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?
First of all, we wouldn't have submitted an EOP plan because we'd have no requirement to.
No, I'm not saying 64 12/11/08 - PUBLIC PROPERTY - BILL 080879 that. What I'm saying is, we would not have submitted an EOP plan. Absent any submission to the City, 47 percent of the workforce is minority. Absent a cable franchise, we've spent $114 million in your city. With the cable franchise, we're saying we'll increase that by $34 million.
So it is my right to ask you the question. Minus the cable franchise, how would your participation in minority and women businesses increase after a five-year period, after a ten-year period, after a 15-year period? Because your Economic Opportunity Plan says that after five years, it would go from 14 percent to 19 percent. After another five years, it 20 would go to 25 percent, and after that, another five years, it would go to 30 percent. My question is -- the numbers would be lower in terms of dollar amount without a cable franchise. My question 65 12/11/08 - PUBLIC PROPERTY - BILL 080879 is, would you be doing more business with minority and women-owned businesses minus the cable franchise and what would those numbers be? You're starting with your baseline standard of 2007 being 114 million and percent. I'm asking how 9 was that going to increase minus the 10 cable franchise? And that's a fair 11 question to ask. 12
Without question, 13 but the premise is based on this: If we 14 don't get approval of a cable franchise, we will not --
I'm asking minus the cable franchise. I'm not talking about the cable franchise now.
There won't be any investment in the City of Philadelphia at all without a cable franchise. 66 12/11/08 - PUBLIC PROPERTY - BILL 080879
But you will spend money in Philadelphia and you will spend money as you did in the baseline year of 2007 where you spent 114 million with disadvantaged businesses, which amounted to percent. I'm asking, how 8 would that increase anyway minus the 9 cable franchise? And it is going to be 10 the same question. 11
Obviously the 12 number would increase above the 114 13 million, but it would increase at a much 14 greater rate if we're investing a billion dollars in your community.
But my question is, how would it increase minus the cable franchise? I'm going to ask the same question over and over again. If you say you don't know, you don't know, which means you don't envision how you'd be doing more business with disadvantaged businesses minus a cable franchise. I'm asking you, did you envision it? Did you have an Economic 67 12/11/08 - PUBLIC PROPERTY - BILL 080879 Opportunity Plan internally before you decided to do a cable franchise, and how would that change in terms of these numbers? The dollar amount might go down without a cable franchise, but would the percentages be the same?
Your point is 100 percent right. If there's no cable franchise, there's no EOP. You're 100 percent right.
There's no 13 EOP that's submitted to the government, but what's your internal Economic Opportunity Plan in terms of how you would be doing business with disadvantaged businesses, how that might increase over five years, over ten years, over 15 years as you have here?
If I may step in for just a moment, Councilman. One of the things I think it's important to point to is Verizon's commitment to minority business enterprises, minority, women, disabled and veteran-owned 68 12/11/08 - PUBLIC PROPERTY - BILL 080879 business enterprises, and that commitment has been longstanding and certainly is the case even before we got to the place of discussing the cable franchise. What happens at Verizon is, because we're a national company, we do business in over states, that we have 9 more of a national focus in terms of how 10 we do business with minority, women, 11 disabled and veterans. 12 I guess if I can use the word 13 "minority business" to cover all those 14 categories without insulting anybody, I'd 15 like to do that, just to kind of make my 16 conversation a little easier. 17 For minority firms, we have -- 18 Verizon is a member of the Billion Dollar 19 Roundtable, which, again, those select 20 group of organizations that spend over a billion dollars with minority business across the country. So the commitment is there. What happened through this franchise is that it created the opportunity for a 69 12/11/08 - PUBLIC PROPERTY - BILL 080879 different kind of discussion where we could get -- we have an Office of Supplier Diversity that runs -- that's chiefly responsible for kind of making sure and tracking and monitoring, but making sure that we are looking at ways of doing business with minority organizations. So long way/short one, we are at a place now where we could create the dialogue between the Office of Supplier Diversity and the City in that regard. So we expect that we'll be able to work in that area.
Actually, my question is, what would your internal goals be for economic inclusion minus the cable franchise?
Are you 70 12/11/08 - PUBLIC PROPERTY - BILL 080879 saying there would be no goals?
Every year Verizon increases the amount of business it does with minority vendors in the City of Philadelphia. That's what our goal is. We have over 2,000 employees, of which 47 percent are women, 44 percent are minority and --
That's what I'm referring to. And we spent $114 million here last year.
In 2007, that's your baseline standard, 2007. Then you have a standard after five years, after ten years, after 15 years with a cable franchise. I'm asking minus the cable franchise, what would your goals be for five years, ten years and 15 71 12/11/08 - PUBLIC PROPERTY - BILL 080879 years? Would they not be --
Obviously it would be reduced, because we wouldn't be investing in the City. That's my point.
The dollar amount would be reduced. Would the percentages be reduced?
I'm not going to speculate on whether the percentages are going down. Obviously more investment --
I'm not asking you to speculate. I'm asking whether you know.
You just said, I do not know what our economic inclusion goals would be minus a franchise.
No. What I'm saying is, it's commonsense to believe that the more you invest, the more 72 12/11/08 - PUBLIC PROPERTY - BILL 080879 opportunity and the more jobs it creates. That's our point.
My question -- and I will actually look to the flip side of that and say, so if you do not have a cable franchise, then you will still increase to percent after 9 five years, 25 percent after ten years 10 and 30 percent to 15 years? 11
We're not 14 talking contractual obligation. We're 15 asking what your goals are. 16
No. We are talking 17 about a contractual obligation. That's 18 what a franchise is. 19
Mr. Bishop, when a business or a residential 73 12/11/08 - PUBLIC PROPERTY - BILL 080879 telephone user calls a Verizon business office from Philadelphia, where are those call centers presently?
There's approximately ten call centers across the country that handle a variety of calls that come in now.
Don't we have one that just serves this region for our --
Each one of them is set up based on the amount of calls they're getting to be able to transfer calls from one call center to another.
I understand overflow. I'm talking normal business day. I from home call. I want to add a feature. I want to talk about my bill. Where are those call centers presently? Tell me where the ones that are servicing first Philadelphia.
Councilman, I don't know if I can use the term "first" in quotes that way, but there is an 74 12/11/08 - PUBLIC PROPERTY - BILL 080879 operation actually that moved -- when I spoke about 400 jobs that moved from the ring counties of the City, some of those jobs moved in from the suburbs into the City over at our facility at 900 Race Street.
They do receive phone calls there. It's not an FSC, but it is a --
If I want to talk about my phone bill or I want to add Direct TV -- you're a reseller for Direct TV, correct? If I call and I want television service presently through Verizon, who am I talking to? Where am I talking? (Witness talking without microphone.)
Mr. Reid, if you have an answer, you have to come up to the mike, or if you're just going to relay it, that's fine. Identify yourself for the record, please.
So wouldn't it be safe to say that if you're already a reseller for Direct TV, the satellite television service, that those customers eventually would be handled by the same call centers that you already have established?
As you may know, there are less than 6,000 Direct TV 76 12/11/08 - PUBLIC PROPERTY - BILL 080879 customers in the City of Philadelphia.
Those would be resell customers of Verizon. So there are very few of those among the 1.5 million people in the City. But that agreement with Direct TV is an agreement between Verizon and Direct TV. There's a special number that people call to handle that. They're not called out of the location here in Philadelphia.
Well, I called to talk about my phone call, not to digress, but the person that I talked to about my phone bill tried to sell me Direct TV.
Well, it happened. But my point is, wouldn't the grand plan of Verizon be to incorporate the television aspect of business into 77 12/11/08 - PUBLIC PROPERTY - BILL 080879 the same call centers that handle dial tone?
The idea is to create centers that can handle any of the services that Verizon would provide.
So you're suggesting that there's going to be need for a new call center, then why not in Philadelphia?
I'm not suggesting that. What I've said to you and to the Committee is that the idea of a call center tied to a cable franchise is beyond the scope of the law. That's what I've said. What I'm suggesting is that the company will continue the work with the union on the location and the need for call centers. What drives a call center is new customers.
I have a question, Mr. Chairman, for the Administration in reference to this. Could I talk to the City lawyer for a moment? 78 12/11/08 - PUBLIC PROPERTY - BILL 080879
Yes. Councilman, actually, what we were thinking about doing, because we have a lot of people here who came down here for purposes of being a part of the Council session, and a lot of them are looking at us wondering why are they down here. They did not come here for cable or anything else, other than being a part of the traditional Council session. So what we were thinking about is recessing this hearing and allowing the individuals -- I think we have three presentations -- and get those on, so these folks can go on about their business. Then we can come back and continue the discussion. Is that okay?
So we're going to -- if I had known I was going to get applause, I'd have done this earlier. 79 12/11/08 - PUBLIC PROPERTY - BILL 080879 Folks, we're going to recess the public hearing on Public Property and Public Works, and the Council President is going to come up and start the session, have presentations, then we'll go back into the hearing. (Committee on Public Property and Public Works recessed from 11:50 a.m. to 12:45 p.m.)
We're now going to reconvene the Committee on Public Property and Public Works. We ask the Verizon representatives to please come back to the witness table. (Witnesses approached witness table.)
Thank you. Mr. Chairman, if you recollect before we started the Council session, I asked for the City attorney.
He's coming now. 80 12/11/08 - PUBLIC PROPERTY - BILL 080879 (Witness approached witness table.)
Mr. Chairman, I'd like to yield for a moment to Councilman O'Neill. He has a question. And he'll be able to leave after he asks his question. Is that okay with you?
Point of clarity. I'm not concerned with the -- what I'm seeing here is Phase under the original plan and Phase under the original plan and then Phase 1 and Phase 2 under the revised plan. I'm not sure I have the latest information here, but for clarity's sake, the original plan was only a week ago. The new plan is roughly seven days, eight days later. Phase went from three years a week ago and now 81 12/11/08 - PUBLIC PROPERTY - BILL 080879 it's four years out of the seven-year build-out. And I've never played the shell game, but I've watched it a lot, and slight of hand is really fun to watch, but not to be a victim of. That's not so much fun. And I want to make sure that that isn't happening. If there's going to be an improvement by more build-out in the first three years in my district, which I've asked for -- and the Chair has been very helpful and other members of the Committee and Council, members of the Administration I know trying to work on that -- I want to be able to say that there will be X number percentage more build-out in my district in the first three years. I don't care what you call the phase. I mean, you could say this is a seven-year build-out. I think we should know what first year, second year, third year right down the line is, because that's really the only way you can tell. 82 12/11/08 - PUBLIC PROPERTY - BILL 080879 But in the new four-year build-out, I want to know whether the area in my district, which is the Knights Road office, is going to be built out in the first three years, which wasn't the case a week ago, or whether it's in the fourth year, that new year that's been added to Phase 1, which would mean that it's not changed. It's just we changed the length of Phase 1.
Sure. We reached an agreement with the City on the original build plan a couple of months ago, and obviously following that, submitted to the Council. Since the last hearing, we've proposed to amend the map to include, as you've indicated, more of your district in the build, and what that means is that all those areas indicated in Phase will be started in Phase simultaneously and they'll be built out over that time 83 12/11/08 - PUBLIC PROPERTY - BILL 080879 period to include the four years and the 45 percent of the City benchmark.
I haven't seen anything yet that shows the Knights Road office, which is in my district, in the new Phase 1.
I have some arrows here, but they don't mean anything to me. And -- I'll wait for the Chair. (Pause.)
Okay. What I don't have here -- and I don't think we're going to have it today -- is what the original percentages were per district. I mean, I can eyeball them pretty clearly, but that's all it is. The company has the information. And as 84 12/11/08 - PUBLIC PROPERTY - BILL 080879 I said to the Verizon representatives when we met two weeks ago, I don't want you -- and I know you've tried not to cherry pick. That was a problem in the past and it's a problem in different parts of the country. That's difficulties in this area. But I want you to be fair. I don't need a big percentage of this, but I don't need to be embarrassed either when I go to a whole lot of Verizon phone customers and tell them that they've been shut out. And that was exactly what was on the map that had been worked out with the City over six months. There was several areas. And I'll use the Northeast since I'm most familiar with that. And this doesn't take any fault away from six months of negotiating on the City's side, because what happened as a result of those six months of private negotiations was that we wound up with a map that if we were New York City would have excluded, virtually excluded -- ten to 15 85 12/11/08 - PUBLIC PROPERTY - BILL 080879 percent build-out is not anything but virtually excluding something, an area -- Staten Island and Queens. And I can assure you that New York City did not start their first map without Staten Island and Queens having a fair piece of what was being done over the five boroughs. And I'm not sure what the percentage is in this with the change to Phase 4, with the simultaneous build-out, and also what -- and this is what happens when you actually have discussions -- and we'll have the opportunity hopefully over the next couple months -- is, I've got a colleague to my left who is the first at-large I think to ever live in my district in history. And he's not in the Knights Road office, and that's not a problem for me. I just don't know why. I'm going to have to listen to Councilman Kelly and his neighbors, and they rightly could ask, How come Knights Road got it and Orchard didn't get it, one side of the Boulevard, the other. And, again, my 86 12/11/08 - PUBLIC PROPERTY - BILL 080879 whole district would have to get built out in Phase 1 for all that to happen. I'm not looking for that. But I would like the courtesy, because other than telling Verizon a little over a week ago that I felt that I had been deceived, because I sat there and said, Is this a fair map, and that fair map had about ten to percent build-out in my district, 11 and, Oh, the map is fair, don't worry 12 about it. Well, I relied on that. I 13 don't want to rely on anything until I 14 get full information. I don't think 15 we're having it here today. There are other issues, the call center. I think they're very legitimate. I think the liquidated damages is very legitimate. I've worked on the performance bond side. I've worked on the liquidated damages side. If I wanted to penalize somebody or have them agree to a penalty, it wouldn't be a performance bond. No knock on surety companies and insurance companies. It 87 12/11/08 - PUBLIC PROPERTY - BILL 080879 would be liquidated damages. That's what ensures commitments. No one ever wants to do liquidated damages that they've agreed to. But I would just ask the Chair, if it's possible, if that amendment on the map -- and this is a lot of progress, just what I've heard here -- could be held until we come back to the continued meeting, because I think more will get done in that atmosphere, or maybe nothing will have to be done, but we won't have to get back to what we're doing today, walking in and hearing something at the last minute. Even what was on my desk wasn't accurate. It still had the -- it was an amendment, but it still had the same information as last week, and obviously that's changed this morning, and I thank you for that.
Thank you, Councilman. Councilman, with respect to the actual amendment, it's my understanding 88 12/11/08 - PUBLIC PROPERTY - BILL 080879 that all of the changes are in one document. So I'd ask the Administration what the process would be as it relates to portions of that amendment, and hopefully before we conclude today, we'll have an understanding as to what, if anything, can be deleted or altered or changed --
And putting on the Administration's hat, beat them up, because I really think they screwed up a fairness issue in a major way on this map, but it's being corrected. And to the extent that the amendments today are showing progress in a fairly short period of time -- and I thank the whole Committee for the work, especially the Chairman -- this map might as well stay in, because it is reflective of the improvement that's occurred over just a little over a week, and hopefully 89 12/11/08 - PUBLIC PROPERTY - BILL 080879 in almost two months later there'll be that much more significant improvement in the entire picture here. I only mentioned the three areas that I'm most aware of as a member not on the Committee, and hopefully it will all be resolved by the time we get this bill out. Thank you.
Thank you very much, Mr. Chairman. I would just like to point out that when things happen in private, without consultation with the key stakeholders, mistakes are made that have to be corrected in a very public process rather than involving key stakeholders up front, and this has applied throughout 90 12/11/08 - PUBLIC PROPERTY - BILL 080879 the last three months, and hopefully this hearing, Councilman O'Neill's expressed frustration and other members of Council who feel the same way, hopefully we can have a different process as we look to future cuts that have to be made and we look to improve this agreement. Thank you.
Michael Athay, Chief Deputy City Solicitor in the Law Department.
Thank you, Counselor. Counselor, Councilman O'Neill touched on this, but I would like for the record you to explain the difference between liquidated damages versus the performance bond and why we have not, according to my colleague, done the best 91 12/11/08 - PUBLIC PROPERTY - BILL 080879 to protect our interests.
The surety bond is a kind of insurance policy. The surety bond is a kind of insurance policy if the principal on the bond defaults on obligations under a contract, then the obligee on the bond, in this case the City, has the right to require the surety to perform the contract to cure the breach, in effect. If the bond amount is sufficient, as we believe it now is, to cover the breach, it is a very industry standard form of protection. Our contracts typically require surety bonds, contracts generally, technology contracts in particular. The liquidated damages are a monetary equivalent of the damages that the parties believe a particular breach can represent. Not really a fine, but 92 12/11/08 - PUBLIC PROPERTY - BILL 080879 it's a way of covering damages, of liquidating damages, so that the amount of the damages -- they're already quantified. Liquidated damages are a terrific remedy. Technology contractors, including cable companies, including technology contractors, generally are very resistant to liquidated damages. It's a tough penalty. The question is whether you have to have liquidated damages in order to be protected against a breach, and my judgment is that a surety bond is good and sufficient protection.
Excuse me, Counselor. Councilman O'Neill has a point of information.
Just some perspective. I was told several years ago when Verizon was getting into the FiOS business -- and Comcast was obviously interested in them not succeeding. And they're competitors. That's what happens with competitors. 93 12/11/08 - PUBLIC PROPERTY - BILL 080879 The National League of Cities, we heard Comcast, we heard good arguments, it sounded good that you won't get the -- the local governments will not get financially what they're getting from the cable companies. Verizon primarily, but anybody going into the phone company side of going into cable, said, No, we'll pay everything they're paying right up front, no negotiations, you just tell us what they're paying, that's what we're paying, you can't have a better, fairer deal than that, and I agreed with that. I am told -- and we'll have several weeks at least to verify this -- that it's standard operating procedure in the cable business -- I'm not talking about the technology business, which is much broader than that -- that liquidated damages is in the cable contracts. That may be bad information, but right now that's all I've got to go on. We have plenty of time to check it. It is something that any one of 94 12/11/08 - PUBLIC PROPERTY - BILL 080879 us would resist if we didn't have to do it, and we would be so happy to have a surety bond. Surety bonds are insurance. They're better than nothing, but nobody wants to decide ahead of time that big question of damages. It's like on a real estate contract -- and that's where many people know -- it's done. You did it or you didn't do it. You already decided in advance. You can't complain about the amount of the damages because you already agreed to them. And what it does, it assures -- unless the company is out of business, they're going to comply with what they agreed to. It really keeps your commitments where they were at the beginning.
Thank you, Councilman. Counselor, let's go back to the liquidated damages versus the performance bond. The incumbent, did they have liquidated damages or a performance bond?
The incumbent has a 95 12/11/08 - PUBLIC PROPERTY - BILL 080879 liquidated damages provision in the renewal agreement.
And a much smaller performance bond and construction bond, but much smaller than the bond that is in this agreement.
So why would we differ in our legal position for Verizon than we did with the incumbent?
Well, it's not a matter of deferring, Councilman. We negotiated very hard over many issues. Verizon refused to pay liquidated damages.
We looked hard at the security that is necessary in order to protect the City. We required that the security be increased during the high-risk years, the build years. Verizon complied with that requirement of 96 12/11/08 - PUBLIC PROPERTY - BILL 080879 the City. The City's judgment is that we have adequate protection. Pretty much any contract, including any franchise agreement, you can look at it and you can find ways to make it better for one party or the other. This was a tough negotiation. That was a compromise.
Tell me, when was the last time the City collected, if ever, on a performance bond?
Well, we go against performance bonds on construction contracts. We go against performance bonds when there's a breach. It's not a real --
Have you collected any -- has there ever been revenue collected from a performance bond?
Could you 97 12/11/08 - PUBLIC PROPERTY - BILL 080879 get that information for the Chair? I'd like to know how many occasions in, let's say, the last five fiscal years that we've ever acted on a performance bond.
Who is the ward leader of the 15th Ward, by the way?
Thank you, Mr. Chairman. Question in a different vein, if I could. Councilwoman Miller and I were talking about this. Community Advisory Board, is there a plan to have one with Verizon? I think there is one with Comcast. Has that been discussed? Is that something that's -- 98 12/11/08 - PUBLIC PROPERTY - BILL 080879
Well, what we indicated at the last meeting, although there's no contractual obligation for Comcast to have an Advisory Board, our understanding is they have one, and Verizon is committed to work with the community. If they want to have one, we'll participate.
So you're saying there's no contractual obligation, but you are going on record that you're committing to having one?
I'll also point out, Verizon will have a franchise service manager dedicated to Philadelphia. It will be an employee that will be the liaison between the company and the government and the community.
Okay. 99 12/11/08 - PUBLIC PROPERTY - BILL 080879 All right. Thank you. Thank you, Mr. Chairman.
Thank you, Councilman. Any other questions of these witnesses by members of the Committee? Councilman Green.
It doesn't necessarily have to be these witnesses, but while they are there and while Mr. James is still in the room, I asked two pieces of information be delivered to the Chair before the next hearing, and I just wanted to check and see if you had gotten it. They were going to do a chart of the different cable franchise agreements between --
It's my understanding that you do have them, Mr. James; am I correct?
Would you please deliver it to the Chair. I don't need to look at it now, but just make sure the Chairman gets it so he can disseminate it to the rest of the Councilmembers. And I think that chart will show that some of those agreements have liquidated damages clauses. Thank you.
I don't know if we asked for -- I think we asked for rates. Do you have any other information?
I asked for all material terms of the contract be prepared, every single material term.
Okay. So you'll still have to get that, right? Okay. All right. There being no other questions, thank you very much for your testimony. I don't have to ask you to stay around, because I'm sure you will. Thank you. I'll try to move this along. 101 12/11/08 - PUBLIC PROPERTY - BILL 080879 Our next panel, we actually have -- Mr. Medin, am I correct, Russell Medin? Ms. Schaffer is still here. I know you were at the last hearing. I want to get you on as quickly as possible. And then we're going to have Ms. Brigitte Daniels from Wilco. You actually can come up now, have a seat, and then we'll talk to Ms. Schaffer. I think you may have different issues, but...
It's good to see you on this side, after covering your exploits for many years.
It's actually good to see you at that side, too. 102 12/11/08 - PUBLIC PROPERTY - BILL 080879
So my name is Gwen Schaffer and I'm testifying on behalf of the Philadelphia Digital Inclusion Coalition, and I'm here to urge City Council to ensure that this franchise agreement with Verizon includes free Internet accounts for low-income residents, as well as funding earmarked specifically for Broadband deployment. And we're thinking that those earmarks either as part of the $2 million technology grant or preferably as a separate grant. About half of all Philadelphians lack Broadband access at home. Since EarthLink shut down its network this past summer, the City of Philadelphia has failed to offer an alternative plan for getting low-income residents online. This is particularly 103 12/11/08 - PUBLIC PROPERTY - BILL 080879 ironic given that many of the policy priorities articulated by City Council and the Nutter Administration require reliable Internet access. Among the Mayor's most prominent campaign issues was improving the graduation rate for public school students. Yet, students can't do basic research without a Broadband connection. The City's goal to expand economic development necessitates that small business owners have access to high-speed Internet at affordable rates. Mayor Nutter also ran on a platform of creating transparency in government, which means posting information electronically and communicating with constituents online. Furthermore, ubiquitous access would make City services far more efficient and actually save the City money. Already Philadelphians with Internet connections benefit from more government services than those who lack 104 12/11/08 - PUBLIC PROPERTY - BILL 080879 access. To name just a few, the Department of License and Inspection's website enables property owners to obtain electronic permits and forms. The Philadelphia court system is increasingly moving functions online, and beginning in January, the Court of Common Pleas will require that all civil suits be filed electronically. Through the Philadelphia Police Department website, residents with Internet access can file complaints about non-emergencies, like narcotics activity and abandoned vehicles in their neighborhoods. The Streets Department urges residents to report potholes online. As part of the Philadelphia's community alert system, officials will send emergency alerts to residents' e-mail accounts. Numerous studies demonstrate that closing the digital divide helps close other divides. This refers to 105 12/11/08 - PUBLIC PROPERTY - BILL 080879 disparities in education, healthcare, housing and economic opportunity. For instance, Americans who possess technology and computer skills earn higher incomes than those who lack so-called digital knowledge. An increasing number of Americans depend on the Internet to locate healthcare information. Today, McDonald's and Home Depot accept only job applications filed online. The reality is that digital communications are becoming integrated into nearly every aspect of our daily routines. Whether that entails registering for a college course, getting a SEPTA schedule, e-mailing our Councilmembers or even downloading a grocery coupon, these tasks comprise our economic, social and cultural lives. Complete participation in these realms is impossible without Internet access. Philadelphia lags behind the national average for Internet access. 106 12/11/08 - PUBLIC PROPERTY - BILL 080879 For this reason, I again urge City Council to ensure that the franchise agreement with Verizon includes earmarks for Broadband deployment and free Internet accounts for low-income residents. Thank you for your time, and I'm happy to answer any questions.
Thank you. Thank you so much for your testimony, Ms. Schaffer. Sorry that you had to come back. Thank you. Before I proceed, I had on the witness list, there were a number of ministers here, but I do not see them. So I'm just going to ask if they're in the hallway or they're within earshot, please come forth. I do not see them, do not hear them, so we're going to proceed to Ms. Daniels from Wilco. (Witnesses approached witness table.)
Good 107 12/11/08 - PUBLIC PROPERTY - BILL 080879 afternoon.
Good afternoon. Mr. Committee Chair, Councilmembers of the City of Philadelphia, members of the audience and members of the press, thank you for inviting me to appear before you today and to be a part of the Philadelphia City Council's Verizon Pennsylvania franchise agreement public hearing. My name is Brigitte Daniel and I am the Executive Vice-President of Wilco Electronic Systems, Incorporated. I'm very honored to be here today, and I thank you for the opportunity to testify. Let me first begin by saying that we applaud the City of Philadelphia's intent to bring competition and choice to the citizens of Philadelphia. In any major metropolitan city, the citizens always benefit from increased competition, particularly in the video distribution market. And this is a sentiment that we're not arguing against at all. What we are urging, 108 12/11/08 - PUBLIC PROPERTY - BILL 080879 however, is that City Council consider that diversity of ownership and the inclusion of local minority and disadvantaged business participation is not only an extreme benefit also to the citizens of Philadelphia through additional choice, diversity of public interest and increase in local job growth, but has been a documented historical legislative policy precedent that has been implemented and enforced by the City of Philadelphia and City Council since the beginning of the Philadelphia municipal franchising process. Wilco Electronic Systems is a local minority and family-owned private cable operator located in Philadelphia. As one of the last remaining African American-owned cable systems in the eastern region of the nation, this year marks Wilco's 31st year of service to the Greater Philadelphia community. Since 1977, Wilco has been serving the Philadelphia area as a multiple-dwelling 109 12/11/08 - PUBLIC PROPERTY - BILL 080879 unit building service provider and a cable service provider for the low-income residential communities. It was in 2001 that Wilco became the first sole and exclusive provider of cable television services for the Philadelphia Housing Authority. Wilco was contracted to provide all of the design work, construction, operation, installation and maintenance of the cable system designed for the Housing Authority units. Will Daniel, the President and Founder of Wilco, who is also my father and who is sitting here today, was able to obtain a contract with the Housing Authority because of the ownership opportunities made available during the early franchising process. This is actually how many minorities in cable and media were able to begin and grow their businesses, by having ownership opportunities made available during franchising processes and contracting bids. 110 12/11/08 - PUBLIC PROPERTY - BILL 080879 Just for background purposes, I thought it would be a benefit to briefly explain how the Philadelphia municipal cable franchising process developed in the early '80s around the building of the first cable systems in the City. Cable service was regulated by the Philadelphia municipality, which controlled the easements under and over public rights-of-way that cable service providers needed to wire Philadelphia local communities. The original franchise agreement was allotted for cable service providers to bid for service in four areas of the City. The four service providers who bid for those areas at the time were, one, Rollins Cablevision, Comcast Cablevision, Wade Cable and Greater Media Cable. Under the Mayor Bill Green and Mayor Wilson Goode Administrations, the City developed, proposed and finally implemented policy that a percent minority participation 25 inclusion via a minority ownership 111 12/11/08 - PUBLIC PROPERTY - BILL 080879 opportunity be established for the granting of the cable franchises in Philadelphia. In addition, each cable provider was required to have a minority partner or minority ownership opportunity within its own individual franchise agreement with the City.
Thus, this minority ownership mandate was fulfilled by the following actions: One, percent of the entire 12 City franchise went to Jim Wade of Wade 13 Cable. Jim Wade was an African American 14 owner that partnered with Cablevision 15 Industries to build the system. 16 Rollins Cablevision had a 17 minority ownership opportunity that went 18 to Will Daniel of Wilco Electronic 19 Systems and a women-owned opportunity 20 that went to a group of local women-owned 21 businesses. 22 Comcast Cablevision offered 23 stock and equity opportunities to 24 minority partners for their franchise 25 agreement, and Greater Media offered 112 12/11/08 - PUBLIC PROPERTY - BILL 080879 stock and equity opportunity to a single minority partner. Now, the power for City Council to support and promote this policy is derived from the City having the right to regulate the use of the public rights-of-way within its borders. The public rights-of-way are actually what govern a service provider's ability to build a system. The City's power to regulate these rights-of-way is through ordinances that are then passed by City Council. The justification for this use of power by City Council is that the Council is in charge of making sure that the use of the public right-of-way benefits the citizens of Philadelphia and is not being used to the detriment of the citizenry. So an important factor to consider, besides choice, is that citizens directly benefit from diversity of ownership. Diversity of ownership provides for choice. Diversity of 113 12/11/08 - PUBLIC PROPERTY - BILL 080879 ownership provides for diversity of interests, programming and community awareness truly reflective of a city's population. Lastly, which in these economic times is very important and priority, diversity of ownership creates job growth, in this case local job growth. Thus, the lack of diversity ownership, particularly in a cable franchise agreement that is proposing to invest $1 billion of infrastructure into Philadelphia, would not only be a disgrace, but should be considered a detriment to the citizens of Philadelphia as a policy issue. That being said, the City of Philadelphia and the Philadelphia City Council has the power to attach conditions via ordinances and amendments permitting the use of the public right-of-way via cable franchise agreements that encourages investment in and ownership opportunities for 114 12/11/08 - PUBLIC PROPERTY - BILL 080879 disadvantaged businesses, minority, women-owned and disabled businesses. Moreover, the power to attach these conditions through ordinances and amendments comes from the right to promote policies that encourage local job growth. That is the spirit, the intent and the heart of the law and policy established by this City's Administration and by this Philadelphia City Council. So some people ask why is diversity of ownership opportunities still even an important issue. I'm sure Verizon is asking that right about now. But it's important because ownership, particularly media ownership, breeds competition, and competition breeds more job opportunities, and job opportunities can be offered by offering better services, and in this instance, through diversity of ownership, better services include customized, community-focused and diverse perspectives in programming 115 12/11/08 - PUBLIC PROPERTY - BILL 080879 reflective of the local communities. Ultimately, diversity of ownership issues ensures the public interest of people living in these communities. This is a policy issue. For example, at Wilco, we own a cable television channel called WPHA-TV, which is online via the Internet as well as our own cable system. The channel features programming that includes educational, entertainment and learning-based original programming geared to the residents that we serve. In addition, we own and operate a television studio that houses WPHA-TV.
The studio provides local officials and PHA community residents the opportunity to create programs and then learn how to produce local community television shows. Lastly, we also hire directly from our customer base. Approximately half of our staff lives in our video service footprint in Philadelphia. We partner with local job placement non-profits, 116 12/11/08 - PUBLIC PROPERTY - BILL 080879 such as the Greater Philadelphia Urban Affairs Coalition's Philadelphia Comprehensive Center for Fathers, for potential candidates to work in all of our office departments. So all of these things and more is what diversity of ownership provides: choice for the consumer, economic stimulus through the creation of local job growth and a benefit to the citizenry through a diversity of perspective and the addressing of the public interest. And as long as the people of Philadelphia freely give up their right to the public right-of-way, this is something that should never be considered a last-minute issue. It is only last minute when we find out that it is not included in the local legislation. So to conclude, we by no means want to stop or impede Verizon from coming into the City of Philadelphia. We by no means want to stop the City from getting done this franchise agreement 117 12/11/08 - PUBLIC PROPERTY - BILL 080879 between Verizon. We are the little guy. We're very neutral. We are the David between all of these Goliaths. But all that we are saying is, if you're going to get it done, just get it done right. And getting it done right means considering the precedent that was done before through two Administrations. Getting it done right means that this provider, like every other provider that came before them had to do to obtain franchise, include minority opportunities. And getting it done right means taking the time to make sure that this very important national and federal policy issue and locally documented legislation is seriously considered and included before approval is granted. Therefore, we are asking that City Council amend any legislation approving and/or authorizing any additional franchising licenses and/or agreements for the City to include provisions which provide for meaningful 118 12/11/08 - PUBLIC PROPERTY - BILL 080879 and substantial disadvantaged business ownership interests and opportunities, as is consistent with the fine history of this legislative body and the goals and objectives of the City of Philadelphia. Thank you.
Councilman Clarke, I do have one more letter that was submitted by LEVAS Communications. They are the owner of WURD in support of this position we have, and I would like to read it into the record.
I'd like to read it actually, sir. It's actually submitted to you. It's not long, Councilman. It's addressed to you.
I know WURD. If they want it read into the record, it's going to be read into the record. 119 12/11/08 - PUBLIC PROPERTY - BILL 080879
Okay. Thank you. Letter dated December 10, 2008 to Councilman Darrell L. Clarke. Dear Councilman Clarke, we at LEVAS Communications, LLC, owners of 900 AM WURD, are writing to express our support for black ownership and diversity in media. As another minority-owned media outlet, Philadelphia's only black talk radio station, we are keenly aware of the limited diversity that exists in the ownership of media outlets and how the effects of the lack of minority owners in media are detrimental to a city's population and the communities in which they reside. We understand that the Philadelphia City Council is currently considering amending the provisions of the law governing the use of the public right-of-way to allow increased competition. We ask and urge that City Council seriously work to address this issue concerning minority ownership as it 120 12/11/08 - PUBLIC PROPERTY - BILL 080879 expands the opportunities for the citizens of Philadelphia to receive video distribution from additional and diverse sources. We believe Philadelphians should not merely receive video distribution services from multiple providers, but that the diversity of ownership of those providers should truly reflect the diversity of this great city. Therefore, we ask that the current Administration and the Philadelphia City Council build upon the foundation of precedent in Philadelphia laid by the work done on this issue by Mayors Bill Green and Wilson Goode by providing for minority ownership opportunities in any additional video distribution/cable franchising agreement currently being considered. Sincerely, Dr. Walter P. Lomax, Chairman.
Quick question. Earlier there was some discussion about the PHA developments, and I understand you currently have contracts with PHA developments, and I know over the last several years, particularly under this Administration, there's been significant conversions from the traditional conventional sites, which are the, as you know, the high-rise multi-family units, to more -- or should I say, less dense developments that essentially are built on the existing street grid. Do you still have contracts with those PHA residents in those new developments, such as Cambridge and Richard Allen?
And you 122 12/11/08 - PUBLIC PROPERTY - BILL 080879 anticipate continuing to be able to provide service?
Because I was concerned that that opportunity may no longer exist as a result of the change in the development scenarios. Okay.
We wired pretty much all of the buildings in PHA to this point, sir.
All with the exception of scatter sites, right? You don't do scatter sites?
And if the Verizon franchise was successful in their contract with the City of Philadelphia in being in a position to wire up the City, I'm assuming -- and correct me if I'm wrong -- that you would also like to offer the Verizon service to the -- FiOS, as it's referenced -- to existing PHA residents, or are you locked into some 123 12/11/08 - PUBLIC PROPERTY - BILL 080879 contractual relationship with the Housing Authority that would prohibit that?
Well, how we provide the service is pretty much and what we provide is pretty much on our end. We met with Verizon in February of this year to actually talk about the issue of providing their wonderful product, FiOS TV. At the time, I think there was not a surety if it could be done and it wasn't proposed as a priority at the time, but we went to them to talk about the partnership. We went to them to talk about just how we could even lessen their barriers to entry in the franchise process and have minority inclusion. So this is not a new conversation. This is not a last-minute issue that we brought to Verizon. This is something that's been brought before them before. But we are neutral, and we have to be neutral in the position that we're in. We can work with whomever and 124 12/11/08 - PUBLIC PROPERTY - BILL 080879 whatever we want to provide to the Housing Authority. We just want to make sure the residents get exactly what they need to get, and in this terms, it's access, it's technology, it's everything that everyone else can get in the City.
Right. Okay. Thank you. Councilman, go ahead, I'm done.
When this franchise agreement happens, could there ever be an opportunity of choice?
In the Housing Authority? Our position is at least that we're not trying to at least -- well, let me say this: I think we're willing to partner with Verizon or we can partner with another provider, but the choice comes in making sure that people can at least have access to all technology that everyone else in the City can get. I 125 12/11/08 - PUBLIC PROPERTY - BILL 080879 think that when choice is coming up, that's what it really means.
Isn't satellite television a factor in public housing also?
Yes. A lot of our market is actually somewhat getting a lot of saturation from the satellite providers.
Because one of my colleagues -- I don't know who it was now -- talked about the quality and the appearance of some of these areas with satellite receivers. These beautifully built buildings now have been -- I can't even think of the word -- have the satellite dishes just stapled all over them, and I think eventually we'll have to deal with that issue of those installs. But so we have satellite in public housing?
So how did 126 12/11/08 - PUBLIC PROPERTY - BILL 080879 the satellite happen?
Well, satellite, unlike cable, is not regulated. There's not a franchise process. So satellite can come into anywhere.
Or Direct TV will market within the Housing Authority, because there's no regulation saying that they cannot -- or there's no contract saying they can or they cannot. So Direct TV does come into our market as well.
I guess I'm a little confused, and I'll keep it 127 12/11/08 - PUBLIC PROPERTY - BILL 080879 short. Is one of these services provided by the Housing Authority to the residents?
No. None of the services are provided by the Housing Authority.
Well, I'm not really sure if Verizon is considered a choice of the Housing Authority at this moment in time.
Verizon knows I have a list, so that's going to be on the next question to them. Thanks. (Witness approached witness table.)
Councilman, I think as a legal matter, Verizon as a provider of resale or Direct TV probably 128 12/11/08 - PUBLIC PROPERTY - BILL 080879 could market its product to those residents. The FiOS will be different because it's using the public right-of-way and is, therefore, a regulated product. But Wilco does not have agreements, to answer your earlier question, which would prohibit it from doing business with Verizon or Comcast. The one other point, if I may -- Sharif Street, by the way, for the record, counsel to Wilco. I would say that the Council -- it was intonated earlier that Council did not have the right or the power to provide conditions to its approval. Council can provide conditions to its approval of the use of the right-of-way so long as the Council maintains a rational basis for those conditions. And there's no federal law, despite what was intonated earlier, that would limit Council's ability to do that.
Thank you. Any other questions of these 129 12/11/08 - PUBLIC PROPERTY - BILL 080879 witnesses? (No response.)
There being none, thank you very much for your testimony.
Next up we have Louis Massiah, Board Chairman of Public Access Corporation; Mr. Jonathan Stein; Patricia Mattern; Danielle Redden; and Reverend Adan Mairena. I hope I didn't butcher that name. (Witnesses approached witness table.)
Good afternoon, Chairman Clarke. Jonathan Stein, Vice-Chairman of the newly formed Philadelphia Public Access Corporation Board. I'll let my colleagues introduce themselves.
I'm Adan Mairena. You tried, but it's Adan. 130 12/11/08 - PUBLIC PROPERTY - BILL 080879
m. and had to leave by this time. Good afternoon, Chairman Clarke and fellow Councilmembers. It's a distinct pleasure for us, the City Council and Mayoral appointees to the newly formed Philadelphia Public Access Corporation, to make our first formal appearance before City Council today on one of the most important funding and policy issues to face our new corporation and the future of Public Access broadcasting in the City, the proposed Verizon cable TV franchise agreement. We're here to seek amendment of the agreement because of our strong belief that Public Access and the residents of the City of Philadelphia are being shortchanged in this proposal. The Verizon financial commitment to Public 131 12/11/08 - PUBLIC PROPERTY - BILL 080879 Access in the franchise agreement was negotiated with the City without us at the table. It does not constitute parity with Comcast's commitment to Public Access, and is inadequate. Verizon would not make any operating grants in seven of the years of their proposed franchise 9 agreement, and both their operating and 10 capital payments would be delayed. 11 And we were pleased to hear at 12 the onset of this hearing, Chairman 13 Clarke, that the Public Property 14 Commissioner clarified her testimony to 15 make clear that the Verizon operating payments are only for eight of their 15 years, leaving seven years, almost half of their agreement, with zero operating support for the Public Access Corporation. And so we agree with the City on those facts, and I think that's an important fact as we go on. We believe that Council should take no further action to adopt this bill 25 until the amendment we appended to our 132 12/11/08 - PUBLIC PROPERTY - BILL 080879 testimony is incorporated into the bill. As you know, thanks to City Council, Philadelphia has finally taken the leap to join the over 2,000 other cities and communities that are delivering quality, non-profit, community-generated Public Access broadcasting to residents hungry for programming that relates to their lives, their work, their communities, programming not burdened by obtrusive commercials and programming that will be created through the dedication and creativity of community residents, young and old. You can view us as an ongoing civic resource or informational utility that must look to ongoing yearly support from the commercial franchisees to sustain operations into the long term. Late last year, with an amended Comcast franchise agreement and legislation, Council passed and the Mayor approved the details for the five-channel cable TV Public Access network and our 133 12/11/08 - PUBLIC PROPERTY - BILL 080879 independent non-profit, Public Access Corporation. Our Board has begun the hard work of getting this network and programming off the ground, and we shall keep Council informed of our progress over time. 7 million capital contribution, two-thirds of which will be coming later into 2009. Although we welcome this Comcast support, we know that Comcast's 500,000 annual operating support will be no more than about a quarter of what the Corporation will later need for its full operations. We hope to begin putting programming out in early 2009, and when a central facility gets established, begin to create new locally generated programming for the five channels dedicated to Public Access. We hope to 134 12/11/08 - PUBLIC PROPERTY - BILL 080879 have youth-oriented programs to nurture and inspire children and teenagers; programming oriented for senior citizens and those who have limited mobility to get around the City; programs for ethnic and language minority communities who have no programming on commercial television. Churches and faith groups will create programming from choral performances to social service messaging. Every arts and culture group in the City will have an opportunity to create programming to extend the reach of their creative work and multiply tenfold their audiences.
Our many wonderful social service non-profit agencies will be able to reach out to clients and people who have a variety of problems, from domestic violence to employment counseling needs, addiction problems and legal aid. Local sports teams will be able to bring their achievements to a larger audience, and we go down the list. As you can see, there is great 135 12/11/08 - PUBLIC PROPERTY - BILL 080879 potential for serving your constituents and for giving voice to communities who cannot access the commercial media now. We are pleased to see that Verizon wants to enter our cable TV market, offering healthy competition in our city, and pleased to see at least some recognition of their responsibilities to the City and its residents to support Public Access in the proposed franchise agreement. The problem that needs addressing via an amendment that we proposed to Council is that Verizon's financial commitment in the franchise agreement that was negotiated with the City, again without us at the table, does not constitute parity with Comcast, and is very inadequate. On day one of Verizon's cable TV operations, Verizon will hook all their subscribers into all the existing Public Access programming of the Public Access Corporation. They're not delaying 136 12/11/08 - PUBLIC PROPERTY - BILL 080879 access to the public broadcast programming a day or a year or anything more than that. They're going to have it immediately. Yet, under the agreement, Verizon would not even begin making their $500,000 annual operating payments until after the fifth anniversary of the agreement's effective date. And perhaps worse, their 500,000 operating payment would only be made for eight of the 12 years of the franchise agreement's term, 13 giving Public Access a total of only $4 14 million over 15 years. This means for 15 seven years, almost half of the life of the proposed agreement, Verizon makes zero operating support for Public Access. Verizon should be required by City Council to make $500,000 in annual payments for each of the 15 years. 5 million. 5 million under this draft proposal before you. 7 million capital payment, delaying its first installment of $900,000 to after the sixth anniversary of the agreement. 7 million available to the Corporation within the first year of our operations and the total remainder two years later. Early receipt of capital funds is essential to ensuring quality production facilities that are accessible to the communities. We have not heard any sound reason for Verizon not to pay any operating support for seven of the 15 years of the franchise agreement, nor for the very substantial delays in payment of operating and capital money. They apparently have argued that since Comcast did not make payments in the years before 2008 of Comcast's current franchise 138 12/11/08 - PUBLIC PROPERTY - BILL 080879 agreement, they should get a free ride for seven years into the future. But this is a rather specious ground, as there simply was no Public Access Corporation in these prior years for Comcast to make payments into. We also have heard that, well, Verizon needs time to grow their subscribers, but they're not going to delay, as I said, one day in using all of the Public Access programming out there that the Corporation will be producing. And we all know they're making an up-front investment of over $1 billion for their network. All we ask is that they make the minimal up-front investment in Public Access that Comcast is doing. We have drafted a proposal, an amendment, which we urge this Committee and full Council to consider. I won't describe it further here. Let me conclude by saying that we believe the amendment we propose is essential to ensuring that the new Public 139 12/11/08 - PUBLIC PROPERTY - BILL 080879 Access Corporation and its five channels of non-commercial broadcasting receive the necessary support to adequately serve the City of Philadelphia and its residents.
We believe that Verizon has an obligation as part of its license with the City, and they'll be embarking soon on a very profitable venture of their own to provide the same parity of support for Public Access as Comcast has agreed to. This amendment ensures that Verizon will make good on being the good corporate citizen that it represents itself as being today. I would ask if Ms. Mattern or Reverend Mairena would like to add anything.
As a pastor and I'm sure you always hear it -- my name is Adan Mairena. I'm a pastor at the West Kensington Ministry at Norris Square in North Philadelphia. 140 12/11/08 - PUBLIC PROPERTY - BILL 080879 I'm sure you've been to church or synagogues, and we all -- faith leaders are always talking about justice, right? And justice is not putting people in jail and throwing away the key. Justice, defined in Greek and Hebrew, is about relationships, about fair, appropriate relationships. And I think after reading who is doing what and who isn't, the question of justice comes up. And being a pastor in Kensington, where I'm sure you hear a lot about it in the news and you've been there -- I know Councilman Rizzo was at the church last year -- we are facing life and death issues. So this is not just about getting people hooked up with cable or about us providing the community a place where they can create relevant information or media. A lot of this can be related to quality of life issues, because just keeping folks, keeping young people off the streets, letting their creative juices flow, allowing them to 141 12/11/08 - PUBLIC PROPERTY - BILL 080879 express themselves, as you know, it's a part of development, and if we can provide that in a fair and just way, then I think we're all on the right track. Thank you.
Thank you so much. Any questions of these witnesses? (No response.)
Thank you so much for your testimony today. Earlier I was looking for a number of our members of the clergy who weren't in the room, and I understand that you did want to testify. Please come forward. (Witness approached witness table.) 142 12/11/08 - PUBLIC PROPERTY - BILL 080879
My name is Bishop Robinson, James Robinson. I'm pastor of the Yesha Ministries Worship Center in South Philadelphia. And after hearing everything concerning this franchise agreement and being here also last week, I come and I sit in support of the Verizon franchise network coming to Philadelphia. I'm looking at the investment opportunity that Philadelphia has, looking at the opportunity that the people in Philadelphia receive as a result of this investment. And I guess even hearing the arguments concerning the things that Verizon should bring to the table, after reviewing personally the agreement and seeing the commitment that they're making, I see that -- I feel as if we should really, really make sure 143 12/11/08 - PUBLIC PROPERTY - BILL 080879 that this franchise comes to this City and that -- and I'm hoping that we don't really delay it to the point that we've run this investment opportunity away from Philadelphia. Being a Philadelphian and being born and raised in Philadelphia, in South Philadelphia and also pastor in South Philadelphia, and understanding some of the things -- some of the other opportunities that have come to this town, I think that based on the history that I'm aware of, I think that -- and this is from my perspective -- that we really can't afford not to allow this to come forth and to be put into practice. We need the competition. It's obvious. We need the kinds of investments that they're bringing to the table. Though I agree with some of the changes in things that were suggested by Council, I just really want us to look at it carefully and to move on it expeditiously so that we can realize this 144 12/11/08 - PUBLIC PROPERTY - BILL 080879 kind of investment for our city. With that being said, and I don't want to belabor the point, I don't want to see us run this opportunity away. I think that they've demonstrated that they want to do something positive in the community. I think that they've also demonstrated that they're willing to make the appropriate changes. After listening to Verizon and listening to the Council, I think that there's a good business opportunity at the table. Let's seize the moment. Let's make it happen, so that we can begin to realize this investment and realize this new system coming into Philadelphia. The other thing, finally, is that it is an upgrade in the technological advancement of the City. It's an upgrade. FiOS is an upgraded system. I would like to see that for our young people. I would like to see that for the community. I would like to see that for the members of my congregation. 145 12/11/08 - PUBLIC PROPERTY - BILL 080879 The churches that I fellowship with and the groups I'm a part of are also aware and want this system in place, because we believe that it will give our members an opportunity to have a choice. And I think for too long -- and I have to be very, very candid -- for too long we have operated in the City with really no 10 real choice, no real ability to say, Hey, why can't I choose this or why can't I -- so I think the choice, the competition, the investment, I think it far outweighs even some of the other, if I could say, arguments that were raised, and I think we need to move on this as quickly as possible. Thank you.
Thank you, Pastor. Thank you so much for your testimony, and thank you for being so patient. This concludes our witness list. Anyone else to testify on this bill? 146 12/11/08 - PUBLIC PROPERTY - BILL 080879 (No response.)
Thank you. Thank you. I want to recess for three seconds so we can establish our quorum. (Short recess.)
Mr. James, before we go into our public meeting, we just want to ask you to summarize the amendments as briefly as possible.
Councilman, there's basically one amendment on behalf of the Administration. It's summarized in the replacement of the original franchise agreement that we submitted previously, and it covers two specific areas. In the area of the performance bond, it changes the performance bond value from $13 million from Years One through Seven, and Years Eight through 15 to $3 million. In Exhibit C, it is a replacement of the -- excuse me. It's a change to Exhibit B, Appendix B, which is the franchise area map, which now 147 12/11/08 - PUBLIC PROPERTY - BILL 080879 includes the additional wire centers of Mayfair and Knights Road.
And you did hear the testimony from Councilman O'Neill that he would like to have additional discussion about that proposal?
Yes. And we're prepared to be able to meet with the Councilman and have those discussions and continue to explain the details of that.
I understood what you said, but for the record, Mr. Chairman, we are going to look at whether or not the performance bond is replaced with liquidated damages. Is that what I'm hearing?
Well, what the Administration has in the amended bill is to change the performance bond value, which has been agreed upon, and the dollar amounts for the years during the 148 12/11/08 - PUBLIC PROPERTY - BILL 080879 build. There are already liquidated damages in other portions of the agreement, which is already in there, which was part of the original bill, which we are keeping as is.
But what I'm hearing is that we want to go back and go a step further and consider eliminating the performance bond, where appropriate, and replacing it with liquidated damages.
At this point in time, we are not prepared to do that. We have the --
Okay. Well, I guess we'll be here for a long time until we get that ironed out. But thank you.
In addition to that, part of the Amendment C or Appendix C of the agreement also reflects the change in the wire centers in the two phases that we talked about before, and also establishes the new thresholds for the four-year construction phase in Phase 149 12/11/08 - PUBLIC PROPERTY - BILL 080879 1, with a 45 percent achievement level, and in Year Six, an 85 percent achievement level. Those are the --
That is the summary of the amendment on behalf of the Administration.
Okay. With that, this concludes -- I'm adjourning the public hearing on the Committee on Public Property and Public Works on Bill 17 No. 080879. We will now go into the public meeting. I will ask Councilman Greenlee to please offer the amendment that was referenced in Mr. James' testimony.
Thank you, Mr. Chairman. I move the Administration amendments to Bill No. 25 080879, I move their approval. 150 12/11/08 - PUBLIC PROPERTY - BILL 080879
It's been moved and seconded the amendments to Bill 7 No. 080879 have been approved. We will now recess the public -- I'm sorry. All in favor? (Aye.)
The ayes have it. We will now recess the public meeting until -- the public meeting of the Committee on Public Property and Public Works will be recessed until 9:00 a.m. January 22nd. Thank you. Thank you very much. (Committee on Public Property and Public Works recessed at 1:55 p.m.) - - - 151 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on December 11, 2008, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)