I'm sure you'll give me more formal language than just deal with those. But what actually happens? I mean, what is the City's recourse? What happens if both parties don't agree to continue the OVS agreement for this upward of ten-year period of time? What actually happens? I wish not to speak in hypotheticals.
Well, in practice, we have had -- in the Boston market alone, we have had six interim open video system agreements that would move to a franchise in four --
We have never had a problem where we haven't delivered on a franchise.
I asked my question; I'd like it answered in the form that I asked the question. We talked about Boston already; we're now talking about Philadelphia. You have an agreement. I asked you what happens if the parties don't agree to keep the OVS 97 10/31/00 PUBLIC PROPERTY, BILL 000452 agreement in place? That's the one question. What happens if they do agree to keep it in place? That's the second question. I would like those questions answered specific to Philadelphia in what you've negotiated with the Department of Public Property.
In the first instance, we worked toward the franchise and we signed a franchise agreement beyond the OVS. If we cannot agree on that for whatever reason, the option is there for to us agree to extend the open video system agreement for a period up to ten years.
Now, what does that mean? What are your requirements, what are your responsibilities, what are your obligations, what are your commitments?
The same that you see before you now, which is virtually the same as the franchise. What we have done in this instance, which, I think, gives Scott some comfort in saying that it's very, very unlikely that we will not reach agreement is because we have negotiated a franchise during this long period. And so all of 98 10/31/00 PUBLIC PROPERTY, BILL 000452 the terms are there, there's very little for to us really negotiate beyond this. What I --
Clearly that presupposes that you're going to have a franchise agreement approved, doesn't it?
Well, yes. I mean, we very much have worked between the parties to negotiate towards a franchise agreement, yes. So the terms are here; there's very little for us to debate about. And when you see the agreement, I'm sure you'll agree.
Well, if I had the agreement, maybe I wouldn't be asking these questions.
Okay. Well, it's very difficult to discuss a document that only you've seen and I haven't seen. What happens in the event that -- we've 99 10/31/00 PUBLIC PROPERTY, BILL 000452 discussed not reaching an agreement on a cable franchise. Now, your obligations, under the OVS, in terms of either participation with PCDC, the school system, various hiring goals and the like are what? What's in the agreement on those issues?
They're all spelled out either in the agreement or in the appendices to the agreement.
In the agreement, have you agreed to terms relative to either contributions to the School District, the minority hiring goals?
What are they? And are those the terms, the conditions that you're saying would stay in place for upwards of ten 100 10/31/00 PUBLIC PROPERTY, BILL 000452 years if you're not able to reach an agreement.
Yes. They're virtually the same as those agreed to by Comcast in their latest renewal.
Because we are very sensitive to level playing-field concerns.
If you have an extended OVS period, what are the requirements or rules around the issue of franchise fees?
So even though you don't have a franchise agreement --
They're still -- even in a pure OVS, one of the requirements under federal law is that we match the franchise fee and also the commitment to public access. So you're protected on two levels.
Okay. We've had a number of, from time to time, meetings around the issue of cable television, and I think the question was asked earlier about either stability of the company or what your long-term future is 101 10/31/00 PUBLIC PROPERTY, BILL 000452 here in Philadelphia. We had an occasion a couple years ago, where a company was in for franchise renewal. The franchise was renewed and subsequently unbeknownst to us, they were in negotiations for the sale of that particular franchise, and subsequently, three months later, the renewed, now more valuable franchise was sold. As a result of that experience, some of us who went through that, try to pay certainly a lot more attention to the details of what the companies lay out and what their commitments are and what they say in these public hearings.
I know that while we were negotiating the agreement, the City was sensitive to this particular circumstance. And in the OVS agreement, subsequently in the franchise, there are three to four pages that deal with a transfer of ownership of control. And I know that before that can take place, we have to be back here before this Council for approval by ordinance.
Councilmember 102 10/31/00 PUBLIC PROPERTY, BILL 000452 Ortiz?
Do you have any collective bargaining agreements with any unions in Philadelphia?
Well, we're not building our network in Philadelphia yet. So the answer is no. 11
You don't have any collective bargaining agreements? The answer is no? Do you have collective bargaining agreement -- a record of collective bargaining agreements with other unions that you might furnish to this Council?
We've used unionized labor to build our networks in other cities, so I would say the answer is yes.
Outside of building the network, how many of RCN companies in other cities are unionized? And who are the unions that you have collective bargaining agreements with those unions? 103 10/31/00 PUBLIC PROPERTY, BILL 000452
Well, in general, our philosophy is to let the employees decide --
I said, in general, our philosophy is to let the employees decide to elect representation or not, and --
I didn't ask that question, whether you let employees decide or not. I asked the question as to what collective bargaining agreements you have in other cities and who are the locals that you have collective bargaining agreements with?
For employees out -- for employees around the country for RCN, there are no 16 collective bargaining agreements, except for, in the Lehigh Valley system, between county operating employees, it's a committee, it's an old union, they are covered by a bargaining union. And, obviously, there's going to be some testimony related to that later today.
So you don't have any collective bargaining agreements with any local anywhere in the United States?
That we understand, if you come to Philadelphia. But once it's built, I want to know whether your employees have collective bargaining agreements in any of those cities where you're at.
Have you had complaints about anti-union practices in any of those cities, and has there been litigation for the National Labor Relations Board?
We have a -- a -- a ruling that is under appeal now in Allentown, and that is with the CWA.
We have a ruling that is on appeal now involving a -- how an affiliation vote 105 10/31/00 PUBLIC PROPERTY, BILL 000452 was handled in Lehigh Valley, and that is with the CWA.
In any other cities, have you had any other complaint filed against you, in any other cities, for anti-union practices?
Are there any other questions for this panel either from members of the committee or from Councilmembers in general? (No further questions at this time.)
It was just pointed out to me, Mr. Chairman, that with the ordinance, the 106 10/31/00 PUBLIC PROPERTY, BILL 000452 OVS agreement, the interim OVS agreement was, in fact, given to all members so that just for the record, all of you do have it.
I mean, there's no 6 one's disputing that it was kept from anybody. Large volumes of information come into Council regularly, and sometimes -- put it this way, if any Councilmember on the committee hasn't read it, it's as good as them not having gotten it. So now -- I mean, they need it -- if they didn't know if it was in their office for whatever reason, through some fault of delivery or through some fault of staff, the fact is that they haven't read it and they're still at a disadvantage, so --
I understand, but the inference was clearly that we did not provide it, and I want to correct that for the record. It has been provided along with your --
I understand. And I have no dispute 'cause I had it and read it. The other issue is that some people claim that -- and, you know, has no right to claim that they didn't get it. So I appreciate you clarifying it 107 10/31/00 PUBLIC PROPERTY, BILL 000452 for the record, but the fact still remains is that they need to get it.
Thank you, Mr. Chairman. Earlier in the testimony, I don't know which of the two gentlemen referred to it. You referred to feeling the responsibilities to the community and having good relations. And I recollect a part of it dealt with public access and how you would cooperate to make public access a reality. And that sounded good. We have not succeeded in Philadelphia in really having what many of us regard as genuine public access. Do you feel the same way about your employees? Do you feel it necessary to have good relations with your employees?
And among the reasons you feel that way, would it have something to do with the fact that if employees are satisfied, it affects their productivity and their 108 10/31/00 PUBLIC PROPERTY, BILL 000452 efficiency?
And that if there is a lot of contention between the company and employees, it may very well affect the quality of the work?
Well, in this labor proceeding that you alluded, which you said is on appeal, were there charges made by employees indicating that they felt the company was in violation of the law? 109 10/31/00 PUBLIC PROPERTY, BILL 000452
The -- that dispute is between the CWA and RCN of the Lehigh Valley, and it surrounds the -- our having an issue with how an affiliation vote was handled. It's not concerning -- it's not.
Could you speak, sir, more directly into the microphone?
It's not concerning treatment of the employees; it's concerning an affiliation vote. And we -- we've appealed that decision, and currently, we are abiding by the existing or the pre-existing labor agreement with the twin-county operating employees committee.
But isn't there a dispute between a pre-existing labor agreement and an allegation that there is a successor organization that alleges that it really represents the employees and is a successor to the previous group?
Well, isn't the affiliation a matter between the employees themselves? And isn't it something that the 110 10/31/00 PUBLIC PROPERTY, BILL 000452 company ought not to have anything to do with?
Well, that's true, but some employees -- many employees have told us that they didn't like the way that the vote was taken and didn't know that that's what was going on. So, you know, if the question is, are we trying to act on behalf of the employees in their best interests? we think that we are. And the answer is yes.
Well, I guess everybody who acts paternalistically always says, I'm doing it for the benefit of, you know, the child or whoever they're being paternal to. But isn't affiliation really a matter of choice by the employees?
Oh, absolutely. And if under the NLRB auspices, if a vote is taken and the members of the employees there decide that they want to be represented by the CWA, we're not an anti-union company, we have no problem with recognizing them as being members of the CWA. Our only issue is in how they --
Could you wait just a minute. 111 10/31/00 PUBLIC PROPERTY, BILL 000452 Go ahead, sir.
But why would the company be concerned as to which affiliation the employees choose?
Well -- and we understand that whatever it is, I'm not sure what point you're making about the company's involvement, but it just doesn't kind of seem healthy for a company to be involved in a matter that's a choice of the employees. Why -- I understand the company made all of its statements to the Labor Board, to an administrative law judge that has hearings and represents the employees' bid. And wasn't there a ruling by the administrative law judge that dealt with violations of labor laws by your company?
Well, why are you appealing the ruling? 112 10/31/00 PUBLIC PROPERTY, BILL 000452
We had reasons that we felt that it was appropriate to appeal the ruling. And when the disposition of that ruling is determined, we have to decide whether we want to appeal it further or not. I mean, we want to do what we feel is in the best interest of the company, the employees --
Well, why are you so determined to put obstacles in the way of your employees deciding with affiliation they ought have?
Well, see, none of this is actually involving the employees; this is happening outside of them. It's the administrative law judge. It is the process of appeals that we're dealing with. The employees are telling us -- some employees have told us that they didn't want the affiliation to happen, and I believe that they're telling me the truth.
Well, the way to resolve those matters is to go to an election and 113 10/31/00 PUBLIC PROPERTY, BILL 000452 to go to an election quickly.
And perhaps the issue raised by the employees that they were seeking to have a determination quickly, and wasn't there an objection by the company?
I'm not aware of that. I'm in favor of us resolving this matter properly in court, I'm in favor of that.
It's a matter of concern because you talk, you know, in a way that some of like to hear about cooperation and about your concern for the community interests, about your desire to make your company available for public access. They're commendable achievements. Yet on the record in the one case that we can test how you feel about your relations with others, we find that there is a serious question as to what your action is toward your own employees. And my experience of a long lifetime is that you can rely much more on workers who are satisfied, that feel they're being treated properly by the company. You can rely on their productivity, on the quality of their work much 114 10/31/00 PUBLIC PROPERTY, BILL 000452 more than you can where there is a labor force that feels it's being treated unfairly and is being denied rights. And that's a concern that I express. Why can't you and the people who are talking about representation get together quickly and make it possible for employees to express their opinion?
I think those are valid questions and valid concerns, and let me just point out that you can judge us by our employees and how they feel about us. And the Lehigh Valley is actually the unit -- or the bargaining unit in questions is 90 employees out of about 6500 that we have company-wide. And that's the only area in the company where we have an issue like this, and we're trying to work through it. Also, I would that many companies -- I would venture to say good companies, like RCN, have labor disputes that they have to work through. And you work through them and sometimes it's painful, but when it's over, you try to get back to the work of the day and do what you have to do. 115 10/31/00 PUBLIC PROPERTY, BILL 000452 So I don't that think it would be fair to characterize our -- a lack of feeling about our employees because we have a labor dispute. Good companies have labor disputes, and they try to work through them.
Well, there's always a suspicion, when a company makes it difficult and very time-consuming to have a decision on labor representation, there's always a suspicion amongst workers in the community at large that the company's doing it for selfish reasons. They don't want to have to engage in bargaining at an equal level with the employees because it may mean changes in working conditions, it may mean higher wages, that kind of thing. So that when the company engages in the kind of procedures you are and there's hearings and then appeals from unfavorable recommendations, and then you said and then you're going to have to decide when the next decision is made whether you're going to appeal that decision, it sounds to me that you're projecting something that may indicate years of labor strife. And Philadelphia has a long tradition 116 10/31/00 PUBLIC PROPERTY, BILL 000452 of believing that companies and workers ought to be able to get together of there's good faith on each side. And I have to say that from my point of view, it doesn't appear as if you are introducing the elements of good faith in your relationship with the employees. Thank you, Mr. Chairman.
Thank you. I apologize if you've already covered this, but were you referring to the labor dispute with North Hampton County?
Could you -- did you reveal the fact that the National Labor Relations Board issued a statement about what went on there? Did you elaborate on that?
Would you please (unintelligible) on there on what you were accused of or charged with, whatever the proper terms are? May I read something that I have and just tell me if this is accurate?
"In a decision, a judge found that RCN engaged in wholesale violations of the National Labor Relations Act, beginning in September 1998, with an independent union, which then represented certain RCN employees in North Hampton County, Pennsylvania, affiliated with the CWA. The result of that affiliation was to set off what can only be described as a campaign of terror in which RCN" -- and then there are many points listed here. Could you just describe what was described as a campaign of terror?
From someone that's 118 10/31/00 PUBLIC PROPERTY, BILL 000452 going to testify here today.
Well, I'm not suggesting that. They were a judge's phrase, and this is a --
And I don't mean to interrupt, but when we have that witness testify, they'll still be here and they can rebut whatever's been said, rather than jump ahead, 'cause we still have the City and we have a number of people left.
I was just asking the question because I thought, obviously, you were accused of this type of activity even before the person wants to testify. And since we're talking about the labor relations --
Well, they haven't be accused on the record yet, so as soon as that happens, we'll allow them to respond. I just want to make sure we don't get off in -- 'cause they'll all be here anyway. 119 10/31/00 PUBLIC PROPERTY, BILL 000452 Any other questions for these witnesses? (No further questions.)
Thank you very much. The Chair now calls Mr. Perez, the Public Property Commissioner, but also would ask that any other support staff that he has with him to please also accompany him to the table for backup. (Witnesses come forward.)
Good afternoon, Commissioner. How are you? COMMISSIONER PEREZ: Good afternoon.
Thank you. Please identify yourself formally for the record and proceed. COMMISSIONER PEREZ: My name is Andres Perez, A-N-D-R-E-S, P-E-R-E-Z, and I'm the Commissioner of the Department of Public Property.
Do you intend to read your testimony or would you like to summarize it? We probably have a number of questions for you and Mr. James, and you could probably submit 120 10/31/00 PUBLIC PROPERTY, BILL 000452 your -- (Unintelligible, parties talking over each other.) COMMISSIONER PEREZ: Because much of the prepared testimony is factual information that's already been repeated a number of times during the course of your questioning.
Why don't you highlight what you think is important to your testimony. I'm sorry, Councilman Cohen, do you have a question?
I was just wondering whether it would be shorter if he read it rather than summarize it?
Are you intimating that the Commissioner is long-winded?
I'll rely on his judgment. COMMISSIONER PEREZ: In English or Spanish?
He can do it bilingually, thank you. Please proceed, with the ad -- as you 121 10/31/00 PUBLIC PROPERTY, BILL 000452 know, we're under time constraints. COMMISSIONER PEREZ: Certainly. As I indicated earlier, I'm the Commissioner of the Department of Public Property, and present with me today, Mr. Chairman, is: Deputy Commissioner Joseph James; Mr. Vincent Costello, of our Communications Division; and Mr. (unintelligible) and Mr. Sutton from the Law Department. Those gentlemen have been the principal negotiating team representing the departments in the City's interests throughout the course of the development of this agreement. Bill No. 452 was originally introduced in June of 2000. It remains -- the agreement remains substantially the same. There is an amendment which clarifies certain aspects of the build-out plan, which I'll ask Mr. James to summarize.
My name is Joseph James, Deputy Commissioner, for the Department of Public Property. We have submitted an amendment to Appendix J, which further clarifies specific 122 10/31/00 PUBLIC PROPERTY, BILL 000452 aspects of the build-out construction in the Center City area based upon some recent plans that we received from RCN. We have submitted them to the Chair for consideration with this bill.
You can proceed. I'm just trying to have staff try and find it for me an. Is this an addendum as far as a map is concerned or is it an amendment to the bill?
It's an amendment -- it replaces Appendix J that was originally submitted with the bill back in June, and it replaces that bill entirely. And it further articulates the Center City section of their construction, which deals more in relationship to their telephone side of the operation as opposed to their video programming side. And it spells out specific sections of the original OVS agreement that applies to those sections of the Center City area that is just telephone-related.
Could you give me a general idea as to how old this amendment is?
Yeah, it's fairly new, and we apologize for not having it to you earlier.
Okay, thank you. And during the course of your testimony, could you give a relatively comprehensive description of its need and what it does?
In the original OVS agreement, and understanding that the OVS agreement was designed to provide a method for RCN to be in the right-of-way, to be authorized to provide telephony-related service in addition to video programming services throughout the entire county. And in those sections of the City that are not going to be applied for as a traditional cable franchise, RCN will begin the right-of-way as an OVS operator, basically providing a bundle of telephony-related service, local service, long-distance, and Internet services. The normal mode of operation for the City in dealing with a company who wants to be in the right-of-way is to have a right-of-way 124 10/31/00 PUBLIC PROPERTY, BILL 000452 ordinance, which is a separate ordinance that basically just says you're authorized to be in the streets, you're authorized to lay cable fiber optics, and you're authorized to go on a certain route of maps throughout the City as you designate where you want to be. And it just has certain provisions that protect the City's interests. The interim OVS agreement is much more comprehensive and it extends beyond a traditional right-of-way agreement, and this is more to the question that's been asked several times today as to why an interim OVS agreement versus a traditional cable franchise. So if we just -- for the second (unintelligible) discussion regarding Areas 3 and 4, which are part of the traditional geographic area that identifies the cable franchises and look out through the other areas of the City that RCN is offering service, there is a specific area of Center City that they plan to construct -- there was a set of maps that were included in the original package. Based on discussions that RCN had with the Streets Department over their specific routes 125 10/31/00 PUBLIC PROPERTY, BILL 000452 that they wanted to lay Center City area, which allows them to connect much of their corridor service, which is a traditional telephony model, there are specific sections that were, let's say, restricted from them going into the market - in particular, let's say, Chestnut Street -- that was just done under a federal grant. There is a five-year moratorium on construction in the excavating into that right-of-way. So in the discussions we had with RCN, they had alternate plans to not go onto Chestnut Street so they wouldn't excavate that. They would not go into parts of South Broad Street that were also recently redone. So what was in the original Appendix J spelled out that corridor in Center City District. What the City recognized and in its review of their plans was, there are certain aspects of the interim OVS agreement that provides the City protections about how they would provide services in those areas that we wanted to incorporate into the document. There are certain specific areas that are cable-related that we wanted to exclude. 126 10/31/00 PUBLIC PROPERTY, BILL 000452 So in the second page of the Appendix J in the lower portion of it, it list specific numbers of sections of the interim OVS agreement that would apply specifically to the Center City or the corridor area. And that was the reason for the appendix and the revision of the original Appendix J.
Now, let me try to say back to you what you just said to me, 'cause I'm not really sure. There are certain areas outside of and that they need to get into in order to complete their plans for 3 and 4. So they're the lease equipment, lease right-of-way from -- not right-of-way, they're the lease conduit and other material that's outside 3 and 4, it's in basically Area 1?
It's basically in Area 1, it's in the Center City area. It is conduit, either leased or built conduit --
-- in the Center City corridor, which really is the Center City business district that they will be in as part of 127 10/31/00 PUBLIC PROPERTY, BILL 000452 connecting their overall system, which extends of the Philadelphia area.
But with not cable television, only Internet and telephone.
Their original plan, as part of their Philadelphia, was not to go into those markets right now and offer video programming. What I understand from all of our discussions is that they needed to connect their fiber that transverse outside of the Philadelphia County to collect into the Philadelphia systems so that they provide the bundle of services in areas -- not only in 3 and 4, but offer telephony service in other areas of the City, because they are different and distinct from any other provider that we've had before you, is that they are a competitive local exchange company and a video provider. So they're unique in certain areas, they're a telephone company.
Why wasn't this amendment a part of the original OVS agreement? 128 10/31/00 PUBLIC PROPERTY, BILL 000452 Was the opportunity to partner with this organization not known at the time?
No. The reason for the amendment was the original Appendix J that we include in the bill was based upon the maps and the designs that we had for the areas of the City that they wanted to construct. What we didn't have was the benefit of having the discussions with the Streets Department to include those moratorium areas in areas that they plan to do in their construction over the next couple of years so that RCN had to alter the design of their plan. When that was submitted to us, it was apparent to us that we should also kind of codify into the agreement the specific protections to make sure that people understood that in those areas where they're only offering telephone service, certain parts of this interim OVS agreement does apply. The ones that are cable-related would not apply, but the other ones do, and that's why we spelled out specific sections.
In this particular section of Area 1, will -- RCN is proposed to be 129 10/31/00 PUBLIC PROPERTY, BILL 000452 able to offer competitive Internet and telephone service?
They have the capability. It's up -- again, it's at their option whether or not they want to offer it.
And it was their choice not to do television there but to simply do Internet, and is that due to the nature of that particular part of Area 1, that it's not -- it's primarily and predominantly office and not as residential as other areas?
I don't want to put words into RCN's mouth, but I would say that based upon the map of the design, it's mainly the Center City commercial corridor, which is either high-rise apartment buildings or office buildings, office towers, and commercial businesses.
So the residents of the high-rise apartment building in that particular part of Area will have the ability to theoretically get competitive phone and Internet 130 10/31/00 PUBLIC PROPERTY, BILL 000452 service but not television.
Not without getting a cable franchise. So if they decide as part of the Center City area that they provide telephone service to, let's say, the Rittenhouse Plaza and decided tomorrow that, you know, they would like to provide video programming into those folks as well, they would have to come by, and that's why it's identified in the agreement, and apply for a traditional cable franchise.
So I guess that leads me to my next question, which is, we've been discussing this OVS agreement versus franchise most of the afternoon. If it's good for Area 3 and 4, why is the not good for Area 1? And I'm not suggesting that anybody get it, but I'm saying, it seems on one hand the OVS agreement is in the best interest of the RCN, and you're going to testify, I assume, in the benefit interests of the City, when in this portion of Area 1, it's not in the best interests of the 131 10/31/00 PUBLIC PROPERTY, BILL 000452 franchise, the potential OVS, the potential -- RCN and the City.
Well, I would answer it a little different than as you phrased it. I would say that from the times the initial discussions with the City when RCN first came to the City was that we were, you know, as part of their FCC filing to become an OVS, we were served notice that they are now certified by the Federal Communications Commission to be an OVS operator in the Philadelphia market. That means that under the Telecommunications Act, they have to come to the City and enter into an OVS agreement with the City.
And that has to be an OVS agreement or could it have been a franchise? Can we cover ourselves under federal requirements by granting a franchise as opposed to an OVS agreement?
Well, that's why I wanted to be specific, is that under the federal communication regulations, as an OVS operator, they enter an OVS agreement. It's their option if they want to take the traditional model of a cable 132 10/31/00 PUBLIC PROPERTY, BILL 000452 franchise.
It's not our -- we do not mandate that; that's why they apply at the federal level, not at the local level, for that application and certification. And the federal communications certifies whether or not they're financially and technically able to provide this type of service. It was designed for telephone companies who want to get into the cable business.
So that unilateral choice of the company is certainly in their best interests, not necessarily in the City's best interests.
It may be, depending on the economics. It's something that they decide. They come in, they say, This is our certification, we want to enter an agreement. And the regulations are somewhat limited because it hasn't really been as developed as a traditional cable regulations, so there are some certain uncertainties about what would apply and what not would apply. The only things that were specific is that the federal government says that cities have right to get a 133 10/31/00 PUBLIC PROPERTY, BILL 000452 franchise fee, you have a right to get paid commitments. And that's pretty much it. I mean, it kind of limits what things we can ask for.
In your opinion, is it better for the City to have a franchise agreement or an OVS agreement despite what the federal government has said about the requirement for OVS?
I think in the areas where they are going to video programming, the traditional cable franchise agreement works. And I would say that --
Well, in any area of the City that they wanted to offer video programming, the best model that provides a lot of certainties for both RCN and for the City is a traditional cable franchise. We've incorporated it into this agreement to allow that to occur and they offer that service.
And you believe we're in that position because the federal law mandates that the company coming in makes the choice -- OVS or a franchise. 134 10/31/00 PUBLIC PROPERTY, BILL 000452
Well, the company has an option -- has a right under the federal act to come in and be an OVS operator and not enter a cable regulation. But then they are open to whatever the vagueness of the regulations are. And I think a company of RCN or any company that wants to come in and expend the amount of dollars that's required to construct in that area needs a lot more certainty, and that's why the traditional cable franchises are attractive. What we've tried to do in this bill was to recognize their federal status, to recognize their public utility status as a competitive local exchange company, and also to identify those requirements that would be important to the City; if they never got a cable franchise, what things would the City value. The City would want to value the same things that we got under the traditional cable franchise, and that's why much of what's in the agreement is what looks like a cable franchise. As you said earlier, it looks like it, it smells like it, why isn't it a cable franchise? What we tried to do to is just limit 135 10/31/00 PUBLIC PROPERTY, BILL 000452 ourselves to the discussion of, let's acknowledge the fact that they're an OVS operator, let's do what's been done universally. And so far in what we have seen in other major cities is, given the status as an OVS operator, but we -- both parties agree to an interim period where they were allowed to be able to function under that, but to identify areas where they would want to offer video services and move out of that document and move into the traditional cable franchise. But for those areas of a city where they're going to offer telephone service and be a regular telephone company, their rights are protected under the Public Utility Commission as a competitive local exchange provider and under the FCC as an OVS and that OVS. And that OVS status allows them at a future time, based on the economics and based on a lot of the other drivers, to leap into the video service. And then we then have the right, and then Council has a right, for them to come back before you and apply for a traditional cable franchise that would be under the scrutiny and the questions and concerns that we would normally ask of anyone who wants to have 136 10/31/00 PUBLIC PROPERTY, BILL 000452 a came franchise and ask them for those obligations.
Or under this proposed agreement, just continue to extend the OVS contract out for ten years.
Yes. They could stay -- and that would allow them to stay in the right-of-way, because without that, they would not have the authorization to be in our right-of-way in those areas where they don't have a cable franchise.
Then what's the motivation to become a franchisee? I mean, if you can extend this two-year OVS agreement for ten years, where is the advantage of ever becoming a franchisee?
Well, if you follow what the RCN -- what they say is their value is a bundle of services, and that bundle includes video services, then the advantage to them is that this document preserves their right at a future time and date that they determine to be where they are able to provide that service and ensure that they can meet the obligation to transfer into that. 137 10/31/00 PUBLIC PROPERTY, BILL 000452 Without that, there is no preservation of that right other than a traditional right-of-way.
If we're giving them video ability now in and and they can continue doing that work for 10 years, where's the motivation on their part to be a franchisee? They can just continue on over a 12-year period and stay an OVS.
They can stay an OVS provider as long as they don't offer video services.
Well, they're offering video service in Years 1 and 2.