We're going to extend the current things that we're doing, the job fairs in different neighborhoods, advertising in multiple newspapers, neighborhood newspapers, that sort of 56 10/31/00 PUBLIC PROPERTY, BILL 000452 thing, making sure that people know that opportunities exist. We have training programs. We bring people on for our technical jobs that don't need to have the technical skills, but we give them to them. So I think if we continue to act to hire and using the practices that we're using now that we will remain, and continue to be, a diverse something.
If you note in the actual agreement, so that it's committed to hard dollars in that area, there is a provision for employment, training, and subcontracting for $250,000.
Well, it is in -- I thought it was in the binder, but it will be in the details of the OVS Agreement, when we get it to you. But it calls for $250,000 of training, for employment training and subcontract training 57 10/31/00 PUBLIC PROPERTY, BILL 000452 and a PCD loan fund. So that there are provisions in the actual agreement that address -- if not entirely, certainly address your issues and your concerns.
My third question was very much related to recruitment training that ultimately lead to employment, so you have addressed that. Philadelphia is a union city, as quiet as it's kept. What provisions, what strategy do you have in place for ensuring that RCN honors the tradition of the City?
We met with Local 98 of BIBW, and we've reached an agreement in principle to utilize Local 98 workers to build our network. And that's a substantial amount of work over the seven years of the build.
Are you current -- what -- of your companies throughout, which ones are utilized right now?
Unionized contractors? 58 10/31/00 PUBLIC PROPERTY, BILL 000452
We utilize different locals in different cities, like Local 3, we work with them in New York. You may want to add to that.
And also, as John said, the construction in Boston is also IBW, most of it being down by a partner in that market, the electric company Boston Edison.
I'd like to -- are you in current litigation for unfair labor practices?
In our Lehigh Valley system, there is a -- we contested how an affiliation vote was handled by the CWA.
Let -- I just want 59 10/31/00 PUBLIC PROPERTY, BILL 000452 to -- don't mean to interrupt the line of questioning, but there is a witness specifically for that issue, and we can have them respond when that witness gives his testimony.
Councilmember Brown, are you finished with your questioning?
One final question. You did mention that you're very committed to working with MBEC, and "committed" is a nebulous word. But then you were somewhat specific in what that meant. I would only like to suggest and advise you with regards to your goal to ensure equity at all levels, in terms of a diverse workforce, that you consider, talk to, speak with and/or connect with the African-American Chamber of Commerce and the Hispanic -- help me out, Councilman Ortiz. The correct name is what?
The Latino Chamber of Commerce, to ensure that all of those worlds are touched. 60 10/31/00 PUBLIC PROPERTY, BILL 000452
I did not grasp how you arrived at the decision for the franchise areas that you ultimately selected. So what data or what research, what logic moved you to ultimately select the two areas that you did? Explain that once more so I can get it.
Well, as Scott Burnside said, we fully agreed that we would do two and not four areas until it makes sense. There are technical reasons why, coming from the north makes sense, because that's where our silent ring comes from. Most of the residential homes -- in Areas 1, there's a large commercial area, and it would not really be in -- the R in RCN stands for "residential." We're not a -- primarily commercial is not -- even though we do have a commercial product, we're primarily a residential company. So we're sort of --
I'm sorry, you're 61 10/31/00 PUBLIC PROPERTY, BILL 000452 going to have to -- 'cause I live in Area 1 and I don't understand the characterization of that area as being primarily commercial.
No, I'm not saying it's primarily commercial. Center City, that is a business area. Again, it wasn't really -- we weren't really avoiding any area, or we weren't -- you know, we wanted -- obviously, we want to get into Philadelphia, we want to serve the communities of Philadelphia. Since it made sense not to do all four, we had to choose two and we chose two.
And it's not -- again, we weren't avoiding anything or choosing something over something else and looking at -- in looking at the shaded areas there and the years that we build them out, it seems like that's a representation of the City of Philadelphia in those areas.
Thank you. Councilmember Blackwell? 62 10/31/00 PUBLIC PROPERTY, BILL 000452
Thank you, Mr. Chairman. You mentioned entering other parts of City, and when -- many of us have a severe problem with talking about this as if it's a franchise agreement. We've been through a cable before, and we're not used to having such little information in writing about such an important area. You're planning to move into other areas of the City. What's your timeline for that expansion?
The resources to build this entire city in a timely fashion are simply not available to any one company. We chose what we thought would be -- and I say "we," I mean collectively the City and the company, chose two franchise areas that we think and strongly believe are strong enough to support competition. The City gains some flexibility. It is entirely possible that in this new age of competition that another company, like 63 10/31/00 PUBLIC PROPERTY, BILL 000452 RCN, of which by today's count, there are 30 or 40, could come to the City tomorrow or the next day and say, We'd like to construct, we'd like to compete in those areas that exist right now, Areas 1 and 2. So the City retains some flexibility, knowing full way that the time frame and the resources to build out the entire city simply were unrealistic to ask of one company. And I assure you, from the company's perspective, we fully agree. I mean, $250 million of construction -- in 7 years to construct in these two areas is a daunting task. And we're anxious to be able to build out the entire city. But my suspicion is that there will be someone else that beats us to it, because competition makes sense, it's good. Prices come down, service quality goes up. And I see no 19 reason why the City won't be -- there won't be an advantage to the City to award that franchise to someone else if they so choose, just like what happened in the early '80s when you awarded four franchises to four separate companies.
Well, you're relatively new to this industry. What are your 64 10/31/00 PUBLIC PROPERTY, BILL 000452 future plans? Do you plan to stay, do you plan to sell? We've had that experience as well.
Well, I -- I -- I can only address that question by saying that there is absolutely no intention on RCN's part to traffic in franchise holdings or to sell its business. We are committed to building this business over the long haul. We've, I think, demonstrated that by our ability to raise capital and have large investments in our business plan. This is not a fast-buck turnaround. We are committed. I think there are a million other ways we could invest money and make profits quicker than engaging in building this kind of a network in the markets that we're in. So, no, there is no plan to sell this company whatsoever.
Many of us will be listening very carefully when it comes to the union discussion. And there's been a lot of talk and a lot of rumors around with regard to RCN and with regard to the role that District Councilpeople would play in this and what our level of interest should be. So we will be watching and listening 65 10/31/00 PUBLIC PROPERTY, BILL 000452 closely, and especially with a lot of material now that it's really not a franchise agreement and not a serious commitment on paper that we see so that we're comfortable what our role should be. Thank you, Mr. Chairman, I won't delay.
Thank you very much. I want to give you a hypothetical about the issue of competition. And while, from a philosophical standpoint, I would agree with you that when there's more than one entity providing the same service, that there's a competitive nature to that relationship; and, therefore, the prices would either perhaps stabilize or even go down. Wade -- Area 2 is served by Wade Cable, correct, Area 2?
They're not, at this point, in competition with, or would not be in competition with RCN because there's no request to be able to service Wade's franchise area. But Comcast, which serves Areas 3, 4, and 1, what happens when the competition kicks in in and 66 10/31/00 PUBLIC PROPERTY, BILL 000452 and the prices begin to go down? That's hypothetically. Does that not risk the possibility that Area 1 could potentially experience an increase in rates due to Comcast's needs to compete with 3 and 4. Without the competitive edge in Area 1, I'm not saying that Comcast would -- I'm going to ask them the same question, but I don't see that they would definitely raise their rates, but the economic pressure on them to maintain a competitive edge with you, or a fair race in 3 and 4, could potentially jeopardize the subscribers in Area 1 who have no competition to seek out if their cable rates are raised as a result of that war.
If they reduce cable rates to compete with RCN in Areas 4 and Areas 3, the benefit of that rate reduction will occur in 67 10/31/00 PUBLIC PROPERTY, BILL 000452 Area 1 as well. But more importantly, in addition to that, I think you need to understand that stabilization or a reduction in prices occur when competition comes in the market, but also quality of service improves. That's a huge benefit. I think we've seen already some indications of that effort here, in anticipation of competition. And perhaps our friends in the incumbent cable provider will testify to that fact. They've made investments, and they're going to continue to make investments to upgrade their systems, to anticipate competition. And that is done on an area-wide basis. They are not going to determine, when your call comes in about a service-quality standard issue, that you're in Area 1 so you get this set of answers as opposed to the same question being answered and the same response being given in Areas 3 and 4. So there are some overlying benefits to all areas of the City, even though there would be no direct competition in Area 1.
But we would have, 68 10/31/00 PUBLIC PROPERTY, BILL 000452 as a resident of Area 1 or -- as a resident of Area 1 or a resident of Area 2, would certainly have a more level and equal competitive pricing advantage compared to Area 4 and Area 3 over the next seven years.
If you guys were building out and while you were building out and 4, just hypothetically, the residents and customers of 1 and 2 would have a direct advantage of competitive pricing as the residents of 3 and 4 would. So I guess my question is and my concern is that we somehow give competitive pricing and high-quality service to two areas over seven years and then do not do the same -- you say someone may come in and do the same thing, but right now -- I mean, since 1996, I'm not aware of anybody else besides RCN that's asked to do anything else in the City Area 3, 4, or 2. So, I mean, it's been four years of this ability to compete. And while, you know, you say there's 30, 40 companies out there that could do it, no one 69 10/31/00 PUBLIC PROPERTY, BILL 000452 yet has requested 1 or 2. So, I mean, my concern is, as we see that line of demarcation over seven years from the northeast and northwest to southeast and southwest, I have a general concern that those individuals will not be able to experience the competitive pricing, the varied service, the high-speed Internet access, and the competition in telephone service. I mean, that's not your -- RCN's direct problem, but it is a concern for us when we're trying to treat everyone in the City equally and give everyone equal access to lower prices and better service.
Okay. Are there Councilmembers who have other questions? Councilmember Rizzo?
Just a question about the actual service itself. To be competitive, are you suggesting that you're going to be able to offer to your customers pretty much a mirror of what the other cable -- the incumbents already offers? Are you going to come in with 70 10/31/00 PUBLIC PROPERTY, BILL 000452 something that will appeal to people that don't want to spend the dollars that they spend? Or will you be able to go head to head with them and offer all of your potential customers the same level of service with all the bells and whistles if they would want them?
Well, the basic package -- I can tell you by our experience in Delaware County now that many people are choosing our Resilink bundle and getting the savings that the bundling provides with either phone and cable or phone and cable and high-speed Internet. And the details of those bundles are in the written testimony that we handed out. But our basic package, we think, is a very competitive package with a very robust basic lineup. But I think that by taking most of the services -- it's the more you buy, the more you save.
Which I'm familiar with. Will you be able to provide to a customer 71 10/31/00 PUBLIC PROPERTY, BILL 000452 without bundling all of the service that the incumbent has available right now and at a lesser price?
I think that our price for comparable services is very competitive, yes. I wouldn't want to say on the record that I know for certain that our price is less than theirs.
I really don't want to talk about -- I shouldn't even have brought price into it. I'm asking that if you put your video service, your cable service or whatever, your RCN service, will you be able to provide all that is presently provided by Comcast?
Is there a specific question or a specific channel that you're asking about?
But you're using the words here today that you're competitive, so I'm asking you a question. If you're competitive, are you able to provide customers with all of the services presently provided by Comcast? 72 10/31/00 PUBLIC PROPERTY, BILL 000452
I'm going to say the answer is yes. But unless there's a specific channel, that's -- (Unintelligible, parties talking over each other.)
But -- so you're saying that you'll be competitive with the cable company.
Could you talk in some specifics as to what you think would be the direct advantage to the consumer in reduction in cable rates? Can you compare for the record what is going on today if Comcast is offering some pricing and what you guys would ensure happens as soon as you're in the market? What kind of reductions would we see? I mean, how much of a percentage of reduction would we expect to see in areas -- I'm sorry in Areas and in the first 73 10/31/00 PUBLIC PROPERTY, BILL 000452 two years, three years of operation?
Well, this question is not for you, but just a general question. In the last three years, how many rate increases have there been in this market? I know the answer to that, and I'm sure you do also.
No, I don't. I just -- my wife just pays the cable bill.
There have been a few. And I can tell you in Delaware County where we're offering service now, in Folcroft, prior to us launching there, Comcast announced a rate increase. And in the areas that we've upgraded, they circulated some information offering to not raise rate for customers that stayed with them if they signed a contract. Now, that was in direct response to us competing with them. So stabilization of the rates is something that I'm sure will be seen in this market, and it's not just here; there have been studies of competitive markets. And, typically, rates are around 15 percent lower than they are in places where there's not competition for similar channel lineups. So there's no reason to believe 74 10/31/00 PUBLIC PROPERTY, BILL 000452 that that would not be the case here, especially since the incumbent is already sort of using those practices in this general market.
Okay. Does anyone have questions on rates? As long as we're on rates, we might as well --
I thought competition was supposed to bring rates down.
And I think that they do. I think that they lower -- they do a number of things. They lower rates, they stabilize rates, they increase channels, they increase variety when we get to the point where new services are being offered. Just like in any other business, if you know that your competitor is offering a new service, you want to bring it to the market as quickly as you can but you have no incentive to do that now -- there might be some, but there would be more if there's competition in the market. So 75 10/31/00 PUBLIC PROPERTY, BILL 000452 this is built-in incentive that's there. Competition does a number of things.
I think consumers are interested in looking at competition and looking at competition to bring the current set of rates down, not stabilize them at the high level that they are at right now.
If competition doesn't do that, then we might as well have a monopoly.
I understand your point, but I know that one of the things that customers do complain about are rate increases. That's a true statement, I would imagine. And I can tell you that an incumbent would be very -- they would think very carefully about whether or not to raise their rates if there is a competitor in the market. I think that that is a definite benefit that customers will very much be in favor of.
On rates? 76 10/31/00 PUBLIC PROPERTY, BILL 000452 Councilwoman.
Thank you, Mr. Chairman. Can you share with us what your experience has been in other markets as it relates to rates, and what is the bottom line achieved, which is the lowering of rates?
Councilwoman, we have evidence in our markets, in our (unintelligible) markets that, in fact, rates do come down. I'll give you one example. Probably with some research, I could come up with some additional -- I will come up with some additional ones. But one the in particular that comes to mind is the town of Sommerville, which is a suburb immediately adjacent to the City of Boston, where we first began to build our network. The incumbent operator, who was announcing at the time a statewide increase in their rates made the following rates: We will increase rates by blank percent -- I forget what the number was, but let 77 10/31/00 PUBLIC PROPERTY, BILL 000452 me just fill in, without being held to it, or 12 percent -- except in the City of Sommerville, where we are faced with a competitive environment. And, ultimately, they reduced rates in that city. So there is overwhelming evidence, and the FCC has been the collection point on a wider scale, where competition exists both in wire-based and in direct broadcast, satellite dishes, if you will. Competition drives prices down, expands service. There is no doubt about that. And any economist that would tell you differently, I think, is reading the wrong books today. I mean, there is absolute experience that prices come down and service gets better, and less complaints flow to City Hall about issues concerning price and service, because people vote with their decision to change. And let me give you one other closer-to-home example. In the Allentown, Pennsylvania market, where there are two completely overbuilt -- RCN happens to own one. A couple of factors in that market. There's a 78 10/31/00 PUBLIC PROPERTY, BILL 000452 higher penetration rate in total. The penetration rates exceeds 90 percent, where the where average is about 60 throughout the country. So more people take cable services from one or the other. Prices on average are to percent lower than 7 the national average. And, as I said a moment 8 ago, customer service complaints are dealt with by 9 the customer choosing to go to the other guy 10 rather than complaining to you all. 11
So in small laboratory, 13 if you will, environments, where competition, for 14 one reason or another, has existed, it is 15 absolutely irrefutable, irrefutable that prices come down and service gets better and technology improves.
Would that be with the OVS agreement? (Unintelligible, parties talking over each other.)
We could 79 10/31/00 PUBLIC PROPERTY, BILL 000452 memorialize that in the agreement, that prices will come down and service will improve?
I think that there is no 5 question -- there is no questioning that that will happen.
Let me ask you a little bit more an issue of more subjectivity. Comcast, you're the incumbent, has a pretty good reputation within the community. Certainly not as specific issues as rate reduction and stabilization and service enhancement, but just talking about being good corporate citizens, having a good reputation within the City, being involved in numbers of philanthropic and charitable and educational issues well beyond their requirements on their franchise agreement. You just get kind of a good feeling about them generally because they've been around and they're visible. Mr. Pitts, you'd be running the company?
And you'd be running it from Trooper for the reasonable short 80 10/31/00 PUBLIC PROPERTY, BILL 000452 term?
How do you ensure that the same kind of hands-on, in-the-community, in-the-civic-affairs, in-the-cultural-affairs things kind of take place with you guys, similar to what Comcast has done since it's been here? And I'm not even talking about the headquarters being here; I recognize you're not moving your Princeton headquarters to Philadelphia, as Comcast has their headquarters here. However, how do you really maintain that kind of connection with the community here and what its needs are if you all go to work every day in Trooper?
Well, overall, our goal -- my goal and, again, I've been -- I mean.
I've been in this area for some time, and our goal is to become good corporate citizens of Philadelphia also. We've already tried to start that process. I would meet with the members of City 81 10/31/00 PUBLIC PROPERTY, BILL 000452 Council, community members -- we've already started to do that -- and other organizations and find out what types of things are important to the community and get involved with those through money, through participation, through volunteerism, all of those things. And I can tell you that even though my office is in Trooper, I probably will spend a great deal of time -- I will have to spend a great deal of time in the City of Philadelphia, and I look forward that. And Trooper is sort of our regional office and it's based on where activity is now. But as activity moves, I think if we're able to be successful here, most of our customers will be skewed more towards this side of our region. Again, I could see us spending more time in the City than in other areas of the region.
If a cable subscriber under an approved RCN agreement with RCN has a complaint about service, billing, or anything else and they dial the RCN number, who will answer the phone and where will that person be?
Well, right now, we have a 82 10/31/00 PUBLIC PROPERTY, BILL 000452 centralized customer service area in Dallas, Pennsylvania, which is where our customer service center has been for a number of years. They dial that number 24/7/365 days a year and they'll get a live body there that will answer their questions.
And will there be offices that people can come to to pay their bills in person?
And to see someone or complain to someone or get information from some live person in Philadelphia?
Could you give us information on where those sites would be located? Do you know specifically where they are right now?
We do not. One of the -- the part of the process -- the process would entail starting construction. We know we've designed the system so we know how it's going to be laid out. We would start looking for real estate. We have idea where our hub sites might 83 10/31/00 PUBLIC PROPERTY, BILL 000452 be. We'd look for sites for walk-in centers, and they're easier to find and easier to -- I mean, they don't have to be -- the parameters aren't as tight as with our technical facilities. We can place them in shopping malls or in high-traffic shopping areas. So we'll locate those areas and find places and purchase real estate and open them up for business.
Well, myself and other members of Council and on this committee would be interested in knowing if -- without giving specific addresses, if you could kind of give us locations, how many you expect to have, and where you suspect they'll be located in Year 1 2, 3, 4, and going out. Philadelphians, it's my experience, enjoy complaining, but they enjoy complaining to someone in person, to be able to go to an office, to go to the bank, to go to places like the phone company, to be able to go and talk to someone individually as opposed to doing it by telephone. I mean, some of us operate by telephone and the computer all the time. We have a cohort of 84 10/31/00 PUBLIC PROPERTY, BILL 000452 residents age-wise and income-wise that need the ability to go to someplace that's accessible by public transportation, that is safe, that has parking, those kinds of things. So those -- even though it may be a longer-term decision for you guys, we would really like to know those things because it helps us to be able to sell or to make constituents and potential customers of yours understand that there's going to be a presence in your community so that they can go somewhere and see someone.
Okay. I'm sorry, Councilmember Brown, you had a follow-up?
The issue of corporate responsibility raised by my colleague is an important one. And since you're not, at this hour, able to let us know what your anticipated plans are, give us a sense of what you've done in other markets, a couple of examples that speak to corporate responsibility. 85 10/31/00 PUBLIC PROPERTY, BILL 000452
You mean in terms of donations, activities, that sort of thing?
And not just donations, but being actively engaged and integrated into the fabric of the community that you're serving.
If you could supply the Chair and the members of the committee with a list of things you've done in Boston or in Chicago and the organizations and events you've been involved in, you know, you've got to kind of know what we're asking for.
And if you can asterisk those items where you're actively engaged with the public school system.
You use the -- you use the state -- you said about being successful, 86 10/31/00 PUBLIC PROPERTY, BILL 000452 if you're successful. Has RCN not been successful anyplace? Have you had to pull the plug? And if you're not successful, when do you know that? When do you know when you're successful or not? And what do you do if you're not?
Are referring, Councilman, to my comment about being successful?
Well, what I meant was being successful in getting into the City. We have not pulled the plug anywhere. And I think that our experience is showing us that if we're able to build and offer service, that our product lines are attractive to enough customers for it to make sense for us to continue to do business.
But in your agreement with the Department of Public Property, is there something in there in the event you'd want to pull the plug?
Well, as I said, Councilman, early on, there is a fairly substantial section that relates to liquidated damages, so that when you read that section, 87 10/31/00 PUBLIC PROPERTY, BILL 000452 you'll be able to see what, if, in the hypothetical, RCN, quote, pulled the plug, unquote, what the financial responsibilities it would incur in doing so, what the penalties would be, what the damages would be. But just to reiterate what John just said, we have met and exceeded -- met and exceeded -- our expectations for penetration in markets where we are building and offering our service today.
So the answer to your question, there is something in the agreement that in the event this is not a successful venture, that there are penalties associated with that.
Very much so, very much so. There is a whole section. And John just mentioned to me that there are also bonds that govern the construction process. So the answer is, there is a substantial amount of written material covering damages, penalties, et cetera.
Well, I'm sure we'll ask the Department of Public Property to tell us 88 10/31/00 PUBLIC PROPERTY, BILL 000452 what they are. Thanks very much, I appreciate that.
Thank you, Mr. Chairman. I do look forward, Mr. Burnside, to one day being able to read the provisions that you're talking about, whenever it is that we get a copy of the agreement that you've been talking about. How long has RCN been in the business?
Okay. And you presently operate in what major cities on the east coast?
On the east coast, we operate in -- I'll talk in terms of markets as well as cities. Going from north to south: Boston; New York. We have an agreement in New York to provide service in all five boroughs. 89 10/31/00 PUBLIC PROPERTY, BILL 000452 We're currently doing that in two of five right now, soon to be three; The Philadelphia market, where we are providing service in the suburbs right now; And through a partnership with the power company in Washington, DC, we have a joint venture providing service in the greater Washington area -- Washington, DC, northern Virginia, and the Maryland suburbs.
We entered the Boston market -- actually, we entered the Boston market prior to 1997. As we began to deploy the plan and it looked like the 1996 act was finally going to become a reality, which essentially was the gating issue with respect to competition, we began to plan and compete for competition in Boston in '96. We've actually been providing service there since mid- or late '97. 90 10/31/00 PUBLIC PROPERTY, BILL 000452
Our agreement in New York was completed in December of 1997, and we began to provide service within six months in New York City through, I will guess, the first -- either the first or late in the first quarter or early in the second quarter of 1998.
And are you currently providing service in the Washington, DC and Virginia-Maryland area?
Yes, we are. We are providing service in the City -- in the district, I should say, in parts of Montgomery County, and just beginning to provide service -- no, I'm sorry. We've just completed our agreement, our 91 10/31/00 PUBLIC PROPERTY, BILL 000452 franchise agreements in a few communities and counties in northern Virginia. The licensing is done a little bit differently in Maryland and in parts of Virginia, where the counties, rather than the city, are the licensing authority.
Okay. And you probably know that Philadelphia is a city and a county?
You probably know that Philadelphia is a city and a county.
Okay. Now, in Boston, do they have franchised areas in Boston, or is it just the entire city? Or what's the Boston situation?
No, sir. In Boston, unlike here in Philadelphia, there is one franchise area that covers the entire city.
We have a franchise in Boston. We actually started very much in terms of the regulatory or legal agreements as we are 92 10/31/00 PUBLIC PROPERTY, BILL 000452 proposing here, or has been proposed here, an interim OVS agreement and a transition to a franchise shortly thereafter.
Does your interim agreement require a build-out citywide or various?
Well, the agreement that's enforced today is a franchise and it requires a franchise in Boston and the agreement requires the full participation of the city.
If you'll excuse me for one moment, let me consult with my Boston expert. (Mr. Burnside confers off the record with colleague.)
Okay. Tell me a little bit about -- we've had discussion about this agreement and I know you're going to get us a copy of it. My best recollection either from the 93 10/31/00 PUBLIC PROPERTY, BILL 000452 testimony or the Q-and-A that's happened so far is that this agreement is for two years; is that correct?
Okay. And if this is approved, and it's the agreement, the OVS agreement that's in front of us today, is that correct?
It is an OVS, and I think the proper terminology is it's an "interim OVS agreement."
Okay. But I also either read or came to understand that should this be approved, you then have 120 days to then apply for a franchise?
That is correct, that is correct. We would move immediately into the 94 10/31/00 PUBLIC PROPERTY, BILL 000452 franchise for a franchise.
Okay. Now, excuse me, during that time, naturally, you would be in construction, you'd be going through all of your areas, the map that was up earlier. And simultaneously, you would be negotiating a franchise agreement; is that correct?
That is correct. Fortunately, the guys who do the construction and the guys who do the negotiations for the franchise are not the same guys.
Now, what happens if you don't come to an agreement on a franchise? What happens to the OVS agreement or what controls or what allows you to continue to continue to operate? What are the provisions?
Well, I would say that that is almost an imponderable situation. I mean, first of all --
Well, let us ponder the imponderable. Give me an answer to the 95 10/31/00 PUBLIC PROPERTY, BILL 000452 question.
Well, fine, but let me explain what I mean. The -- and perhaps -- if you'll excuse me. (Mr. Burnside confers off the record with colleague.)
Since Mr. Steel has already identified himself, we'll refer to the specifics in the agreement, but I was specifically going to say that the overall agreement has in it virtually all of the difficult issues with respect to franchising, so I doubt very much if the condition that you've just described would very likely, but let's be specific if we may.
What would happen if the parties could not agree on a franchise, then we could mutually agree, each of us, to continue the OVS agreement for a period up to ten years. So we would be -- that would be the option. That would have to be the agreement of both parties. And if we fail or have a material problem in construction or we otherwise triggered the sections (unintelligible) as penalties, and we would have to deal with those. 96 10/31/00 PUBLIC PROPERTY, BILL 000452