03 Staff Report - Digital Infrastructure and Video Competition Act of 2006!o , • os COUNCIL AGENDA REPORT
MEETING DATE: 8/4/2008
ITEM NO:
DATE: AUGUST 1, 2008
TO: MAYOR AND TOWN COUNCIL
FROM: GREG LARSON, TOWN MANAGER
Jp
SUBJECT: ADOPT ORDINANCE TO IMPLEMENT STATE VIDEO FRANCHISE PROVISIONS AS
REQUIRED BY THE DIGITAL INFRASTRUCTURE AND VIDEO COMPETITION ACT
OF 2006 (DIVCA)
RECOMMENDATION:
Adopt the attached ordinance (Attachment No. 1) to implement state video franchise provisions as required by the
Digital Infrastructure and Video Competition Act (DNCA) of 2006.
DISCUSSION:
On June 16, 2008, the Town Council voted to introduce an ordinance implementing the provisions of the DNCA
Act of 2006. Subsequent to the introduction of the ordinance, AT&T submitted the attached document
(Attachment No. 2) with proposed changes regarding the definition of gross revenues, fee payment, including
Public, Educational, and Government (PEG) fees, auditing, and late payments. After close examination of the
proposed changes, staff recommends no changes to the ordinance language.
Many of the issues raised by AT&T are differences without a distinction in that the current language of the
Ordinance does no more than permit the Town to exercise its rights to the fullest extent under, but not in excess of
the DNCA law. Additionally, AT&T errs in suggesting that the Town does not collect Public, Educational, and
Government (PEG) fees from the incumbent cable provider. The PEG fee is applicable to all cable service
providers in the Town, including the incumbent.
Attachments:
Attachment No. 1: Ordinance implementing state video services franchise provisions as required by
the Digital Infrastructure and Video Competition Act of 2006 (DNCA)
Attachment No. 2: Proposed Ordinance Language Changed from AT&T
Distribution:
AT&T
Verizon
Comcast
KCAT, Community Access Channel OE PREPARED BY: J MA
ASSISTAN TOWN MANAGER
N:UV[GRIJHar❑yama\Staff ReportsWIWA Ordinance Final Adoption Staff Report.doo
Reviewed by: Assistant Town Manager
Clerk Administrator _-4-Finance
Attorney
ty Development
ORDINANCE OF THE TOWN OF LOS GATOS IMPLEMENTING STATE VIDEO SERVICES
FRANCHISE PROVISIONS AS REQUIRED BY THE DIGITAL INFRASTRUCTURE AND VIDEO
COMPETITION ACT OF 2006 (DIVCA)
The Town Code of the Town of Los Gatos is hereby amended to add Chapter 30, which
implements the provisions of the Digital Infrastructure and Video Competition Act of 2006, codified in
California Public Utilities Code section 5800 et seq., which the Town is required to administer and
enforce.
The Council of the Town of Los Gatos, California ordains as follows:
Chapter 30
STATE VIDEO SERVICE FRANCHISES
Article I - General Provisions
Section 30.10.010 Purpose.
This Chapter is applicable to all video service providers who are eligible for, and have been
awarded, a state video franchise under the California Public Utilities Code section 5800 of seq. (the
Digital Infrastructure and Video Competition Act of 2006), to provide cable or video services in any
portion of the Town.
Section 30.10.020 Rights Reserved.
The rights reserved to the Town under this Chapter 30.10.020 are in addition to all other rights
of the Town whether reserved by this Chapter 30.10.020 or authorized by other applicable law, and
no action, proceeding or exercise of a right shall affect any other rights which may be held by the
Town
Section 30.10.030 Compliance with Chapter 30
Nothing contained in' this Chapter 30 exempts a state franchise holder from compliance with all
ordinances, rules or regulations of the Town now in effect or which may be hereafter adopted which
Page 1 of 11
ATTACHMENT 1
are not inconsistent with this Chapter or California Public Utilities Code section 5800 of seq., or
obligations under any franchise previously issued by the Town, insofar as those may be enforced
under California Public Utilities Code section 5800.
Section 30.10.040 Definitions
For purposes of this Chapter 30, the following terms, phrases, words, and their derivations
shall have the meaning given in this chapter. Unless otherwise expressly stated, words not defined in
this Chapter 30 shall be given the meaning set forth in the Digital Infrastructure and Video
Competition Act of 2006, Division 2.5 of the California Public Utilities Code, section 5800 et seq.
("DIVCA"). When not inconsistent with the context, words used in the present tense include the
future, words in the plural number include the singular number, words in the singular number include
the plural number, and "including" and "include" are not limiting. The word "shall" is always
mandatory.
"Access channel" means any channel on a cable system or video system set aside by a state
franchise holder for public, educational, or governmental use.
"Applicant" means any person submitting any application required under Division 2.5 of the
California Public Utilities Code.
"Applicable law" means all lawfully enacted and applicable f=ederal, State, and Town laws,
ordinances, codes, rules, regulations and orders as the same may be amended or adopted from time
to time.
"Council" means the Town Council, the governing body of the Town of Los Gatos, California.
"Cable service" means (f) the one-way transmission to subscribers of video programming or
other programming services; and (ii) subscriber interaction, if any, which is required for the selection
or use of such video programming or other programming service.
Page 2 of 11
"Construction," "operation," or "repair" and similar formulations of those terms mean the named
actions interpreted broadly, encompassing, among other things, installation, extension, maintenance,
replacement of components, relocation, undergrounding, grading, site preparation, adjusting, testing,
make-ready, excavation and tree trimming. The term "operation" does not encompass or regulate the
provision of services, but refers to activities affecting rights-of-way and other property subject to the
jurisdiction of the Town.
"Director" means the Director of Parks and Public Works of the Town, or his or her designee.
"DIVCA" means the Digital Infrastructure and Video Competition Act of 2006, Division 2.5 of
the California Public Utilities Code, section 5800 et seq., as may be amended from time to time.
"Gross revenues" means all revenues (whether in the form of cash or other consideration) of a
state franchise holder or its affiliates in any way derived from its operations within the Town.
"Incumbent cable operator" shall have the same meaning as in DIVCA.
"Network" shall have the same meaning as in DIVCA.
"Person" means an individual, partnership, association, joint stock company, trust, corporation,
or organizational entity, or any lawful successor, transferee or assignee thereof. The term does not
include the Town.
"Public rights-of-way" shall have the same meaning as in DIVCA.
"State franchise" means a franchise issued by the California Public Utilities Commission to
provide cable service or video service, as those terms are defined in DIVCA, within any portion of the
Town
"State franchise holder" means a person who holds a state franchise.
"Subscriber" means the Town or any person who legally receives any cable service or video
service from a state franchise holder delivered over that state franchise holder's network.
Page 3 of 11
"Town" means the Town of Los Gatos, California.
"Town Manager" means the administrative head of the Town Government under the direction
and control of the Town Council.
"Video Service" shall have the same meaning as in DIVCA.
Article 11 - Fees
Section 30.20.010 State franchise fees.
Any state franchise holder operating within the Town shall pay to the Town a state franchise
fee equal to five percent (5%) of the gross revenues of it or any affiliate that are subject to a franchise
fee under California Public Utilities Code Section 5860.
Section 30.20.020 PEG fees.
Any state franchise holder operating within the Town shall pay to the Town a PEG fee equal to
one percent (1 of the gross revenues of it or any affiliate that are subject to a franchise fee under
California Public Utilities Code Section 5870.
Section 30.20.030 Payment of fees.
The state franchise fee required pursuant to Section 30.20.010, and the PEG fee required
pursuant to Section 30.20.020, shall each be paid to the Town quarterly, in a manner consistent with
California Public Utilities Code section 5860. The state franchise holder shall deliver to the Town, by
check or other means specified'by the Town, a payment for the state franchise fee and a separate
payment for the PEG fee not later than forty-five (45) days after the end of each calendar quarter.
Each payment made shall be accompanied by a report, detailing how the payment was calculated,
containing such information as the Town Manager may require, consistent with DIVCA.. Unless the
Town Manager provides otherwise, the summary statement shall identify:
Page 4 of 11
1. revenues received from subscribers, by category, with service revenues broken
out by service levels;
2. any charges to subscribers for which revenues were received, but on which a
franchise fee was not paid;
3. where the fee is paid on an allocated portion of revenues received, the total
revenues received; the allocation factor; and how the allocation factor was calculated.
Section 30.20.040 Audits.
The Town may audit the business records of the holder of a state franchise in a manner
consistent with California Public Utilities Code section 5860(i).
Section 30.20.050 Late payments.
In the event a state franchise holder falls to make payments required by this chapter on or
before the due dates specified in this chapter, the Town shall impose a late charge at the rate per
year equal to the highest prime lending rate during the period of delinquency, plus one percent (1%).
Section 30.20.060 Lease of Town-owned network.
In the event a state franchise holder leases access to a network owned by the Town, the Town
may require a fee for access to the Town-owned network separate and apart from the franchise fee
charged to state franchise holders pursuant to Section 30.20.10, which fee shall otherwise be payable
in accordance with the procedures established by this Chapter.
Article III - Customer Service
Section 30.30.010 Customer service and consumer protection.
Each state franchise holder shall comply with all applicable customer service and consumer
protection standards, including, to the extent consistent with California Public Utilities Code section
Page 5 of 11
5900, all existing and subsequently enacted customer service and consumer protection standards
established by state and federal law and regulation.
Section 30.30.020 Penalties for violations of standards.
(a) The Town shall enforce the provisions of section 30.30.010.
(b) For material breaches, as defined in California Public Utilities Code section 5.900, by a
state franchise holder of applicable customer service and consumer protection standards, the Town
may impose the following penalties:
1. For the first occurrence of a material breach, a fine of $500.00 may be imposed
for each day the violation remains in effect, not to exceed $1,500.00 for each violation..
2. For a second material breach of the same nature within 12 months, a fine of
$1,000.00 may be imposed for each day the violation remains in effect, not to exceed $3,000.00 for
each violation.
3. For a third material breach of the same nature within 12 months, a fine of
$2,500.00 may be imposed for each day the violation remains in effect, not to exceed $7,500.00 for
each violation.
(c) Any penalties imposed by the Town shall be imposed in a manner consistent with
California Public Utilities Code section 5900.
(d) The Town Manager is authorized to provide any notices required under California Public
Utilities Code section 5900.
Article IV Right-of-Way Management
Section 30.40.010 Construction in the Public rights-of-way,
Except as expressly provided in this Chapter 30, the provisions of Chapter 23 of this Code,
and all Town administrative rules and regulations developed pursuant to Chapter 23, as now existing
Page 6 of 11
or as hereafter amended, shall apply to all work performed by or on behalf of a state franchise holder
in any public rights-of-way.
Section 30.40.020 Permits.
(a) Prior to commencing any work for which a permit is required by Chapter 23 of this
Code, a state franchise holder shall apply for and obtain a permit in accordance with the provisions of
Chapter 23. A permit application is complete when the state franchise holder has complied with all
applicable laws and regulations, including but not limited to all Town administrative rules and
regulations, and all applicable requirements of Division 13 of the California Public Resources Code,
section 21000, et seq. (the California Environmental Quality Act).
(b) The Director shall either approve or deny a state franchise holder's application for any
permit required under Chapter 23 of this Code within sixty (60) days of receiving a complete permit
application from the state franchise holder.
(c) If the Director denies a state franchise holder's application for a permit, the Director
shall, at the time of notifying the applicant of denial, furnish to the applicant a detailed explanation of
the reason or reasons for the denial.
(d) A state franchise holder that has been denied a permit by final decision of the Director
may appeal the denial to the Council by filing a written notice of appeal in duplicate with the Clerk not
more than ten (10) days after the Director's decision is issued. The notice shall state clearly the
reasons why the Director's decision should be overturned. The Council shall only hear the appeal if
the notice is filed and all required fees are paid within the ten-day appeal period. Once a notice of
appeal has been.filed it may be withdrawn by the state franchise holder prior to the distribution of
public hearing notices, but not thereafter.
Page 7 of 11
(e) The appeal shall be heard by the Council within fifty-six (56) days after the date the final
decision by the Director was made. The Council may continue from time to time any hearing held by
it.
(f) The Clerk shall set the hearing of the appeal and shall give notice of such hearing in the
manner required for the hearings before the Planning Commission. In addition, the Council may give
notice of the hearing in such other manner as it wishes.
(g) The Director shall transmit the entire record concerning the permit application to the
Council.
(h) When hearing the appeal, the Council shall consider the record and such additional
evidence as may be offered by anyone and may affirm, modify or reverse, in whole or in part, the
determination appealed from, or make and substitute such other determination as is warranted, or
may remand to the Director for further review and determination. The state franchise holder bears the
burden of proof before the Council to prove that one or more reasons exist on the appeal for
reversing or modifying the Director's decision. The standards of Chapter 29 governing the discretion
of the reviewing body shall apply to actions of the Council.
(i) Any decision of the Council modifying, in whole or in part, the order, requirement,
decision, determination, interpretation, or ruling appealed from, or making and substituting another
decision or determination, requires the concurrence of a majority of the membership of the Council.
0) If the Council decides to modify or reverse the decision of the Director on any appeal, the
resolution shall specify one or more of the following:
(1) Where there was error or abuse of discretion on the part of the Director; or
(2) The new information that was submitted to the Council during the appeal process that was
not readily and reasonably available for submission to the Director; or
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(3) An issue or policy over which the Director did not have discretion to modify or address, but
which is vested in the Council for modification or decision.
(k) If the only or predominant reason for modifying or reversing the decision of the Director is
the availability of new information as defined in subsection 0)(2) above, it is the policy of the Town
that the permit application will be returned to the Director for review in light of the new information
unless the new information has minimal effect on the application.
(1) The decision of the Council upon the appeal will be expressed by a written resolution. The
Council will forthwith transmit copies of the resolution to the original applicant, the appellant, and the
Planning Commission.
(m) The issuance of a permit is not a franchise, and does not grant any vested rights in any
location in the Public rights-of-way, or in any particular manner of placement within the rights-of-way.
Without limitation, a. permit to place cabinets and similar appurtenances aboveground may be
revoked and the permittee required to place facilities underground, upon reasonable notice to the
permittee.
Section 30.40.030 Compliance with Other Provisions of Town Code.
Except as expressly provided in this Chapter 30, nothing in this Chapter 30 shall relieve a state
franchise holder from complying with Chapter 23 (Streets and Sidewalks), Chapter 27 (Utilities) and
Chapter 29 (Zoning) of the Town Code.
Article V - Emergency Alert
Section 30.50.080 Emergency Alert Systems
(a) Each state franchise holder shall comply with the emergency alert system requirements
of the Federal Communications Commission in order that emergency messages may be distributed
over the state franchise holder's network.
Page 9 of 11
Article VI - Interconnection
Section 3.60.010 Interconnection for PEG Programming
Each state franchise holder, and each incumbent cable operator, shall negotiate in good faith
to interconnect their networks for the purpose of providing PEG programming. Interconnection may
be accomplished by any means authorized under Public Utilities Code Section 5870(h). Each state
franchise holder and incumbent cable operator shall provide interconnection of PEG channels on
reasonable terms and conditions and may not withhold the interconnection. If a state franchise holder
and an incumbent cable operator cannot reach a mutually acceptable interconnection agreement, the
Town may require the incumbent cable operator to allow the state franchise holder to interconnect its
network with the incumbent cable operator's network at a technically feasible point on the state
franchise holder's network as identified by the state franchise holder. If no technically feasible point
for interconnection is available, each state franchise holder will make an interconnection available. to
each channel originator providing PEG programming to an incumbent cable operator, and will provide
the facilities necessary for the interconnection. The cost of any interconnection will be borne by the
state franchise holder requesting the interconnection unless otherwise agreed to by the state
franchise holder and the incumbent cable operator.
Article VII - Notices
Section 30.70.010 Notices.
(a) Each state franchise holder or applicant for a state franchise shall file with the Town a
copy of all applications or notices that the state franchise holder or applicant is required to file with the
Public Utilities Commission.
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(b). Unless otherwise specified in this chapter, all notices or other documentation that a
state franchise holder is required to provide to the Town under this Division 6 or the California Public
Utilities Code shall be provided to the Town Manager,
In the event that any part of this ordinance is held to be invalid, the invalid part or parts shall be
severed from the remaining portions which shall remain in full force and effect.
Article VIII
In the event that any part of this ordinance is held to be invalid, the invalid part or parts shall be
severed from the remaining portions which shall remain in full force and effect.
Article VIX
This ordinance was introduced at a regular meeting of the Town Council of the Town of Los
Gatos on
, 20_ and adopted by the following vote as an ordinance of the Town of Los
Gatos at a regular meeting of the Town Council of the Town of Los Gatos on , 20
This ordinance takes effect 30 days after it is adopted.
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
N:1MGRUHaruyamalProjectslcahle television renewalkCable OrdinanceTinal Ordinance Chapter 30 - 8-10-08DOC
Page 11 of 11
Proposed DIVCA Ordinance Changes/Concerns from AT&T
Section 30.10.040 Definitions
The definition of gross revenues in the Ordinance is inconsistent with DIVCA and is
overbroad. The Ordinance defines "gross revenues" as "all revenues (whether in the
form of cash or other consideration) of a state franchise holder or its affiliates in any way
derived from its operations within the Town." Public Utilities Code § 5850(d) defines
"gross revenues" as all "revenue actually received by the holder of a state franchise, as
determined in accordance with generally accepted accounting principles, that is derived
from the operation of the holder's network to provide cable or video service within the
jurisdiction of the local entity..."
The City's definition would require a franchise fee to be paid on the revenues obtained
from AT&T's telephone or wireless operations. That is not permitted under DIVCA.
The Ordinance defines most terms as having "the same meaning as in DIVCA." It is
unclear why the City decided to use a different definition for "gross revenues" which is
not permitted under DIVCA, Public Utilities Code § 5850(c), which provides as follows:
"No local entity or any other political subdivision of this state may demand any
additional fees or charges or other remuneration of any kind from the holder of a state
franchise based solely on its status as a provider of video or cable services other than as
set forth in this division and may not demand the use of any other calculation method or
definition ofgross revenues. " [Emphasis added.]
Section 30.20.020 PEG fees.
This section would require a state franchise holder to pay a PEG support fee equal to 1%
of gross revenues. It is my understanding that the City does not collect PEG support fees
from its incumbent cable provider. Under DIVCA, Public Utilities Code § 5870(l), "[a]II
video service providers and the incumbent cable operator shall be subject to the same
requirements for recurring payments for the support of PEG channel facilities."
Section 30.20.030 Payment of fees.
This section states that each franchise fee payment shall be "accompanied by a report,
detailing how the payment was calculated, containing such information as the Town
Manager may require, consistent with DIVCA." DIVCA, however, provides only that
each franchise fee payment be "accompanied by a summary explaining the basis for the
calculation of the state franchise fee." Section 5840(a) of DIVCA further provides that a
local entity my not "impose any requirement on any holder of a state franchise except as
expressly provided in this division."
ATTACHMENT 2
Section 30.20.040 Audit
The language of this section is inconsistent with DIVCA. Public Utilities Code § 5860(i)
allows a local entity to "examine" the business records of a state franchise holder rather
than "audit" them as set forth in the Ordinance.
Section 30.20.050 Late payments.
This section would impose late fees on any late payments due the City. DIVCA,
however, only permits late fees on late franchise fee payments. Public Utilities Code §
5860(h).