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HomeMy WebLinkAboutORD 1997-120 - - ORDINANCE NO. 9�-�20 � � AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS, PROVIDING THAT THE CITY COUNCIL HAS DETERMINED AT THIS TIME THE REASONABLENESS OF BASIC TELEVISION SERVICE RATES; DIRECTING PARAGON CABLE TO KEEP AN ACCOUNT OF ALL AMOUNTS RECEIVED BY REASON OF PROPOSED RATES; DIRECTING THE CITY SECRETARY TO NOTIFY PARAGON CABLE; DECLARING AN EMERGENCY AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City of Grapevine is certified to regulate basic cable service rates pursuant to the Cable Act of 1992 and FCC Rules; and WHEREAS, Paragon Cable, in accordance with the Cable Act of 1992 and Chapter 25, Article VI, Grapevine Code of Ordinances, submitted FCC Form 1240 on October 2, 1997 in order to adjust its maximum permitted rate for basic cable service; and � WHEREAS, the City in cooperation with Charles Gramlich and Associates has reviewed and analyzed the components of FCC Form 1240 filed with the City by Paragon `� °° and approves the consultant's findings and recommendations and recommends that the City Council take action to establish the maximum permitted basic cable services; and WHEREAS, the City has held a public hearing on the proposed basic cable rate, as requested by Paragon Cable, to provide a reasonable opportunity for consideration of the views of interested parties. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. That all matters stated in the preamble of this ordinance are true and correct and are hereby incorporated into the body of this ordinance as if copied in their entirety. Section 2. That the City Council hereby directs Paragon Cable to reduce its maximum permitted rate for basic cable service from $9.33 per month to $9.06 per month, . effective on or about January 1, 1998. �. Section 3. That the report from Charles Gramlich and Associates identified as "Exhibit A" is accepted by the City and attached hereto and is made a part hereof. � Section 4. That Paragon is directed to maintain all records necessary to determine rates which each customer was charged and the amounts each customer paid. � -- Section 5. That the City Secretary is hereby directed to mail a copy of this ordinance to Paragon Cable. ��� Section 6. If any section, article, paragraph, sentence, clause, phrase or word in this ordinance, or application thereto, any person or circumstance is held invalid or unconstitutional by a Court of competent jurisdiction, such holdings shall not affect the validity of the remaining portions of this ordinance; and the City Council hereby declares that it would have passed such remaining portions of the ordinance despite such invalidity, which remaining portions shall remain in full force and effect. Section 7. The fact that the present ordinances and regulations of the City of Grapevine are inadequate to properly safeguard the health, safety, morals, peace and general welfare of the public creates an emergency which requires that this ordinance become effective from and after the date of its passage, and it is accordingly ordained � PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 18th day of November , 1997. APPROVED: :�;:;,..ms ' /G William D. Tate Mayor ATTEST: �ti J i C. Brown ssistant City Secretary APPROVED AS TO FORM: John F. Boyle, Jr. City Attorney r.w� ORD.NO. 97-120 2 EXHIBIT� T0. ������"�� CHARLES GRAMLICH&ASSOCIATES P�9@ ��' Of Cable Television and Telecommunications Consulting 8105 Chardonnay Cove Austin,Teaas 78750 � Telephone 512-342-7848 Facsimile 512-342-7844 VIA FAX TO 1-817-329-1970 AND REGULAR MAII. October 30, 1997 The City of Grapevine Attn: Mr.William A Gaither, Director of Administrative Service 200 South Main Street Grapevine, Texas 76051 Dear Sir: At the request of the City, I have reviewed the information from Paragon Communications d.b.a. Pazagon Cable ("Paragon") that was submitted on Federal Communications Commission ("FCC") Form 1240 dated September 30, 1997. FCC Form 1240 is used to update maximum pernutted rates for regulated cable services. The Form has been modified pursuant to the Time Warner Social Contract According to the FCC Form 1240 and my telephone conversations with Gordon Harp, who signed the forms for Paragon, and Buz Nesbit, Vice President of Operations for Paragon, Paragon plans to make the following changes in monthly rates effective around January 1, 1998. Basic Cable Service decreases from 59.33(the permitted rate)to$9.06(which is the new permitted rate). The City can regulate rates charged for Basic Cable Service and certain installation and equipment rates, unless effective competition exists. The City cannot regulate the rates cha.rged for the Cable Programming Service Tier ("CPST"), the FCC does. According to Gordon Harp, Paragon has not deternuned the new rates, to be effective around January 1, 1998, for the CPST, installation and equipment. Paragon must notify its subscribers at least 30 days prior to any increase in rates. The � � decrease in the Basic Cable Senrice monthiy rate is partially because of a change in the FCC rules regarding cable television rates. This rule change will probably result in a corresponding increase in the CPST rate in addition to any increase in the CPST because of other factors contained in the FCC rules. � EXHIBIT� T0� � � � CHARLES GRAMLICH&ASSOCIATES Page of „ , October 30,1997 Page 2 � I have provided my findings and recommendations in the following. There is considerable uncertainty about various aspects of the rate regulations. Therefore, I recommend that the City issue an Accounting Order that directs Paragon to maintain all records pertaining to this matter. I. FINDINGS 1. Notwithstanding additional information or subsequent nilings of the Federal Communication Commission and taking into consideration the past nilings of the FCC, it is my opinion that the rates as submitted on FCC Form 1240 dated September 30, 1997 by Paragon appear to be reasonable. II. RECOMMENDATIONS 1. The City consider accepting and approving these Findings and Recommendations after providing a reasonable opportunity for consideration of the views of interested parties pursuant to Part 76.935 of the FCC Rules and Regulations. 2. The City supply Pazagon with a copy of this Report and issue an Accounting Order directing the Paragon to maintain all records necessary to determine the rates which each customer was charged and the amounts which each customer paid. OVERVIEW OF REPORT PREPARATION The review included mathematical verification of all steps necessary to complete the foims,worksheets and accompanying schedules. Please note, however, that Charles Gramlich & Associates has not undertaken an "on-site audit" of Paragon's books and records to determine whether the information included in the Form and worksheets or the accompanying schedules has been accurately identified. Such an on-site audit would require physical presence by employees of Charles Gramlich&Associates, or a qualified accounting subcontractor, at the premises of Paragon to review the books and records and verify that entries have been accurately recorded and assumptions properly calculated. In completing the worksheets and schedules of the FCC Forms and related worksheets, cable operators are required to make certain assumptions and report information to the best of their ability. In some cases, it may be appropriate for franchising authorities to verify the accuracy of the information reported by a cable operator by conducting an on-site audit of the operator's books and records. Currently, I do not believe that such an on-site audit is necessary, based on the information I have reviewed in Pazagon's FCC Forms and related worksheets and the other relevant information I have reviewed. However, I make no representat�on with respect to the accuracy of the information reported � � by Paragon on its FCC Forms and related worksheets but simply base my conclusions and analysis on the information Paragon has provided. �� OVERVIEW OF FCC RATE REGULATIONS EXHIBtT � TO ��� '7 /�= CHARLES GRAMLICH&ASSOCIATES Page 3 of . October 30,1997 Page 3 � In 1992, Congess passed the Cable Television Consumer Protection and Competition Act. The 1992 Cable Act includes significant provisions regarding the regulation of cable rates, and directed the FCC to adopt rules prescribing rate regulation. Local franchising authorities that desire to regulate rates are permitted to do so by filing a form with the FCC. The FCC has retained the obligation to oversee the regulatory process. A cable operator's basic service tier, satellite tiers, equipment charges, and installation charges are subject to rate regulation. Premium channels and pay per view services are not subject to regulation by either local franchising authorities or the FCC. . In implementing its rate regulations, the FCC adopted a uniform rate scheme that is applicable to both the rates for basic cable service and cable programming service tiers in areas where there is no effective competition. The 1992 Cable Act pernuts franchising authorities to regulate the rates charged for basic cable service and certain installation and equipment rates. The FCC has the sole authority to regulate the rates for cable programming service tiers. Over the last few years the FCC has adopted several modifications to the rules and regulations regarding cable television rates. On September 15, 1995, The FCC adopted rules giving regulated cable operators the option of filing for rate adjustments on an annual basis instead of the then existing quarterly system. On February 8, 1996 President Clinton signed the Telecommunications Act of 1996 into law. The new law made sweeping changes to federal telecommunications law and policy. Under the new law, .�H . regulation of cable progamming and some basic service tier rates will be lifted or gradually phased out, depending on the size of the cable system and presence of effective competition. In addition, the new law allows telephone and cable companies to compete in each othe�'s business, and creates a new statutory entity know as an "open video system" to govern certain video programming. Many areas of cable regulation are not affected by the 1996 act. For example, local franchising authorities can continue to regulate rates charged for basic cable service and certain installation and equipment rates, unless e$'ective competition exists. FCC Form 1240 Pursuant to the FCC rules FCC Form 1240 may be used to adjust the maximum pernutted rates(which were determined either by Form 1200, a previously filed Form 1210 or Form 1240, a cost-of-service showing, or election of a streamlined rate reduction for qualified systems) for the following reasons: increases or decreases in external costs; the addition and deletion of channels from regulated tiers; and inflation. The FCC Order establishing the annual system calls for a series of calculations, involving both the projection of future events and an accounting of events that are known to have happened. FCC Form 1240 is used to adjust rates annually, instead of quarterly, to reflect changes in external �� costs, inflation, and the number of regulated channels that are projected for the 12 months following the rate change. A cable operator has the burden of proving that projected changes in external costs, inflation or the number of channels aze reasonably certain and quantifiable. (The FCC rules recognize „��, seven categories of extemal costs: retransmission consent fees, copyright fees, programming costs, certain cable specific ta�ces, franchise-related costs, franchise fees and FCC regulatory fees.) An EXHIBIT� TO — '� Page of CHARLES GRAMLICH&ASSOCIATES � October 30,1997 Page 4 ��- -� operator whose actual cost excced its projections during a rate year ma.y at the time of its next annual rate chan�e adjust or "tnie up" its rates. A cable operator opting for annual adjustments must file a basic rate adjustment request with its franchising authority 90 days before the effective date of the proposed change. After the 90 days, the operator may change the rate,unless the franchising authority has rejected the change as unreasonable. A cable operator may ask whether the franchising authority intends to issue a rate order after the 90-day review period, and if it does not respond within 15 days, the franchising authority will lose its ability to order a refund or a prospective rate reduction. FCC Form 1205 Changes to equipment and installation rates must be filed on FCC Form 1205 when other rate adjustments aze filed on Form 1240. An operator must base proposed annual adjustments to equipment and installation rates on past costs. FCC Form 1215 Form 1215 is submitted with Form 1240 as a part of the cable operator's proposed rates. Form 1215 requires the cable operator to provide channel information, including channels and packages of channels offered on an a la carte basis. The regulations also require that the cable operator submit rate cards and channel line ups and explain any discrepancies between them and the rate filing. In reviewing a basic service rate filing, a franchising authority may decide whether a collective offering of a la carte � channels will be treated as an unregulated service or a regulated tier. Thank you for your consideration in this matter. Please contact me if you have questions, comments, or desire additional information conceming this matter. Sincerely, C�(,t�t��� , Gl��—�, Charles Gramlich ��