COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON PUBLIC PROPERTY - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, December 11, 2008 10:45 a.m. - - - PRESENT: COUNCILMAN DARRELL L. CLARKE, CHAIR COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN BILL GREEN COUNCILMAN WILLIAM GREENLEE COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN KRAJEWSKI COUNCILWOMAN DONNA REED MILLER COUNCILMAN FRANK RIZZO COUNCILMAN BRIAN O'NEILL COUNCILWOMAN BLONDELL REYNOLDS BROWN BILL 080879 - An ordinance authorizing the Department of Public Property to enter into a franchise agreement with Verizon Pennsylvania, Inc... - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good morning. For those of you who are waiting for the public meeting for the Public Property Committee, my apologies to you for the delay. We will now start the hearing that was recessed from last week. This is the Committee on Public Property and Public Works. This will be on Bill No. 080879. Our first witness is, we will have the Commissioner of Public Property and Mr. Joe James. (Witnesses approached witness table.)
CIO. Thank you, sir. COMMISSIONER SCHLOTTERBECK: Good morning, Mr. Chair and members of the Public Property and Public Works Committee.
Good 3 12/11/08 - PUBLIC PROPERTY - BILL 080879 morning. COMMISSIONER SCHLOTTERBECK: Commissioner Joan Schlotterbeck from Public Property. I'd like to correct for the record my testimony earlier. There was a typographical error, so I would like to correct that. The original testimony, it was , Paragraph 3, Bullet Point No. 11 1. It read "4 million in annual grants over the franchise term, which is $500,000 per year for eight years, and an additional 2.7 million spread over the" -- I'm sorry. Forgive me. I'm reading it backwards. The original testimony is Paragraph 3, Bullet Point 1, "4 million annually and an additional 2.7 million spread over several years to support Public Access programming." The correct testimony is -- and it's already been submitted. It's a matter of record. I just want it to be publicly on the record. 4 12/11/08 - PUBLIC PROPERTY - BILL 080879 Paragraph 3, Bullet Point No. 3 1, "4 million in annual grants over the franchise term, which is $500,000 per year for eight years, an additional 2.7 million spread over several years to support Public Access programming." Thank you.
Good morning. My name is Joseph James, First Deputy Chief Information Officer for the Division of Technology in the Managing's Director's Office. Good morning to the Chair and members of the Committee. As a result of the first hearing, we went back and had some further discussions with Verizon in relates to the area of the build-out and in specifically into the area of the performance bond, and we are prepared to introduce an amendment today that reflects the changes that we've negotiated with them. And I will just 5 12/11/08 - PUBLIC PROPERTY - BILL 080879 summarize what the changes are, and I'll also provide a map that also reflects the change. As you recall in the conversation, there was two phases of the build-out. The initial phase was going to be for three years and the second phase was going to be for four years, and we identified a number of wire centers in that. And based on the conversation, we specifically wanted to address the level of construction as it is phased in the Northeast. So what we've added to the build-out is an additional wire center in what's called the Mayfair Wire Center and additional wire center called the Knights Road Wire Center. To allow for that build-out to be successful, we've also amended the construction phases so that the first phase will take -- not to be completed within four years as opposed to three years, and the second phase to be completed no later than three years. 6 12/11/08 - PUBLIC PROPERTY - BILL 080879 With the change in the schedule, we've also changed the level of performance on the milestones. The original milestone was a three-year milestone, with a 32 percent build-out and a five-year where we would measure the performance to the number of income to the total number of income in the City, and then we had a six-year phase that they would be at 70 percent. We've now changed it so that the four-year phase -- there will be a four-year at 45 percent and by year -- it's right in the amendment. Sorry. The four-year benchmark would be at 45 percent, and a six-year benchmark, they would be at 85 percent of the total households within the wire center. So we have a significant increase in the number of percentages from the construction. We've changed the time period for the construction to incorporate more wire centers, and we've maintained a threshold at the fifth year 7 12/11/08 - PUBLIC PROPERTY - BILL 080879 to make sure that the measurement to the number of households that are constructed are within the median income of the total population of the incomes in the City. So we believe that in this amendment, we are addressing the concern of trying to be as inclusive as possible and also to increase the percentage of the construction to be more successful so that they can get the build-out completed a lot faster. The additional part of the amendment is that we've gone back to deal with the area about the performance bond, which ensures the completion of the build-out, and what is proposed in the amendment is from Years One through Seven, the performance bond will be set at $13 million. So in the original phase, it was a ramp-up from a million five in the first year and it got up to the latter year, six, seven and eight, at 13 million. Now what's being proposed in the amendment is a $13 million 8 12/11/08 - PUBLIC PROPERTY - BILL 080879 performance bond from Year One all the way to Year Seven, and then it would decline to $3 million at the out years. So those two areas deal specifically with the construction and with the performance. In addition, one thing that we didn't spend a great deal of time talking about is the Economic Opportunity Plan that's also part of what's being proposed, and in the Economic Opportunity Plan lays out a certain percentage of performance in supplier diversity.
Verizon, as they testified last week, has a history of doing this here in the market and does have a Supplier Diversity program, and in their last year when they looked at it, they were generating about $114 million in business with suppliers here in the Philadelphia marketplace, which represented about 14 percent of business. What is proposed in the Economic Opportunity Plan is for them to 9 12/11/08 - PUBLIC PROPERTY - BILL 080879 increase that five percent over the next five years so that by Year 15, they will be at 30 percent, and, of course, they have a specific plan to increase the number of inclusion into awareness about what exactly -- their Supplier Diversity program, how contractors get on there, how they get access to bids. So they have the opportunity to bid on a growth of new business that will happen through the build, as well as just general Verizon business in general. And we think that's very beneficial to minority, women and disabled businesses in this particular marketplace. They've also agreed to the creation of jobs during the construction, which would generate about approximately 100 new jobs, Verizon jobs, here in Philadelphia during the construction phase. And we take that, along with the -- there is a training component, that they will provide training to minority, women and disabled businesses. 10 12/11/08 - PUBLIC PROPERTY - BILL 080879 And, of course, there's opportunity for new jobs through their service centers, and they're going to operate four service centers, very similar to Comcast provides today, which will generate between to 7 50 new jobs. 8 So we believe the package of 9 amendment and additional enhancements to 10 the Economic Opportunity Plan will 11 provide a better value added to the 12 original proposal that we brought to you 13 at the first hearing. And now we're just 14 prepared to answer any questions you may 15 have. 16
Thank you. 17 Just real briefly, and I have a couple of 18 questions by members of the Committee. 19 Real briefly, on the 100 new jobs, can 20 you be a little more specific about the 21 types of jobs or at least categorize them 22 as best as possible. 23
In general, during 24 the build-out, there will be a number of 25 new jobs that are created in both the 11 12/11/08 - PUBLIC PROPERTY - BILL 080879 technical field that will be Verizon employees that these jobs will be created for, but it will be specific around technical, customer service. There would be some construction jobs I'm sure that will be created as a part of this build-out, because they're going to do a significant amount of new construction and investments. So they have identified categories in the technical field, the construction field, the customer service field that some of these new jobs will be created in.
How will we know, "we" the City, know that these are new jobs and not simply jobs moved from other locations that Verizon has currently as its employees?
One component about the compliance in the Economic Opportunity Plan is, the Office of Economic Opportunity will be receiving quarterly reports from Verizon on their performance to all of the categories that 12 12/11/08 - PUBLIC PROPERTY - BILL 080879 we talked about in the Economic Opportunity Plan, including their employment. In addition to the quarterly reports, there will be an annual report, a face-to-face meeting, with Verizon representatives to talk about their performance in those particular areas, and, of course, the head of the Economic Opportunity Office has the ability to request information about their performance at any point in time as they continue their build-out.
Now, traditionally the Economic Opportunity Plan and the individual monitoring such plan deals specifically with MBE, WBE and DBE. Will that person also be monitoring activity relating to jobs that don't -- or individuals who don't fall within those categories? Is that their responsibility to all 100 jobs and just not simply --
No. Councilman, to answer your question, the Office of 13 12/11/08 - PUBLIC PROPERTY - BILL 080879 Economic Opportunity will be monitoring their performance in the Supplier Diversity program. They'll be monitoring the number of firms that actually go through the program. They will be getting reports on the number of bids that they actually bid on. They'll be getting numbers on the actual spend rate on what the actual -- the spending dollars that are attributed from the suppliers. So they will be --
There are going to be 100 new jobs created, and my assumption is that the hundred new jobs will not all fall within the categories of MBE, WBE, DBE. The question is, who is going to monitor the entire 100 jobs, those jobs that are not within those categories, to make sure that these are new hires and not simply individuals that have moved from other locales? 14 12/11/08 - PUBLIC PROPERTY - BILL 080879
I just want to do a follow-up question to this whole issue of inclusion and diversity. Who is writing the Equal Opportunity Plan? Because I have not seen it. Is there a draft? When is it going to be ready?
There is a draft. We can provide that to you today. But the Economic Opportunity Plan was drafted between -- as part of the negotiation process that we went through between 15 12/11/08 - PUBLIC PROPERTY - BILL 080879 Verizon and the Administration.
And it's my understanding it's going to be monitored by Michael Bell's department?
That's correct. He has reviewed it and gave his input, and some of the enhancements to the Economic Opportunity Plan is the result of his input.
How does this differ from when you did the first agreement with Comcast back in whatever? I was not a member of Council then, but I do believe I read in the paper that there was minority inclusion built in for the four franchises. And now this is -- cable has been here, as we all know, for a long time, and now comes Verizon, and they're dealing with the citywide issue. So how does the minority inclusion other than the employment, how does that build in? Help me understand that.
Sure. In the 16 12/11/08 - PUBLIC PROPERTY - BILL 080879 Economic Opportunity Plan, because the nuances in the Verizon franchise is different than what the original cable franchise was with Comcast, we've taken the same basic foundation to say there has to be an area that deals with suppliers. So in the Economic Opportunity Plan, there is a section that speaks specifically to the level of engagement and providing business opportunities for minorities, small businesses and disadvantaged businesses here in the Philadelphia area. So in the Economic Opportunity Plan it lays out a set of steps that Verizon is intending to do to demonstrate their ability to increase their performance. So the first phase of that was to understand what has been their spend rate so far. So as I mentioned to -- what we did is, we looked at their history, and they provided basic information that says that in their past, they spent about $114 million in suppliers and they had about a 14 percent 17 12/11/08 - PUBLIC PROPERTY - BILL 080879 interest. So in the Economic Opportunity Plan, it established a five percent increase from the first five years, that they will increase that number five percent, and then another five-year increase. So similar to the way the Comcast plan is where they have percentages and good-faith efforts to get to those goals, the same thing is in the Economic Opportunity Plan. And part of the difference between Verizon and the Comcast deal is, not a lot of businesses are familiar with how to actually participate in that job opportunity or contracting opportunity, so they have set a set of steps where they are going to meet with the different chamber of commerces, educate people about what their Supplier Diversity program is all about, help them get people into the Supplier Diversity program so they can get certified and then make sure that they can then monitor 18 12/11/08 - PUBLIC PROPERTY - BILL 080879 their participation to bid as opportunities come out, so they can then demonstrate that they're meeting their numbers.
Well, that's good, and I think the Supplier Diversity program is probably a good program, but I think what I'm talking about more, when the City was broken up, you had minority people providing cable, that kind of --
Yeah. In the original four franchises, there was a concerted effort for Area Two to carve out a franchise, that Wade Cablevision had that franchise, and they were a minority firm. This is different because they were talking about a single company, which is different than --
So the idea is that 19 12/11/08 - PUBLIC PROPERTY - BILL 080879 this is a little different because you have a private firm who wants to build out the entire City. We're not doing four different individual franchises, which the original model was to try to get four different firms to kind of get competition about building out, because they would have different areas to target it. This is -- I said this is the difference, and it kind of reflects the nuances where we are in technology and in the business world. So we have Verizon offering to build all four franchise areas. We don't have it kind of set at one particular franchise for minority business, but they have a program that has minority inclusion, which is similar to what we have today where we have Comcast, which is not a minority firm, but has the ability to engage minority businesses as part of their suppliers and for new business opportunities.
Excuse me. There's a point of information on the 20 12/11/08 - PUBLIC PROPERTY - BILL 080879 point of information. Councilman Green.
Thank you, Mr. Chairman. I want to correct a few statements that have been made and then talk specifically about what happened under the Green and Goode Administrations. But the percent that 11 you just cited is not MBE, WBE. It 12 includes categories that our Economic 13 Opportunity Office does not look at, and 14 I want to have you make sure that the goals are based on our criteria of measurement and not Verizon's, which includes other people besides -- that our group does not, veterans, et cetera. Under then-Mayor Bill Green and Mayor Wilson Goode, the City developed, proposed and finally implemented a policy that a percent minority participation 23 inclusion via minority ownership 24 opportunity be established for the 25 grading of cable franchises. In 21 12/11/08 - PUBLIC PROPERTY - BILL 080879 addition, each cable provider, each, was required to have a minority partner or minority ownership opportunity within its own franchise agreement in the City of Philadelphia. I don't understand if you're doing this citywide or not why that cannot be a part of this, and I'd like to understand why the Administration didn't think that that kind of arrangement should be a priority.
Well, it's not a question of whether it's a priority. It kind of reflects where we are. Comcast today is not a minority firm. I don't believe they have a minority partner for each of the four franchise areas that they maintain ownership.
But they did have minority partners, and those people worked with them and sold out to them eventually and did very well, and that's the kind of opportunity that that process was intended to provide, and why don't we want to provide that opportunity today? 22 12/11/08 - PUBLIC PROPERTY - BILL 080879
And, again, Councilman, I think the difference is that back then in the 1980s, this was a brand new fledgling opportunity and it was viewed as a fledgling opportunity to create a brand new opportunity. This is a different marketplace today. Comcast is a mega corporation nationwide. It's not one franchise area either. And we're trying to get a franchise for a nationwide corporation that's competing on the nationwide level and we're trying to make sure that there's parity, and I don't believe that we have the same ability to create a policy by which we can tell them that they need to create -- a percentage of their business needs to be set aside for minority businesses.
Councilman, I don't believe that came up in our discussions. What came up in our discussion was to find the parity between the franchise agreements, and then the franchise 23 12/11/08 - PUBLIC PROPERTY - BILL 080879 agreement that we have with Comcast was renewed. It set aside minority participations in the agreement, and that's what we went to do.
Your testimony is, we did not try for minority inclusion or ownership stakes; is that correct?
Mr. James, for the record, I want to say that this brief delay we've had in this process has already improved the product, am I 24 12/11/08 - PUBLIC PROPERTY - BILL 080879 correct, that we have already made improvements to this franchise agreement?
Okay. Are there any areas in the Verizon build-out that will not be completed, that there's 100 percent build-out -- the plan. Are there any areas that we know that are going to be excluded?
Could you explain to me why Comcast does not serve public housing, and will that model continue with the Verizon build-out? Public housing has got an -- you can explain better than I.
I think in both agreements there is a difference in that residential property versus what they call multiple-dwelling units, and in the 25 12/11/08 - PUBLIC PROPERTY - BILL 080879 Philadelphia Housing Authority, when they first started out, had a lot of high-rises, which would have been privately owned multiple-dwelling units which we cannot make them provide service to, because it's an arrangement between the company and the owner of the property, very similar to whether it's the Symphony House or it's The Phoenix or any other property. If it's privately owned, whether it's a condo or just an apartment building, that building owner has a right to set terms by which they provide service in their building, and that's in negotiations between the two of them.
So you're talking about towers that no longer exist was the rationale for that?
Could you revisit with this Verizon deal and also go back to Comcast and PHA to see if that arrangement could change? 12/11/08 - PUBLIC PROPERTY - BILL 080879
Councilman, I believe much of what's changed now that PHA has changed the type of property stock and they're moving more things onto the block and making them part of the residential block, I think that no longer has that same kind of multiple-dwelling unit kind of creation. So I believe that that won't be an issue to have those conversations with the Housing Authority to the extent that that's possible between Verizon and the Housing Authority.
About their ability to provide it? I think there's a willingness for Verizon to provide service to everyone. I think they have to negotiate under what terms that will 27 12/11/08 - PUBLIC PROPERTY - BILL 080879 happen.
Well, I think that should be part of the negotiation. You're talking about an antiquated model that goes back 20-some plus years that should be revisited, especially in this deal, and possibly go back to Comcast to see if there can't be this direct relationship and not have to have this in-between relationship.
Well, there's nothing in the deal that prohibits that from happening. I mean, to the extent that the properties are residential and they're on the block, Comcast or Verizon can service them like they can service any other residential customer.
My last question is, these negotiations have been going on now since early summer. Could you provide to the Chair all the parties involved in the negotiations, the consultants, et cetera, please?
The names of all 28 12/11/08 - PUBLIC PROPERTY - BILL 080879 the people that were involved? Well, besides Michael Athay in the Law Department and myself, it was Paul Trane, who give testimony at the previous hearing; Brendon Pinkard, who also gave testimony at the previous session; Marie Lasota, who works for Verizon. And that's basically --
Could you provide the Chair a list of everyone that was involved in these negotiations?
Thank you, 29 12/11/08 - PUBLIC PROPERTY - BILL 080879 Councilman. I actually wanted to -- I'll recognize you in a second, Councilman. I just wanted to add to the issue with respect to the Philadelphia Housing Authority build-out.
I agree with you. I think we had this conversation where the traditional conventional sites, multi-unit developments, are becoming a thing of the past and they're converting the properties that are on the street grid. Unfortunately, those properties that have been converted still do not have service from a cable operator and they're still serviced, I believe, by Wilco. I know one in particular, because I got some questions asked by one of the residents there up in Schuylkill Falls. So I believe that there is still an opportunity, although those properties have been converted to 30 12/11/08 - PUBLIC PROPERTY - BILL 080879 accommodate the traditional street grid. So in that conversation, it's not sure that those PHA properties that are still owned by PHA will automatically be a part of either the incumbent or any new cable franchise within the City of Philadelphia. So there could still be an opportunity for a minority partner who currently happens to have the contract with PHA. In the event that Verizon was able to enter into that, there will still be some opportunities both in conventional and possibly in the newer type of models of development that PHA owns.
I understand, Councilman, and we'll take that information back to both Verizon and they should have that conversation with the Housing Authority, find out what the terms of that -- and they'll work something out. The one thing I did wanted to just kind of add to my testimony, if you 31 12/11/08 - PUBLIC PROPERTY - BILL 080879 would be indulging, is in reference to the question about the minority franchise question of Councilman Green. It's in the Cable Act that we cannot condition a franchise with a minority ownership. So there is a legal basis why that policy that occurred in the early days is no 9 longer a policy that we can implement today, because there have been changes in the law that won't allow us to do that.
I think, Councilman, there was an earlier point that I kind of jumped the gun on. It was a point of information by Councilman Green.
I yield to Councilman Goode. 32 12/11/08 - PUBLIC PROPERTY - BILL 080879
Thank you, Councilman. Mr. James, you said that the federal act does not allow you to require it.
Good morning, Councilman. We cannot condition a franchise agreement with that condition as part of the reasons why we provided them a franchise or deny them a franchise.
Which means that you cannot require it and we could not reject it based upon that. It does not mean that you cannot ask for it and they could not offer it.
It's not against the law for you to ask for it. It's not against the law for them to offer it. 33 12/11/08 - PUBLIC PROPERTY - BILL 080879
Councilman, we could ask the question as -- if they wanted to provide it. We could ask the question.
My point of information was in reference to Councilman Rizzo's question about consultants, and what I wanted to point out to the Chair and the Committee is that in the '80s, City Council in fact hired its own consultant to help advise it with respect to the cable contract. It got its own advice, and it was very involved in adding additional terms that benefited the citizens of the City of Philadelphia. And I think that might be a model that this body should look at, because in this short delay, through the negotiations of the Chair and the Public 34 12/11/08 - PUBLIC PROPERTY - BILL 080879 Property Committee, you have already improved the contract, as Councilman Rizzo pointed out. We might be able to do a little bit better. Thank you.
Thank you, Councilman. Point well taken. Any other questions by members of the Committee for these witnesses? (No response.)
There being none, thank you. I'm assuming you will stay around --
Have you circulated it? I think we've circulated the EOP amendments. Do you want to offer the amendments now?
We do want to offer 35 12/11/08 - PUBLIC PROPERTY - BILL 080879 the amendments.
Have you circulated them? Okay. We have the EOP plan, but we don't have any of the other amendments. Mr. James, before you leave, there's going to be the need to have some questions or some explanations about the map, the expanded Phase 1 area. Would it be best for you to do that, the Administration, or would it be best for the Verizon individuals to do that? We still don't have the street grid, so it's still a little difficult to get a sense of exactly what those areas are.
If you don't mind, we could do it together with the Verizon folks if you want or we can go --
We'll just hang around. Maybe we can answer the questions together.
Okay. 36 12/11/08 - PUBLIC PROPERTY - BILL 080879 Thank you. Next we're going to have the representatives of Verizon. (Witnesses approached witness table.)
For the record's sake, my name is Tabb Bishop, Vice-President of Public Policy for Verizon Pennsylvania, and looking forward to answering the questions that the Committee may have today, as well as presenting some information for your benefit.
My name is Paul Trane representing the Verizon 37 12/11/08 - PUBLIC PROPERTY - BILL 080879 Pennsylvania. Since completing six months of negotiations with the City, Verizon has met with Committee members and staff, held a briefing, listened to comments of the general public and answered a myriad of questions about our proposed franchise. At the hearing last week, Committee members asked Verizon to improve our availability of service to the Northeast section of the City, which we are willing to do. Verizon was asked to increase the performance bond during the build-out of the Verizon network, which we're willing to do. Verizon was asked to ensure that there be job and economic opportunities for Philadelphia residents and businesses, which we are also willing to do. It is this last commitment on jobs and economic opportunity that I would like to speak to you this morning about. There is an unprecedented 38 12/11/08 - PUBLIC PROPERTY - BILL 080879 economic crisis going on in our country. In November alone, 533,000 jobs were eliminated. According to Moody's, 30 states are officially in a recession. Since our last hearing, telecommunications companies have been announcing layoffs. AT&T alone announced 12,000 layoffs. Today, the NBC/Wall Street Journal poll shows that the American people feel that unemployment is the number one issue facing the country. The budget crisis that the Philadelphia City government is facing demonstrates that no sector of the economy is exempt from this crisis. Unlike the bad economic news that engulfs us, the Verizon franchise is a good-news story. If approved, the franchise will trigger the largest investment in telecommunications infrastructure in the history of the City. It will help to preserve jobs. The 2,000 members of the Philadelphia-based Verizon workforce is 39 12/11/08 - PUBLIC PROPERTY - BILL 080879 among the most diverse workforce in the City. Forty-four percent are minority. Forty-seven percent are women. In addition to jobs preservation, as part of the Verizon franchise, Verizon has agreed to an Employment Opportunity Plan to expand both employment and opportunities for Philadelphia-based businesses. The Verizon EOP calls for Verizon to create not less than 100 new employment opportunities in the City during the next six years of the franchise. Some of those jobs will be new; some of those jobs will be moved from elsewhere in the State to increase wage tax opportunities in the City. In 2007, Verizon spent $114 million with Philadelphia minority, women, disabled, small business enterprises. In the new EOP plan put forth today, Verizon commits to increasing the 114 million by 20 percent by 2014, 25 percent by 2019 and by 30 40 12/11/08 - PUBLIC PROPERTY - BILL 080879 percent by 2024. This $34 million increase will provide an estimated 50 additional employment opportunities through greater procurement to Philadelphia-based businesses for services ranging from street markings to right-of-way restoration to IT services and construction-related services. Additionally, Verizon has committed to open four local customer service centers that present even more local employment opportunities. Market research taken since our last hearing indicates that close to 80 percent of your constituents want you to take positive action on the Verizon franchise. And why wouldn't they in this economic environment? Current jobs will be preserved. New jobs will be created. Millions of dollars in new revenue will be generated for the City. Economic opportunity will be enhanced for local businesses, while consumers will get choice and competition. Without your 41 12/11/08 - PUBLIC PROPERTY - BILL 080879 immediate action, none of this would be possible. Under the Communications Act, the Committee and the Council is to determine only whether Verizon has the financial, technical and legal qualifications to operate a cable system. S. has met this criteria.
Additionally, Verizon has operated within the bounds of Bill 53-A passed in 1984, which provides the local framework from which cable franchises are approved by your board, your Council. We've been here. We've tried to answer all your questions. We're here this morning to answer any additional questions you have, and we respectfully request action on our proposal. Thank you.
Thank you. First I'd just like to say that 42 12/11/08 - PUBLIC PROPERTY - BILL 080879 I want to thank you all, first of all, at Verizon for expressing an interest in the City of Philadelphia. I know that a number of our constituents have asked about this FiOS animal that we've been hearing about so long, and I don't know what it looks like, but it must be good, because a whole lot of people are asking for it. So I just wanted to thank you all for expressing a significant interest in the City, and hopefully we can come to a conclusion that will allow you to benefit all of the citizens of the City of Philadelphia, and as most people think, there will be that opportunity to provide the level of competition that will hopefully bring our rates down a little bit in the City. Councilwoman Krajewski.
Thank you. Of course, you know what my question will be. Can someone relay to me exactly what this map -- it's a little 43 12/11/08 - PUBLIC PROPERTY - BILL 080879 confusing. Will you extend it for the Northeast?
In the interim, Joe James is going to pass out an additional map that might help clarify.
One of the issues is that it references, I guess, the call centers, but it doesn't really talk about street grids, the ones that we are more familiar with. So if you can... We're having a side-bar, folks.
I wish they would have done this before this, Mr. Chairman. Thank you.
Thank you. You have extended it quite a bit. I wish I had seen this before, though.
Thank 44 12/11/08 - PUBLIC PROPERTY - BILL 080879 you.
Thank you, Mr. Chairman. Just so I'm clear on the map -- and, again, I agree with Councilwoman Krajewski, you certainly extended it and you took care, I think, of a lot of the concerns that people had. And before I even get into that, I know you have addressed a lot of the questions we've had generally. The addresses, I think the Chairman alluded to it, but I'm not real clear. The addresses you have on this map, they are what now?
Those are the addresses for the Verizon wire centers that are referenced on the map. That was in response to a request from a Councilmember to specify those locations.
So the idea with that was to give a little bit 45 12/11/08 - PUBLIC PROPERTY - BILL 080879 more specificity even though we'd like a real street breakdown, but I know you alluded to what you think the problem is with that. Explain exactly what a wire center is. Maybe that's the easiest way to ask this.
As we touched on at the last hearing, Verizon is deploying its network based on its existing telecommunications infrastructure, which is comprised of wire centers. That's 14 where all the switching equipment and all 15 the telephone equipment currently 16 utilized by Verizon exists today. 17 Through the process of 18 Verizon's deployment, Verizon will 19 upgrade those facilities and then extend 20 fiber through the geographic areas 21 covered by those wire centers. 22 So this map reflects the wire center boundaries that exist. And those don't necessarily cover political boundaries or any other defined 46 12/11/08 - PUBLIC PROPERTY - BILL 080879 boundaries. They're just a function of our existing infrastructure. What we've tried to show here on the map is those wire center boundaries overlaid against Council districts, and then in addition to that, we've added the specific addresses for those wire centers.
In addition, if I could, Councilman. What the City just handed out, Joe James handed out, was taking those wire centers that we've now addressed on the map and then tying those to the specific zip codes that they serve.
I appreciate that. I think that does give us a lot more idea about where we're talking about here.
I recollect this a little differently. I don't think 47 12/11/08 - PUBLIC PROPERTY - BILL 080879 it's important to me to know where the wire centers are, but I thought we were going to have in each build-out the actual street boundaries of the build-out. A line here doesn't mean much to me. So even though you've provided the wire centers -- I used to call them central offices. Is that the same thing?
-- that we wanted, at least I wanted, a map that showed Broad Street, where Phase 1 was going to start. That's what I recollect the request was.
What was asked of us at the last hearing, we did discuss that and what we informed the Committee, that we consider the detail of that proprietary, but we were willing to provide it, as Comcast does, in a hearing or a meeting with the Commissioner, and that's what we agreed to, just as Comcast did. After talking it through with the Committee, there was a request to provide 48 12/11/08 - PUBLIC PROPERTY - BILL 080879 zip codes tied to the, as you noted, wire centers or central offices. That's what we provided. So what you have is the list of wire centers and what zip codes they serve.
Point of information. Councilwoman Miller. COUNCILMAN DiCICCO: You should wait for me to ask a question. You can have another point of information. 49 12/11/08 - PUBLIC PROPERTY - BILL 080879
So the zip code list does not indicate order of build-out. It's just information about when the map says Germantown, then these are the zip codes that's included in the Germantown area, correct?
So it doesn't mean that this will go first, that will go second, because that's what you don't want to divulge, correct?
Thank you, Councilwoman. Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Mr. Chairman. Good morning, gentlemen. 50 12/11/08 - PUBLIC PROPERTY - BILL 080879 Mr. Trane, while I don't have a copy of your testimony, I do appreciate the comments that you made in referencing the issues that we're faced with in this country and in this region about jobs, and I do appreciate that should this franchise be awarded, that there will be some jobs coming, significant jobs, coming to the City of Philadelphia. But I think I talked to you about this at the last hearing. I just wanted to restate it for the record. In addition to the competition that people want, probably deserve -- and have the opportunity for jobs is a main issue for us; in particular, the issue of the call center. And I understand that that's not an issue that your company is willing to consider, and if I'm wrong, you can correct me, but as we move forward in this process, I think you recall at the last hearing I said that I think we're going to get to where we need to get to and I think that at the end of 51 12/11/08 - PUBLIC PROPERTY - BILL 080879 the day, maybe not today, but at the end of the day shortly, you're going to have a franchise agreement. But I really would like for that issue of the call center to be continued to be discussed, because for me and the rest of us, those are jobs that we consider to be if not Philadelphia jobs, at least the facility would be located in Philadelphia and help us with our tax base. I don't know if anyone has discussed it with you. We have a lot of great opportunities in terms of incentives for new businesses to come in. We have KOIZ zones. We have all kinds of places in which I believe a facility such as a call center would work well. There may be some economic benefits to locating a call center within one of those KOZ zones or KOIZ zones that may offset some financial concerns that you may have. So I just want to put that on the record as we move forward through 52 12/11/08 - PUBLIC PROPERTY - BILL 080879 this process, and ask that you seriously consider that and keep discussing those issues with Mr. James and the folks in his department as well.
What we've negotiated is a cable television franchise. It simply allows Verizon to provide video or cable service to residents. The call center is not directly related to the cable franchise. That being said, obviously Verizon will continue to talk with the union about the location of this facility that you've mentioned. Those talks will be ongoing. I'm sure they'll be lengthy, but they're not directly related to the franchise. I'll point out, though, that it's called a call center for a reason. Customers call there. We don't have any customers. The need for a call center will only increase if we get a cable franchise and get customers. 53 12/11/08 - PUBLIC PROPERTY - BILL 080879 So what we would request is, pass our franchise, allow us to compete with Comcast, allow us to get customers, and I'm sure that those discussions with the union will be ongoing. COUNCILMAN DiCICCO: I respect what you're saying, and this is not a reflection on you, but when it gets from you up to the top guys, they may not agree that once they get the franchise, then they'll consider doing a call center. I'm not an attorney, so somehow we got to figure out, if we can, how the two are linked together. Because I can understand you not wanting to have a call center unless you have a franchise, but there's some way there should be an opportunity for us to be able to link the two together. And while I have a good relationship with the union, this is not necessarily about the union. It's about jobs. So you understand that. Certainly I would suspect that the union would be the folks who would do the work, but this 54 12/11/08 - PUBLIC PROPERTY - BILL 080879 is about jobs, and how the union issues shake out is for other negotiations between Verizon and the union.
Understood. What I'm simply pointing out to you, Councilman, is, those -- we have great faith in the union members. That's how this network will be built. Those discussions will be ongoing. What I'm simply pointing out to you is that the call center is not directly related to the requirements of providing a cable franchise. COUNCILMAN DiCICCO: Understood.
That's all I'm pointing out to you. COUNCILMAN DiCICCO: But it's part of what you do. It's part of --
Absolutely, and what we're willing to do -- COUNCILMAN DiCICCO: -- the business of cable.
Without question, 55 12/11/08 - PUBLIC PROPERTY - BILL 080879 and what we're willing to do is talk to the Council and the Administration about ways and helpful items that you've mentioned that could be used so that the company is fully informed of what the City would like to offer the company. However, the presence of that in a cable franchise is well beyond the scope of what the Communications Act allows. COUNCILMAN DiCICCO: Understood.
That's all I'm saying. COUNCILMAN DiCICCO: Understood. Thank you. I appreciate that. Mr. Bishop?
Yes. Councilman, good morning. If I may add just a little bit more clarity on this issue, too. I should say it's more in a tangential kind of way. It's important, I think, to put on record that Verizon is not resistant 56 12/11/08 - PUBLIC PROPERTY - BILL 080879 to any ideas about trying to create opportunities. We're very Philadelphia focused in what we do. That's what led to at the beginning part of this year we made an announcement to bring over 400 new jobs to the City of Philadelphia. With that, up through July, all those jobs have moved from surrounding counties into the City proper. These are certainly good-paying jobs at a variety of different levels. So I think as the conversation exists about looking forward, in a forward direction, I think we also have to kind of look at what's happened in a very recent kind of way. I mean, less than a year ago we made this commitment to the City, and we followed through on that committee. So I think it's a strong statement of where Verizon is as it relates to jobs in the City of Philadelphia. COUNCILMAN DiCICCO: Thank you.
Point of 57 12/11/08 - PUBLIC PROPERTY - BILL 080879 information.
Oh, I'm sorry. Councilman Goode. Councilman Goode, your mike is weak. It's kind of hard to hear up here.
Thank you, Mr. Chairman. Mr. Trane, you said that the call center is not on the table because it's not directly related to the cable franchise; is that correct?
Is your Economic Opportunity Plan directly related to the cable franchise?
Actually, no. It expands the opportunities for all phases of the Verizon Pennsylvania business.
So the call 58 12/11/08 - PUBLIC PROPERTY - BILL 080879 center is not on the table because it's not directly related to the cable franchise, but your Economic Opportunity Plan in general is not related to the cable franchise. Is that a contradiction?
No, because, as you know, the City requires an EOP plan to be submitted.
So what is your Economic Opportunity Plan based upon? If not the fiber to the premise network, if not the FTTP network, which is the actual project that we're here to discuss, if your Economic Opportunity Plan is not directly related to that, what is it actually related to? What is it based upon? Who wrote it? And why is it different from other Economic Opportunity Plans that have been submitted to this Council?
The cable franchise itself does not provide any new ability for Verizon to build its network. 59 12/11/08 - PUBLIC PROPERTY - BILL 080879 Verizon currently has the right to build its network without the cable franchise. The cable franchise itself is simply providing Verizon to provide cable service. Verizon already has the right to build on your streets in your right-of-ways pursuant to local law.
My question is, what is the Economic Opportunity Plan based upon? Is it directly related to the FTTP network? Is it broader? If it's broader, why is it broader? Who wrote the plan? And why is it different than other plans that we have received?
Because most plans are project based, and since you raised the issue of the call center not being project based, I'm raising the issue of the plan not being project based and why you submitted a different type of plan.
Because, as I noted, if we simply tied the Economic 60 12/11/08 - PUBLIC PROPERTY - BILL 080879 Opportunity to cable service, it would be very little to offer the City, because we --
So, in other words, the actual FTTP network that we're approving may not necessarily have that much economic opportunity?
Again, point of clarification, if I could, Councilor. You're not approving the building of the FTTP network. If the Council deems it appropriate to approve the franchise, you're approving only the provision of cable service. We already have the right to build the FTTP network.
The cable franchise, let's use the term "cable franchise." So, in other words, the cable franchise itself, in and of itself, does not necessarily offer that much economic opportunity?
Well, outside of the fact that we pay the City $11.2 million -- 61 12/11/08 - PUBLIC PROPERTY - BILL 080879
But it does not necessarily provide opportunities related to jobs and the use of disadvantaged businesses?
Correct, because we've expanded on that, because what the EOP calls for is for Verizon Pennsylvania as a whole to provide the economic opportunity. That means --
So when you have these goals as Verizon Pennsylvania minus the cable franchise, would you be increasing your economic opportunity goals anyway? I mean, you're using a baseline standard of 2007.
You would not be increasing your goals for doing business with minority and women businesses if you were not building a cable franchise?
I'm talking 62 12/11/08 - PUBLIC PROPERTY - BILL 080879 about your percentages, not the dollar amounts.
What I'm saying to you is, the economic reality is that Verizon could not afford to build this plan, invest a billion dollars in the City of Philadelphia without having the ability to provide cable service. That's why we haven't started building --
That's not the question I'm asking. Since you're basing your Economic Opportunity Plan based upon Verizon Pennsylvania as opposed to just the cable franchise and you use goals for Verizon Pennsylvania, not necessarily for the cable franchise, minus the cable franchise, if there was no cable franchise, how would your economic opportunity goals increase? You used a baseline standard of 2007, which is before there's a franchise, right?
The question is, you used a baseline standard of 2007, 63 12/11/08 - PUBLIC PROPERTY - BILL 080879 which is before there's a cable franchise; is that correct?
So I can clarify, the 2007 money spent by Verizon absent a cable franchise in the City of Philadelphia for minority-owned businesses was $114 million, absent the cable franchise.
Absolutely. So my question is, how would your numbers increase from percent if there were no 13 cable franchise? 14
What we agreed to do -- we always strive to increase minority participation.
My question is, how would it increase if there were no cable franchise?