that the City and
its administration has found the cable company to be lacking on these two areas, and
therefore, had an opportunity to cure. This City did notice TCI on both of these issues
almost two years ago. The third and more generic that the operator does not have the
financial, legal and technical ability to provide services, facilities and equipment as set
forth in its proposal, in this context the proposal that we will be receiving on July 10`h.
And the last is, that the operator's proposal in terms of a denial would not be reasonable
to meet the future cable related needs and the community's needs and interests taking into
account the cost factors of meeting such needs. Now this goes back again to the
ascertainment process. This is a little redundant, but I think it's important to understand
that the preliminary hearing is on September 22"d. In the event there is a preliminary
denial, then we go through this administrative process, the administrative hearing, and
you have 120 days to follow this process, at the end of which there is a written decision
and then, you know, we go to court. In addition to the Federal Statute, you also have in
Florida a Florida Statute which essentially look... takes the same process, but adds a
different... a few different issues. And again, what we have here, is that before a City
denies or in fact grants a franchise there has a public hearing, there has to be an
evaluation of the economic impact upon private property. There has to be an evaluation
of the public need. A capacity evaluation of the PROW which is the rights -of -way. An
evaluation of the future uses of the rights -of -way. The potential disruption and resultant
inconvenience in the event that the... a cable system would be denied a franchise. The
financial ability of the applicant, any other societal interests, and any other relevant
matters. Again, pretty much wraps into the Federal Statute. What I thought would be
important to create a greater understanding is to look at what TCI systems around the
country look like, and also what some other cable companies are offering in some of the
critical areas. And what we have done here, is just taken a snap shot because there are
hundreds of systems that TCI runs.
Commissioner Gort: I think you have to focus it. The top button.
Mr. Leibowitz: OK. Is that any better?
Commissioner Gort: Or you could bring it down.
7 July 7, 1998
Mr. Leibowitz: OK. What we have here is a number of the critical issues. Your system
design, your peg channels, your peg support, I -net, and others. Now, let me try and
explain some of this jargon. The system design is essentially the type of system that you
have in the ground to provide the services. The City of Miami in its original franchise
required. a state-of-the-art system. What we have in the ground today is a 400 megahertz
system. It is under great debate as to whether that system is adequate even as a 400
megahertz system, and whether in fact that they have maintained it in such a way that it
could provide adequate service. Generally speaking though, and you can see it from this
chart, the 750 megahertz system is pretty much the state-of-the-art today. It has the
ability to provide a lot more channels, but it also has the ability to provide for telephone
services to a data Internet service, et cetera where the 400 megahertz system onto itself
doesn't. Now one of the issues we've had with TCI is, TCI as a company has generally
embraced recently a digital system... concept where they can compress the signals to go
down a smaller pipe, if you will, a 400 megahertz, a 400 megahertz system. So one of
the issues that we've had with TCI is whether or not the digital... the digitized 400
megahertz system is adequate, or in fact is it a poor stepchild to a 750 megahertz system.
But here you can see that in 1987... in 1997, TCI has agreed to a 750 megahertz system.
You have in Dallas a 750 megahertz system. You have Houston as early as 1978, a
franchise but it's been upgraded. King's County in Miramar you have an upgraded
system but only the 550 megahertz, and then we have some additional cities to reflect.
For instance in North Miami, the system has been upgraded to 550 and it's on it's way to
750. The next... One of the other criteria that you have to evaluate is the PEG channels
(Public Educational Government Use). Just as this meeting today is being publicized and
being broadcast or cable cast to the community, you have alternative channel uses that are
for the government... government. For instance in Dade County, we have the educational
channels. There... initially there was a great debate as to how many channels any city
would ever need, and in fact, in our franchise the City of Miami, you have an
authorization for up to 20 channels. In the real world, the cities tend to use a much lower
number. So, one of the questions then for negotiation is the number of channels that are
available for this City either for public access, educational programming, or government
channels. Along with those channels, the question then is PEG support, and that is
financial support for the system. Who is going to pay for the camera? Who is going to
pay for the photographer? Whether or not there are going to be mobile trucks going
through the City that will be able to provide cable casting on a live basis for events within
the community. These things obviously take money and the question is, where is that
money going to come from? Inevitably, cable companies around the country and TCI
here, as you see, has supplied support either in direct grants, or percentages of gross
revenue, or dollars per subscriber to financially support the PEG system.
Commissioner Regalado: Can I stop you, just one...?
Mr. Leibowitz: Sure.
8 July 7, 1998
Commissioner Regalado: For the benefit of the people watching us, and I am sure that
members of the staff and the Commissioners. How many public access channels does the
City have right now?
Mr. Leibowitz: Right now we have three channels. I am sorry, four channels.
Unidentified Speaker: [inaudible — off microphone]
Commissioner Regalado: That's what I... That's what I thought. In other cities, major
cities, does the City itself operate public access channel? That is, for the benefit of the
people watching those public access channel is a channel where people from the different
communities can come and do their own programs, or we can film their neighborhood
associations meeting, and put it on the tube. Do you know if in other areas of South
Florida, cities does operate some public access channels?
Mr. Leibowitz: There are actually very few communities in Florida that operate public
access channels. Some of the largest cities around the country and up north have. One
of the problems that the cities have run into with access channels is control. For instance,
the best or the worst example depending on our point of view is New York City, where
because the way their system is setup which Federal law requires you have a lot of X-
rated programming live broadcast into your home, or the most extreme sexual exploitive
nature that you could ever imagine, and there is no constitutional way to prevent that type
of programming on those kinds of channels. Similarly, in the terms of given the first
amendment, the City would not be allowed to restrict the type of programming and
viewpoints aired on those channels. So, again you can have some very extremist groups
making pretty extreme statements on those channels. As a result, a lot of cities have
shied away from it. However, there are cities around the country that have an access
board that is setup and that goes through the procedures, takes the risks, if you will of the
negative type programming in order to provide the quality type programming that you are
referring to. The public access channels generally run on a first come first serve basis and
allows people to work, to come forward... Almost like High Park in England where you
can get up and say almost anything you want and express your views and have people
hear you.
Commissioner Regalado: Let me ask you this, Matthew. The City has one official
channel. Can cities operate public access channels, that is with the facilities that we
have, we can operate an access a public access channel in which the City will place the
programs that the City board, or the City Commission ,or the City Manager agrees with?
Mr. Leibowitz: Well, I think institutionally what you would do is, instead of calling them
public access channels, you would have government channels. And on the government
charnels....
Commissioner Regalado: Or public service channels.
9 July 7, 1998
Mr. Leibowitz: Right, exactly. And under the government channels then the City
Commission and its staff would be able to regulate what type of programming goes over
that channel. For instance, the airing of this City Commission, the meetings of any of the
boards or any of the committees. If the Fire Department or the Police Department wanted
to have a safety program, it's an appropriate type of programming for that channel.
Those are well developed around the country and the question is, where is the money and
the staffing going to come from, and that goes back to the financial support that I spoke
of earlier. So the type of programming I think that you are eluding too is very possible,
and in fact is done around the country over the government channel as opposed to the
public access channel. Going forward is the I -net, the institutional network. At the time
this City originally issued its franchise it was very much in vogue among the engineers to
have two separate cables laid in the ground. One for the consumer, the residents and one
for the govern... the City government called the institutional network. It was an
expensive process and almost inevitably around the country what people have found is
that institutional network never worked. In the case of Miami, that institutional network
still exists, it marginally works. It initially was owned and operated and maintained by
TCI. Several years into the franchise there was a re -negotiation that... that cable is now
owned by this City, but supposedly maintained by TCI, but that's also one of the
problems we had. Now one of the advantages of an upgrade, and particularly the 750, is
that the cable company often will incorporate the technology in that 750 line to provide
for I -net services to the City. And what do I mean by I -net services? For instance, in
times of emergency, the Manager or the Mayor would be able to speak to all locations
within the City in terms of City Officials, City staff to give direction on what to do. You
could have internal communications by telephone. You can have data transmission
internally. Right now those services that you... similar services that are being offered
are being paid for by the City, primarily I think, through BellSouth. And then the City
also has recently issued and received back proposals for a very, similar type of
technology which would provide those services, but at several hundred thousand dollars a
year. The advantage of having an I -net with... through the cable system is that you have
tremendous cost efficiencies to provide those internal types of services. Now, what other
kind of services can you anticipate getting from the cable company? Well, for instance,
one of the most traditional complaints that we have here and around the country is
customer service. Customer service hit such an abysmal point that in 1996, over a veto of
President Bush, a Republican Congress adopted a cable... a new cable act which allowed
cities for the first time to put into place, very tough customer service standards, and
billing standards. And standards so that when the customers get a bill, they have some
reasonable opportunity to understand what's on that bill. This City did not take the
opportunity at that time to adopt the customer service standards, but this is something
that we can certainly impose during these negotiations and this renewal. Secondly, is we
have all heard the administration in Washington talking about wiring our schools and
libraries for the Internet and for the Information Highway. The cable industry has in
principle, embraced this concept through a program called "Cable in the Classrooms."
Unfortunately, what they have been generally talking about and providing is a single
hookup. A single modem, if you will, for every school and library. We all know that's
totally inadequate. In a number of situations, we have been able to negotiate with the
10 July 7, 1998
cable operators to provide additional service beyond that, and in some situations, in some
communities around this country, they have actually agreed to provide a hook-up for
every single classroom in the community. So there is a lot to discuss there. In terms of
different types of support for programming, because that's always a difficult issue.
Federal law prohibits the City from entering in discussions into particular programming
content. So you can't say for instance, I want the golf channel. But you can take in this
evaluation process a look at the overall mix of programming and type of programming
that's being made and provided by your cable operator to see if in fact, they are being
responsive to the local community needs. I want to move away from TCI for a moment
and take you to look at what some of the other cable operators are providing in the State
of Florida. I have chosen Media One as the first, not by accident, but as you know there
is a proposed transfer being discussed between and TCI and Media One. It is our
understanding that the Letter of intent has been signed, but the definitive contract has not
been executed. We are told that they are in their final stages of due diligence. It is taking
a very long time and I don't particularly understand why. But it is my understanding
from the company that they are looking at a closing on the transfer sometime in the fourth
quarter. Now, that's a separate issue from the transfer... from the renewal process, and
we have to keep them separate. On the other hand understand that once they enter into
that contract, they will have to come to you again, and seek your permission for that
transfer. And it's important to understand that the transfer process is very different from
the renewal process and actually you have a great deal of flexibility in that process. But
let's look at what Media One is building. First of all, they are proposing almost
universally 750 megahertz systems which is what we have been trying to get TCI to talk
to us about. And they have been building those systems in a period of 12 to 18 months.
Secondly, they have been incorporating in those rebuilds the installation, operation and
maintenance of an I -net at the company's expense. Third, they have been providing
government channels, and in fact, recently in Coral Gables, the City has retained the right
up to use six channels. They have provided substantial funding for those channels and for
the provision of cable services. In terms of Coral Gables, it was not only a two percent
gross revenue, but actually a two million dollar ($2,000,000) grant over a 15-year period.
They also provided cable service, not to every one... one to a school, but to at least every
floor of government buildings and schools throughout the City. They also provided
online access in terms of the Internet, and an issue that is first and foremost, I think to
Commissioner Plummer, and I apologize, he's not here, is cost recovery. And that is, that
the cable company actually reimburse the City for the expenses of consultants and
engineers and accountants that was used during the renewal process. This is a... always a
debate. Your... your existing ordinance does provide for cost recovery, and in fact, TCI
when it first got the system did reimburse this City for the legal cost and the financial
consultants. There have been some intervening cases, none of them that are binding,
none of them that are persuasive. So the cost recovery, although a hot topic of discussion
and negotiation, usually resolves itself at least partially, if not totally in the City's favor
Comcast also has a strong presence in South Florida, and again, they are looking at a 750
megahertz system which is again, similar to the Media One and the Adelphia. As I said,
750 is essentially the state-of-the-art of the cable technology today. Comcast also
provides substantial support for the PEG channels and has been very up front in
11 July 7, 1998
developing a two-way data transmission network program. You will hear over again...
over and over again, that the cable companies are very anxious to get into the Internet
business. Why? The speed that the cable fiber can transmit data is dramatically more
than the telephone system as we know it today. So, although the cost of that... that cable
modem may be a little more expensive, the speed is just overwhelming. And the cable
company is looking at the Internet and data transmission as one of their near future,
tremendous opportunities in revenue generation. And I guess secondarily, you will find
again, the conversations and discussions of telephone service being provided over the
Inter... over these cable systems. And that's exactly why AT&T and TCI are now
teaming up. But, that's a little bit further down the line. Again, Comcast has provided
for cost recovery. And what's interesting with Comcast is at least in Philadelphia they
froze the basic rates in the entire City to provide affordable cable for minorities and
senior citizens. In this community we have had a number issues raised as to some of the
subsidized federal housing and what the City can do to try to assist in that area. And
there are actually a number of things that the City can do in discussions with TCI and
potentially, Media One. Again Philadelphia has a 750 megahertz system and has a very
broad deployment of online services and... and the modems.
Commissioner Sanchez Mr. Leibowitz, I have got a question for you.
Mr. Leibowitz: Surely.
Commissioner Sanchez: You just said to "freeze the basic cable cost?"
Mr. Leibowitz: Correct. The basic rates. Now, one of the... Let me divert... give you a
little background on cable rate regulation.
Commissioner Sanchez: OK.
Mr. Leibowitz: It's a mess. It is one of the...
Commissioner Sanchez: Well...
Mr. Leibowitz: ...screwiest things that the federal government ever did. The United
States Congress in 1996, and again it was a Republican Congress overriding a
presidential veto that a Republican president had put this in place.
Commissioner Sanchez: Before.... before you go any further, let me just ask you
something. Why is it that.. You know, I am reviewing all these statements that I have
here. How? Why is there such a discrepancy in charges? I have yet to understand the
charges here. I mean, the only thing that I could compare them both, both of these
billings is the basic service. It's eleven fifty-four. That's.... You look at every bill. So
even though we did not even participate in that...
Mr. Leibowitz: Process.
12 July 7, 1998
Commissioner Sanchez: Yeah. The President or whatever did not go about. Apparently,
we won't involved in it, or we didn't participate in it, or we weren't a part of it.
Mr. Leibowitz: Well, again let me try to give you some back and then bring you forward
so you understand what's happening. In the Federal statute the gov... the Congress said,
well all right, with respect to the basic rates, we are going to give the initial jurisdiction to
the local authorities. But for the upper tiers or anything that could be offered on an a la
carte basis, the jurisdiction rested with the FCC. The FCC literally came out with no less
than 1,000 pages of rules and regulations and initial cases interpreting what that all meant
and what that process was. This City did certify so that it was appropriately empowered
to regulate basic rates. TCI ultimately entered into a rate settlement. But the process...
this City did not go through the full rate regulation process on the basic tier, and on the
upper tier, again there was this national settlement through the FCC (Federal
Communications Commission). Real world is that the cable operators were successful
again in avoiding any successful rate regulation. The statute itself sunsets this year, and
so in this coming Spring, unless there is a change of law, all rate regulation goes away.
Now there is a great question as to what happens in that vacuum. Congress quite
candidly is again taking up the issue of whether they should try to have a different type of
rate regulation and if so, what for. The FCC is scared to death of that because of the
fiasco they just went through. But nobody knows the question with any certainty as to
once that sunsets what happens, and who has the rate regulation.
Commissioner Sanchez: Could this Commission freeze the basic, or can the City in a
negotiation or whatever?
Mr. Leibowitz: No.
Commissioner Sanchez: How can it be frozen? You just said that it could be done.
Mr. Leibowitz: Yeah, the company can freeze the rates. This City can discuss that with
the companies, but it has to be a company determination. And in fact, at one point earlier
on in the evolution, if you will of the rate regulation, the FCC outlawed specific private
negotiations and private deals between the companies and local jurisdictions. So it really
does have to be an agreement between... or by the operator itself. Having said all that,
there are things that the City can do. There are bulk rate negotiations that go on. There
are provisions in federal law for minorities and for senior citizens. There are
opportunities to enter into some of those discussions.
Commissioner Sanchez: OK, so that's... just to clarify some things here, and that's what
we want to basically do here for our sake is, how can we put together a... a proposed item
or idea to have some of these what we call "commordores" which a lot of the elderly
people participate in to get that or provide that service for them, to get a bulk? But then, I
have looked into it already and there are some problems along the way on who is going to
13 July 7, 1998
receive the bill and who is going to pay the bill, and who is going to be responsible for
gathering up all the bills and paying for it, correct? And I...
Commissioner Regalado: Commissioner.... Commissioner, if I can just...? I remember
that representatives of TCI were here several months ago, and on the record they said
when we brought that problem that TCI would not raise the basic rate for the HUD
(Department of Urban and Housing Department) buildings, the public housing buildings
throughout the City of Miami, and they kept that promise for two or three months. But
recently all the tenants in the public housing buildings have received increases and now I
researched and there is a line under federal regulations that calls for a cable company to
respect... Is it...? I don't know if that's the word they use. Is it to respect or to oblige by
the codes of the different cities regarding public housing buildings? I don't know if that,
Matthew has worked into the federal. I think it is, but I am not sure.
Mr. Leibowitz: Well, in terms of the HUD housing, first of all you run into a problem of
jurisdiction. Does HUD have the jurisdiction or does the City have the jurisdiction to
enter into negotiations and a contract on behalf of any individual public housing unit? It
is the present interpretation that it's the HUD, the federal government that has that right.
Now whether the City can seek an Interlocal effectively to intercede on behalf of the local
housing is one of the questions that we are looking at. Secondly, is that you can seek, and
if the company does elect, just as they previously did to have a freeze on their own, that's
certainly in their prerogative and that's certainly something that you can ask for, you just
can't mandate it. And the third potential opportunity is bulk rates. The cable companies
do negotiate bulk rates all the time, and perhaps, you know there is... It's again, a thorny
issue and I apologize, but this is rate... when it comes to rate regulation it is a total
morass. No one truly understands it and nobody believes it's effective for anyone other
than the lawyers and the accountants who make a lot of money over it. But, the bottom
line is, there are some opportunities that we are looking at to see if, particularly with the
HUD housing in this community, we can make some difference. The interesting thing is
right now we are paying a higher per channel charge than almost anybody in Dade
County. And that's with one of the worst systems in Dade County. In theory what we
will find and is that when the system is upgraded to seven fifty, the cost per channel will
go down. Now one of the things we want to try to do is when we negotiate with TCI, is
to try to make sure that in fact happens. But again, when it... your hands are pretty much
tied more than anything else in terms of programming selection and rate regulation, and
not withstanding the overall picture of the regulatory authority, Commissioner.
Commissioner Gort: Commissioner, I think for the sake of time, I think a lot of the
questions that are coming up are specific services and cost of service, that's something
that we can bring up in the negotiation. Like he was telling us, I think today, we really
need to concentrate how do we... What procedure do we follow on what we are going to
do next. My understanding is, what's being in front of us today is, what is the procedure
we need to follow. I have got a couple of questions. Are you through with your
presentation, because...?
14 July 7, 1998
Mr. Leibowitz: Well I was just going to finish on this one page...
Commissioner Gort: OK.
Mr. Leibowitz: ... which pretty much summaries our next steps, plays off exactly on
where I think you are, Commissioner. And that is, as of the timing today, TCI is to
submit a proposal to the City on July 10`h. Now, I will tell you that the City, and I
received a letter yesterday asking again, for another extension of time. I have orally
informed them that regardless of the political will to do that or not to do it, there is simply
no procedure in place since the City Commission doesn't even meet `till the 14`f'. So TCI
will be filing a proposal on July I Oh- At that time the City has to give prompt public
notice of the receipt of that proposal. The City staff and ourselves will study that
proposal and we can... will make some type of status report to you on July 21" that at
least we have the proposal on hand and then, perhaps a very superficial analysis of it.
However, the true discussion and analysis of that will be presented to you at your
September 22nd meeting, and at that meeting, what we will be looking at is taking the
ascertainment report, which again summarizes all the issues and the needs and interests
and what the staff in this City has deemed are the essential elements of a new franchise,
and comparing that to the proposal. At that time, the Commission will have the ability to
grant the renewal based on that proposal, or issue a preliminary determination to deny it.
If they do that, then we again, go back to the trial litigation of the administrative hearing.
Commissioner Gort: OK, my question is based on a time schedule. Do we have to wait
until September 22nd? Do we have specific dates that we have to meet that are required?
Like for example, if you give us a report on the 21', can we call the public hearings
anytime we wanted to, or do we have to wait until the 22nd? Is there a time restraint?
Mr. Leibowitz: Well, part of the problem is that usually these things are fairly
voluminous, and the likelihood of being... receiving it on the I O'h and having to be able to
go through it and make a adequate analysis by the 21" is almost impossible. The problem
then goes, is that the Commission, it doesn't meet during the month of August and your
first two meetings in September are budget meetings.
Commissioner Gort: No, I understand that. My question is, there is no time request
then... requirement.
Mr. Leibowitz: Well, your only requirement is that you have 120 days from the receipt
of the proposal which is July 10`h . So, somewhere by, on or before November 10`h you
have to make that preliminary determination.
Commissioner Gort: I understand.
Mr. Leibowitz: You can do it as soon as you want.
15 July 7, 1998
Commissioner Gort: That's my question. There's no specific restriction or guidelines, or
Federal restrictions or state restrictions that we have to do certain things within a certain
time.
Mr. Leibowitz: Well, there is no specific guidelines other than you have to, in order to
prevail if we ever go to court is you have to make a... have a reasonable analysis and a
record.
Commissioner Gort: I understand.
Mr. Leibowitz: Right.
Commissioner Gort: We will wait for staff, for you and yourself and your professionals.
Mr. Leibowitz: Right.
Commissioner Gort: ... to come up with an analysis, and come back to us and let us
know how you feel about this contract. We can say at that time we don't like the contract
we'll have a public hearing within a week. We can call a special meeting if we want to...
Mr. Leibowitz: Yes.
Commissioner Gort: ... have the public hearing. In other words, there is no restraint on
the time when we can call these meetings.
Mr. Leibowitz: No.
Commissioner Gort: Like the 120 days, it's got to be before the 120 days. It could be
within five, ten or fifteen days that we can do the decision. In other words, we don't
have to wait 120 days.
Mr. Leibowitz: Correct, so long as you act by... within 120 days.
Commissioner Gort: Within 120 days. That's what I want to do, I want to expedite this
as soon as possible.
Mr. Leibowitz: And you have to have a public hearing where the Commission has an
opportunity to reasonably explore, you know, and compare the ascertainment report and
the proposal.
Commissioner Regalado: Let me ask you this...
Commissioner Gort: My last question...
Commissioner Regalado: No, go ahead.
16 July 7, 1998
Commissioner Gort: My last question is, according to, and I have never seen the original
contract. But my understanding in presentations that I recall, it's been 16 years, there was
a lot of commitment and a lot of promises, and I don't know if that's what's written in the
contract. And if those promises and commitments were written in the contract and they
were never implemented, would that be taken into consideration by you all?
Mr. Leibowitz: The answer is yes, but let me give you a footnote because I don't want to
mislead you. Over these last 16 years the various City Commissions have re -negotiated
many different elements of that original proposal...
Commissioner Gort: OK.
Mr. Leibowitz: ... and have traded them away.
Commissioner Gort: Based on the last decision made by the Commissioners?
Mr. Leibowitz: Right. However, to the extent that there are significant elements of that
contract, such as the requirement to maintain state -of -the art technology. This City has,
and staff and management have noticed TCI of our belief that they've failed to live up to
that franchise. And we have two technical notices out to them, both one on technical
issues and one on financial issues where we believe we've pointed out where they have
failed to live up to their franchise agreement...
Commissioner Gort: OK.
Mr. Leibowitz: ... and that definitely will be part of the evaluation.
Commissioner Gort: OK, thank you, sir. Commissioner Regalado.
Commissioner Regalado: A freeze in rates, it's out of the question, right, according to
federal regulations?
Mr. Leibowitz: Well, we can't mandate a freeze, neither can... but they can if they elect
to do so.
Commissioner Regalado: They can go to court if they...
Mr. Leibowitz: No, no. In other words, TCI as the operator can decide to freeze their
own rates, but you are without authority to mandate that freeze.
Commissioner Sanchez: But just for my record, it has been done in other states, correct?
Mr. Leibowitz: Not to my knowledge.
17 July 7, 1998
Commissioner Regalado: No.
Mr. Leibowitz: There have been freezes that the companies have announced. They are
the only freeze that were... that have ever successfully passed court muster was when the
initial rate regulations were issued in 1996. It was a federal freeze, and that freeze was
upheld during the interim period of time when the rules were being rewritten. But there
is... to my knowledge there has never been a local freeze, rate freeze that has been upheld
under the '96 rate regulation process.
Commissioner Regalado: The reason I am asking Matthew is because we're talking for
final, final, final decision. How much, 180 days from today?
Mr. Leibowitz: Well, if you allow the full-time to go forward.
Commissioner Regalado: Right, if you do.
Mr. Leibowitz: You have until November 10`h to make your preliminary determination,
and then you have 120 days again for your administrative hearing and then your final
determination. So, you're right. If you are taking the full extent of the statutory time,
you are into next year.
Commissioner Regalado: OK. So, meanwhile, the City Commission can or could
impose the freeze?
Mr. Leibowitz: No.
Commissioner Regalado: OK, that's what I want.
Commissioner Gort: No. Commissioner, my questions originally was we can do this in
less... in less than 120... We can do it in two months.
Commissioner Regalado: Yes, I understand that, but suppose that... suppose that the City
Commission will decide to... well, deny the renewal, and open a new process, that would
take several months.
Mr. Leibowitz: In fact, your existing franchise speaks to that issue, and it requires the
company to provide and maintain service for a six-month period. And the City has
interesting enough, is the right to require the system or remove it or designate a
transferee. But again, you have to go through the entire process, and I can assure you by
the time you get here, you have spent over one million dollars ($1,000,000) in legal fees
and you are several years down the line. Now one of the things to bear in mind is that
you have a transfer being discussed here, actually you have two different transfers.
Transfer one is to Media One. And you know, the cable comp... TCI is saying, that
that's going to be closed in its fourth quarter. For them to close that transfer in the fourth
quarter, they need to get this renewal done. Secondly, if that transfer for some reason
18 July 7, 1998
goes away, you know, as of last week, you have the AT&T transfer where AT&T is
buying out TCI. And again, that has to come before you. So those are issues in terms of
timing that's important to keep in mind.
Commissioner Gort: That was going to be one of my questions. My understanding, and
all the reading that I have done, AT&T is buying TCI.
Mr. Leibowitz: I am sorry?
Commissioner Gort: My understanding is, AT&T is buying TCI throughout the nation.
Mr. Leibowitz: Correct.
Commissioner Gort: So, you are going to be... there is going to be two different
transfers?
Mr. Leibowitz: No, not necessarily and... and it is confusing. As I understand it, we
don't have copies of the documents. There is a non binding letter of intent between TCI
and Media One...
Commissioner Gort: Right.
Mr. Leibowitz: ... whereby TCI will sell to Media One. We all know that there are deals
that crater between the time of the Letter of intent and the contract. So that might
happen. On the other hand, you know, all the information we have is that Media One
deal is going forward. But until the contract is signed and the cities approve it, and it's
closed, anything can happen. So in the event that the Media One does not go forward,
then on a global basis, a national basis, AT&T is acquiring TCI in the recent deal that was
just announced last week, and then in that case, AT&T would be coming before you to
ask permission to acquire the TCI franchise.
Commissioner Gort: Instead of Media One?
Mr. Leibowitz: Instead of Media One.
Commissioner Gort: OK, it's not that Media One will come in and then they will sell it
back to... to transfer it to... Do we have any other questions. My understanding is
gentlemen is, I think we have some leverage right now. All these individuals will have to
come to us and they will have to deal with us, and we should take into consideration all
the questions that have been asked and all... and the public hearings, I am sure, once we
have the public hearings many of the items and issues will come out that we can try to put
into the whatever negotiation we do with whichever company it is.
Commissioner Regalado: Well, yeah. What I would like to do is to give you and the
administration a list of complaints, a list of ideas, and probably on the 10' you are going
19 July 7, 1998
to get their response from... starting the 10 h to get written responses and a way of
commitment maybe, from TCI, so we can make our mind whether they are really
committed to stay with the City or leave the City. I would then... I will wait then for the
10°i to... for you to get their proposal and then send you all the ideas and complaints and
questions, and I... even if we are not in session in August, I would like to have the
administration get back to us every week with a response if we have any from TCI.
Mr. Leibowitz: Well, as you know, given the Sunshine Law, we can't... you can't meet
as group, but individually, you know, the staff and the Manager's Office and my office is
available to anyone of you at any time to answer questions or discuss the status.
Commissioner Regalado: Yeah., but not from the administration, I mean, the
administration, it's on our side.
Mr. Leibowitz: Right.
Commissioner Regalado: So, but I am... What I mean is responses, direct responses
from TCI...
Mr. Leibowitz: Uh-huh.
Commissioner Regalado: ... or from Media One for that matter, if they want to do it. On,
on... On different issues that eventually we are going to be discussing in the public
hearings...
Mr. Leibowitz: Yeah.
Commissioner Regalado: ... so you know...
Mr. Leibowitz: Well, along those lines, TCI has taken the public position in letters and in
allegedly comments to each one of you. And I say, allegedly, because I wasn't there and
I have some questions as to whether these conversations occurred, that if they were
forced, and I use the word "forced" to file a formal proposal, they would have no
informal negotiations. We know that's not... it's not the case in other communities. They
have been forced to file formal and they still maintain informal negotiations. Two, is
even in their latest correspondence they acknowledged that once a formal proposal if
filed, is that it is likely the City would want to have some questions posed back to the
company and receive answers before their evaluation. So, again, there is another piece
of evidence that there will be discussions between the company and the City. And
thirdly, as you will recall at my urging in the last resolution, this City Commission
adopted a provision which specifically said, not withstanding TCI's protestation to the
contrary, we are open and willing and anxious to provide informal negotiations, to
maintain that second track. Along those lines, I did get a phone call yesterday, and had
some interesting conversations. Where they go, we are not sure. But, I would hope that
20 July 7, 1998
those conversations on the informal track continue and that we keep their feet to the fire
through the formal process.
Commissioner Regalado: One, one thing that will, I guess, make sure that the company
understands is that what we are going to do in September is really final, or like
Commissioner Gort says, even before, you know that they should not try to come to the
Commission and ask for a 90 days, 60 days delay or extension on the... to continue
talking to you and the administration. Because I remember Commissioner Gort was here,
but I remember that we started giving extensions to TCI like in September '96, right? In
November, '96, from then on it's 90 days, 90 days, 90 days. And the problem with that, I
mean, the issue has been raised and said, well, they are paying. The problem with that, is
that since we started giving extensions the quality of service has suffered a lot, and the
programming and the rates have been uncontrolled by this Commission or by the
administration, and that's, that's my problem in... in trying to understand that they will
need some extension. If they were to ask for an extension or something like that, they
should understand that in return, even if they might not get the franchise, they have to do
something, and...
Commissioner Gort: Let me tell you what my experience tells me as the... I think what
they were looking is... I think a year ago they knew they were going to sell, and it's very
difficult to sell if you have a contract and it's there and it's not to their favor. Whatever
contract they sign with us or they renew with us it gives them a leverage in their sale, and
I think that's what was going on. So, this is something that we have to consider. And the
message to those individuals that are interested in buying is that we are very much
dissatisfied with their services and they will have to come in term with us if they want to
get the City of Miami franchise. And I think that message has been sent to them.
Commissioner Sanchez: Well put.
Commissioner Regalado: Have you met with Media One yet, or no.
Mr. Leibowitz: Well, what's interesting is, we have negotiated on behalf of other cities
with Media One and we have been in a similar situation involving a transfer in another
City. In this City, they have been particularly absent and unavailable and don't return
phone calls. So they are keeping a great distance, but I think Commissioner Gort's
statement is very true, and I think TCI is starting to realize that there time is running out
and that they need to move forward. Notwithstanding that, we still received a letter
earlier this week asking for an extension from July 10t' to August 3l't for the formal
presentation and again, I informed them that that's not doable and I will inform them
again that the political will of this body is very clear too.
Commissioner Gort: We took a decision the last Commission meeting, and I think that
was final. Anything else, any other business, any other questions? Well, I want to thank
you all, and once again, I want to apologize for being late, but unfortunately, I couldn't
change my appointment today. Thank you.
21 July 7, 1998
Mr. Leibowitz: Thank you very much.
THERE BEING NO FURTHER BUSINESS TO COME BEFORE THE CITY
COMMISSION, THE MEETING WAS ADJOURNED AT 3:32 P.M.
ATTEST:
Walter J. Foeman
CITY CLERK
Maria J. Argudin
ASSISTANT CITY CLERK
JOE CAROLLO
MAYOR
22 July 7, 1998