City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council introduce and adopt an urgency ordinance
implementing Culver City’s video and cable television regulatory authority under the
state’s Digital Infrastructure and Video Competition Act of 2006.
Enactment of an urgency ordinance requires a 4/5 vote.
BACKGROUND:
In California, as in many other states, local agencies (including cities) have had the
authority to regulate various businesses through the negotiation and issuance of
franchise agreements. Under this decades-old, traditional process, Culver City has
issued franchise agreements for cable television services. Under the existing
franchise, cable television services are provided to Culver City residents by Time
Warner Cable. Under the terms of a franchise agreement, local agencies could
provide for various terms under which the franchisee would operate. Some major
areas traditionally regulated via the franchise process included: (1) the amount of
the franchise fee payable to the local agency, (2) the availability and funding
mechanism for public, educational, and government (PEG) channels, and (3)
minimum customer service standards required of the franchisee – including
penalties for non-compliance.
Over time, federal and state legislation has significantly reduced the authority local
agencies have over cable television providers. For example, local authorities once
Meeting Date: 12/17/07 Item Number: A-4
AGENDA ITEM: Introduction and Adoption of an Urgency Ordinance, under
Culver City Charter Section 614, Implementing Video and Cable Television
Regulations by Adding Section 11.21.480, Relating to Holders of State Video
Franchises, to the Culver City Municipal Code
Contact Person/Dept.: Roland
Miranda/City Attorney’s Ofc.
Phone Number: (310) 253-5660
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [x] Attachments: [x]
Public Notification:
Master Notification List (12/12/07); Time Warner Cable (12/12/07); AT&T (12/12/07);
Verizon Communications (12/12/07)
Department Approval:
Carol A. Schwab (12/13/07)
City Attorney Approval:
Carol A. Schwab (by R. Miranda)
(12/13/07)
Fiscal Impact Approval:
Jeff Muir (by M. Noller) (12/13/07)
City Manager Approval:
Jerry B. Fulwood (12/13/07) City of Culver City, California
City Council Agenda Item Report
had the authority to set maximum cable television rates and provide significant input
on channels offered in the local markets. Both areas of regulation are now pre-
empted or forbidden by federal and state law.
In late 2006, the State Legislature enacted the Digital Infrastructure and Video
Competition Act (“DIVCA”, aka AB 2987). In enacting DIVCA, the Legislature’s
voiced intent was to respond to changes in technology and to provide a single,
statewide franchising process for all video providers in the state.
Local agencies throughout the state (including Culver City) voiced significant
concerns to the Legislature in attempting to create a “one size fits all” regulatory
environment in a state with such varied communities. Ultimately, the Legislature
enacted DIVCA without thoroughly addressing many concerns voiced by local
agencies. Further, the legislation itself either (1) did not clearly address many issues
contained in the various franchises issued throughout the state or (2) did not
address those issues at all.
During the year since the enactment of DIVCA, local agencies have been attempting
to (1) determine what regulatory authority remained with local agencies and (2) how
best to exercise the local authority remaining under DIVCA.
DISCUSSION:
A. Under DIVCA, What Authority Remains in the Purview of Local Agencies?
Among other things, DIVCA provides for statewide franchising, by the state Public
Utilities Commission, of new video services providers. Under DIVCA, the definition
of “video services” encompasses both video and cable television services. Any
new video service providers must apply to the Public Utilities Commission for a
statewide franchise. Under DIVCA, the holder of a statewide franchise will not need
to obtain a franchise from the municipality in which it will be providing its video
services. Existing cable television providers (such as Time Warner in Culver City)
may apply for and be granted a statewide franchise but cannot begin operating
under a statewide franchise until January 2, 2008.
Municipalities, however, retain their control over the public rights-of-way and may
require an encroachment permit in order for a statewide franchise holder to access
the public rights-of-way. Under DIVCA, the franchise fee is set at 5% of gross
revenues. Municipalities can choose to enact a lower franchise rate; however, such
a change is not recommended at this time.
City of Culver City, California
City Council Agenda Item Report
Time Warner recently notified the City of its application for a statewide franchise.
Once Time Warner has obtained a statewide franchise, Time Warner could (and
most likely will) terminate its franchise with Culver City.
Under DIVCA, the soonest that Time Warner could begin operating under a
statewide franchise would be January 2, 2008. However, under DIVCA, a new
holder of a statewide video franchise must also notify a municipality of its intent to
begin offering video services at least 10 days prior to commencing offering video
services in that municipality. In this case, Time Warner would need to give the City
notice, but service should continue without interruption.
B. The Need for Enactment of This Ordinance
Prior to the enactment of DIVCA, items such as the franchise fee rate, financial and
operational support for PEG channels and some aspects of customer service
standards were established in the franchise agreements negotiated between
municipalities and their cable operators. In contrast, under DIVCA, cable operators
and video service providers will not need a municipally-issued franchise in order to
offer their services. Under DIVCA, however, local agencies retain the following
limited areas of regulatory authority:
1. Municipalities can enact fees, up to 1% of a cable operator’s gross
revenues, to be used to support PEG channels. Such fees may be and are
routinely passed on to the consumer by the video service provider.
2. Customer service standards are set solely by state and federal law.
However, these customer service standards are to be enforced by the local
municipalities. In order to enforce these customer service standards,
municipalities must enact penalties, as prescribed by DIVCA.
3. The franchise fee will be 5% unless a municipality adopts a lower franchise
fee rate. The City’s current franchise fee is 5% (and staff recommends
continuing this long-standing rate).
Once Time Warner has been issued a statewide franchise and has provided the City
with the required 10 days’ notice, Time Warner could begin operations under a
statewide video franchise as early as January 2, 2008. In addition, AT&T, which has
already obtained a statewide video franchise and a related Culver City
encroachment permit, can be expected to begin offering video services in Culver
City in the near future. Also, Verizon has made initial contacts with the City relating
to its desire to offer video and other related services in Culver City. Similar to AT &
T, staff expects Verizon will submit an application for an encroachment permit in the
near future. City of Culver City, California
City Council Agenda Item Report
Therefore, in order for Culver City to be ready to maintain the public peace, health,
or safety through exercise of its regulatory authority under DIVCA by the time that
any provider begins offering video services in Culver City pursuant to a statewide
video franchise, staff is recommending adoption of the attached urgency ordinance
which would:
1. Reserve the City’s right to enact the maximum PEG fee, 1% of the video
provider’s gross revenues, allowable under DIVCA.
2. Enact the maximum penalties allowable under DIVCA for violations of the
customer service standards which, under DIVCA, are to be enforced by
the involved municipalities.
3. Enact a franchise fee of 5% of the video provider’s gross revenues.
Although 5% is the default rate, the telecommunications expert whom staff
consulted regarding implementation of DIVCA recommended that the City
adopt this rate as part of any ordinance implementing DIVCA.
C. The Urgency for This Ordinance
As stated above, it is possible that a video service provider, such as Time Warner
Cable, could begin offering video services under DIVCA in Culver City as early as
January 2, 2008. Therefore, to maintain the public peace, health, or safety, the City
should be prepared by having the regulatory authority to enforce the DIVCA
customer service standards as early as January 2, 2008. It is important that the City
be able to ensure its residents and businesses that video services, which are a vital
source of information, are operating in compliance with applicable customer service
standards. Thus, staff is recommending that the ordinance be adopted as an
urgency ordinance, which would go into effect immediately, pursuant to Culver City
Charter Section 614. Under Section 614, the City Council must make a finding that
urgency exists and that it is necessary to adopt the urgency ordinance in order to
preserve the public peace, health or safety. As discussed above, public safety could
be impaired if the City lacked the ability to adequately enforce standards regulating
video services—which are a primary source of public news and information and
which may include vital emergency announcements.
So that the City is prepared to enforce the customer service standards applicable to
video service providers offering services under a state franchise, staff recommends
adoption of the attached urgency ordinance.
City of Culver City, California
City Council Agenda Item Report
FISCAL ANALYSIS:
Should the City Council, at some time in the future, determine to impose the PEG
fees authorized under DIVCA and this Urgency Ordinance, based upon the franchise
fees collected from Time Warner in Fiscal Year 2006/2007 of approximately
$320,000, such PEG fees could generate up to $64,000 annually for use in
operating the City’s PEG channels.
On a related note, staff will be presenting a comprehensive report on a major
upgrade to the City’s Cable Government Channel (the “G” in PEG) in the first quarter
of 2008. As part of that report, staff will include a recommendation with respect to
PEG fees for the City Council’s consideration.
ATTACHMENTS:
? Digital Infrastructure and Video Competition Act (Govt. Code sections 5800 –
5970)
? Proposed Ordinance No. 07-____
MOTION:
That the City Council:
Introduce and adopt Urgency Ordinance No. 07-_____, pursuant to Culver City
Charter Section 614, adding a new section to Chapter 11.21, Cable Systems, of
the Culver City Municipal Code, relating to State Video Franchise Holders and
implementing the City of Culver City’s regulatory authority under the Digital
Infrastructure and Video Competition Act of 2006 .
(Adoption of an urgency ordinance requires a 4/5 vote)