06 Staff Report - Opposing AB 2987~pW N OF
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DATE:
TO:
FROM:
SUBJECT:
COUNCIL AGENDA REPORT
JUNE 5, 2006
MEETING DATE: 6/19/06
ITEM NO.
MAYOR AND TOWN COUNCIL -
DEBRA J. FIGONE, TOWN MANAGER
ADOPT RESOLUTION OPPOSING AB 2987 AND ENDORSING LEAGUE
OF CALIFORNIA CITIES TELECOMMUNICATIONS REFORM
PRINCIPLES
RECOMMENDATION:
Adopt resolution opposing AB 2987
Telecommunications Reform Principles.
BACKGROUND:
and supporting League of California Cities
Technological advances have made it possible for cable, telephone, Internet providers, electric
utilities, and other companies to expand the range of telecom services they can offer consumers. The
new opportunities for consolidating services will displace the multiple subscriptions customers have
for cable or satellite TV, "land-line" and/or cell phone service, and broadband and/or wireless
Internet service. However, for cities the convergence of telecom technologies poses both fiscal
challenges and concerns about preserving local control and protecting citizens' interests.
According to the League of California Cities, throughout the nation, millions of dollars are being
spent by telephone and cable companies to influence members of Congress and state legislators that
today's telecommunications innovations make local franchise agreements, currently required of cable
television service providers, no longer an effective regulatory tool. These renewable local franchises
require franchise fees to use the public right-of-way and provide a means by which municipalities
are able to mandate specific service levels; guarantee access to and funding for public, educational,
and governmental (PEG) access television; and secure cable providers' support for these efforts.
Telephone companies, who are seeking to break into the video (cable) market, argue that local
franchises take too long to acquire, and thus, represent a barrier to competition and expanded
PREPARED BY: JEN
NIV' H RUYAMA
A4inistxative Pr rams Manager
N:\.MGR\JHaruyama\Staff Reports\teiecom refoim4pd
Reviewed by: Assistant Town Manager _J~)V'-Town Attorney Clerk Administrator
Finance Community Development Revised: 6/12/06 3:35 pm
Reformatted: 5/30/02
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT RESOLUTION SUPPORTING LEAGUE OF CALIFORNIA CITIES
TELECOMMUNICATIONS REFORM PRINCIPLES AND OPPOSING AB 2987
June S, 2006
customer service. As a result, legislation is being introduced at the state and federal level providing
blanket video service agreements to telephone companies, eliminating the need for phone companies,
such as AT&T to negotiate franchise agreements with local municipalities. Concurrently, cable
television providers are lobbying state and federal legislators to include amendments that would
make the proposed legislation applicable to cable operators.
DISCUSSION:
In California, reform efforts now focus on AB 2897 (Nunez and Levine) that would create a new
statewide franchise for cable and video service providers. The franchise would be issued by the
California Department of Corporations, creating the need for a new bureaucracy within state
government at an agency with no prior experience in this area. The League of California Cities is
opposed to AB 2987 and has requested that cities adopt the attached resolution (Attachment No. l)
opposing the proposed legislation and supporting League Telecommunication Reform Principles that
would protect the interest of consumers and preserve local government control and revenue.
Adoption of the resolution would also authorize the Town of Los Gatos to join the League's "No on
AB 2897" Coalition.
Although the bill was recently amended, the amendments only address marginal concerns and do not
resolve core issues for cities. According to the League, the bill in its current form would impact the
Town of Los Gatos and other communities in the following ways:
Build Out of Telecommunication Services. The bill in its current form would allow
telecommunications providers to selectively pick and choose parts of the community that receive
new services. Providers should work with local government and consumer groups to establish
reasonable standards to permit the deployment of these services in an equitable manner. Under
current law, the Town determines the deployment of video services to ensure that all areas of a
community are served.
Public, Educational, Government (PEG) Channels and PEG Support/Institutional Networks
(INETs). The bill in its current form fails to adequately protect the community's public, education
and governmental (PEG) channels and development of INET services. The bill would impact the
ability of local agencies to participate in decisions about the number of PEG channels to support the
community's needs and the funding needed to support PEG stations. If AB 2987 passes, the Town's
ability to secure PEG grant funding through franchise agreement and renewal processes would be
eliminated. Other impacts include a lack of protection to preserve institutional networks, whereby
schools and other governmental agencies receive telecommunications network services, including
free use of cable and/or internet services. Under the current bill, these protections would be ignored.
Consumer Protection and Customer Service. The bill in its current form would not allow cities
to enforce customer service standards adopted by the Federal Communications Commission (FCC)
and continue to enact stricter customer service standards when desired.
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: ADOPT RESOLUTION SUPPORTING LEAGUE OF CALIFORNIA CITIES
TELECOMMUNICATIONS REFORM PRINCIPLES AND OPPOSING AB 2987
June 5, 2006
Public Rights-of-Way. The proposed bill fails to adequately protect the public right-of-way. Local
agencies would not be able to retain full control over access to the public right-of-way, resulting in
reduced local government oversight of construction activities, such as trenching and video equipment
aesthetic and placement concerns.
Revenues. Under the bill, local government revenue from franchise fees are in jeopardy. In its
current form, the bill is defined as a tax under the constitution of the state. This definition would
allow the state at any time, to legally collect and keep the franchise fee revenue. The bill also
narrows the definition of "gross revenues" which is the basis for calculating the franchise fee
revenues is likely to result in a loss of revenue. The Town receives an estimated $300,000 annually
in local cable television franchise fee revenue from Comcast. Depending on how the bill is
implemented, the Town could lose between $30,000 to $300,000 annual in franchise fee revenue.
CONCLUSION:
Given its significant impact on consumer rights, customer service standards, continued support of
PEG access, and local control and revenue, it is recommended that the Council adopt the attached
resolution supporting the League of California Cities Telecommunications Reform Principles and
Opposing AB 2987.
FISCAL IMPACT:
Should the AB 2987 be adopted by the state legislature, the Town's cable television franchise fees
would be at risk. The Town currently receives an estimated $300,000 in franchise fees from
Comcast. However, under the bill, the Town may lose between $30,000 -$300,000 in revenue,
depending on how the bill is implemented. Additional fiscal impacts include an in ability to secure
future PEG funding through the cable television franchise renewal process.
Attachments:
Attachment No. 1: Resolution Opposing AB 2987 and Supporting the League of California
Cities Telecommunications Reform Principles
RESOLUTION NO.
RESOLUTION OF THE TOWN OF LOS GATOS OPPOSING AB 2987 AND ENDORSING
LEAGUE TELECOMMUNICATIONS REFORM PRINCIPLES
WHEREAS, technological advances in telecommunications services are outpacing the
current state and federal regulatory framework for those services; and
WHEREAS, the new telecommunications services will be vital to the businesses,
households and the public safety of local communities; and
WHEREAS, the California state Legislature is considering AB 2987 (Nunez/Levine),
legislation that would establish a statewide franchise for new entrants into the telecommunications market,
and
WHEREAS, fair, level playing-field competition among telecommunications providers
is important to delivering telecommunications services at the best price for our citizens, the consumers; and
WHEREAS, telecommunications industry services to a local community such as Public
Education and Government (PEG) channels, INET services to local schools and other agencies, and E-911
and 911 public safety services to local citizens are important services to maintain;
WHEREAS, financial resources that cities receive under the current regulatory
framework for telecommunications services are vital to support local public services such as public safety
and transportation; and
WHEREAS, the taxpayers have a financial interest to protect in the public's right-of-
way; and
WHEREAS, the Town of Los Gatos is opposed to AB 2987 in its present form, because
as currently written it would fail to ensure that build out of telecommunications services would fairly and
equitably provide service to all businesses and residents of the Town of Los Gatos within a reasonable
timeframe, it does not guarantee community access to PEG channels, INET services and E-911 and 911
public safety services, it does not protect the city's financial resources and it does not protect the public's
right-of-way.
THEREFORE, BE IT RESOLVED, the Town of Los Gatos does hereby join the
League of California Cities "No" on AB 2987 coalition, urge the state and federal legislature to work for
reform that guarantees fair competition in telecommunications services, and adopt the attached principles
(Exhibit A) for the state legislature to consider in its debate over a new telecommunications regulatory
framework.
PASSED AND ADOPTED at a regular meeting of the Town Council of the
Town of Los Gatos, California, held on the day of , 2006 by the following vote:
COUNCIL MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN: SIGNED:
MAYOR OF THE TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK ADMINISTRATOR OF THE
TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTACHMENT 1
EXHIBIT A
LEAGUE OF CALIFORNIA CITIES
TELECOMMUNICATION REFORM PRINCIPLES
REVENUE PROTECTIONS
• Protect the authority of local governments to collect revenues from telecommunications providers
and ensure that any future changes are revenue neutral for local governments.
• Regulatory fees and/or taxes should apply equitably to all telecommunications service providers.
• A guarantee that all existing and any new fees/taxes remain with local governments to support
local public services and mitigate impacts on local rights-of-way.
• Oppose any state or federal legislation that would pre-empt or threaten local taxation authority
RIGHTS-OF-WAY
• To protect the public's investment, the control of public rights-of-way must remain local.
• Local government must retain full control over the time, place and manner for the use of the public
right-of-way in providing telecommunications services, including the appearance and aesthetics of
equipment placed within it.
• Existing telecommunications providers and new entrants shall adhere to local city policies on
public utility undergrounding.
ACCESS
• All local community residents should be provided access to all available telecommunications
services.
• Telecommunications providers should be required to specify a reasonable timeframe for
deployment of telecommunications services that includes a clear plan for the sequencing of the
build-out of these facilities within the entire franchise area.
PUBLIC EDUCATION AND GOVERNMENT (PEG) SUPPORT
• The resources required of new entrants should be used to meet PEG support requirements in a
balanced manner in partnership with incumbent providers.
• For cities currently without PEG support revenues, a minimum percentage of required support
needs to be determined.
INSTITUTIONAL OR FIBER NETWORK (INET)
• The authority for interested communities to establish INET services and support for educational
and local government facilities should remain at the local level.
PUBLIC SAFETY SERVICES
• The authority for E-911 and 911 services should remain with local government, including any
compensation for the use of the right-of-way. All E-911 and 911 calls made by voice over internet
protocol shall be routed to local public safety answering points.
• All video providers must provide local emergency notification service.
CUSTOMER SERVICE PROTECTION
• State consumer protection laws should continue to apply as a minimum standard and should be
enforced at the local level. Local governments should retain the authority to assess penalties to
improve customer service