COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, November 3, 2005 2:20 p.m. - - - PRESENT: COUNCILMAN DARRELL L. CLARKE, CHAIRMAN COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN JUAN RAMOS COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO COUNCILMAN MICHAEL A. NUTTER BILL 050858 - An ordinance consenting to the transfer of control of the Area II cable television franchise from Urban Cable Works of Pennsylvania, LLC to Time Warner Cable Inc., and to the transfer and assignment of the Area II cable television franchise from Urban Cable Works of Philadelphia, L.P. to Time Warner Cable Inc., both under certain terms and conditions. - - - 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 afternoon. This is the Committee on Public Property and Public Works. It's a public hearing. I'd like to say we have a quorum. On my left, Councilman Rizzo, Councilman Kenney, Councilman Kelly, Councilman Juan Ramos and Councilwoman Donna Reed Miller, Vice-Chair, and Councilwoman Tasco. The gang's all here. Will the Clerk please read the title of the bill.
Bill No. 050858, an ordinance consenting to the transfer of control of the Area II cable television franchise from Urban Cable Works of Pennsylvania, LLC to Time Warner Cable Incorporated, and to the transfer and assignment of the Area II cable television franchise from Urban Cable Works of Philadelphia, L.P. to Time Warner Cable Incorporated, both under certain terms and conditions.
Thank you. 3 11/3/05 - PUBLIC PROPERTY - BILL 050858 This is a continuation of, I believe, two public hearings. I would like to ask Councilman Nutter, who is the prime sponsor of the bill, if he can kind of give us a summation as to where we were and where we are now, hopefully where we are now at this point. Councilman Nutter.
Thank you, Mr. Chairman. Mr. Chairman and members of the Committee, I appreciate this unique opportunity. Would you like the short version of the summation or would you like the long version of the summation?
Well, we're here today. Thank you. I appreciate this opportunity to speak. Mr. Chairman, first, let me thank you and all the members of the Committee. Your cooperation has been critical to moving this process along, 4 11/3/05 - PUBLIC PROPERTY - BILL 050858 and I thank you for scheduling this hearing. This is a matter that the Committee took up back in the spring, a proposed transfer of franchise, which under the Franchise Agreement must be approved by this body. There were any number of issues that had been raised during that time. This Committee took a great amount of testimony, and at that time at least, the view of the Committee was that this should not go forward, and ultimately the Council voted in that way. Since that time, there have been a tremendous number of discussions and meetings involving Urban Cable Works, Time Warner and the City Administration, as well as myself to address many of the operational issues that this Council has been concerned about and is within our purview with regard to the transfer of a franchise, whether it's service issues, penetration rates, quality of service, Community Advisory Board, marketing of 5 11/3/05 - PUBLIC PROPERTY - BILL 050858 the franchise and how it grows and serves people, minority participation, employment, a whole host of issues. Months of time and effort have been put into trying to address those issues in a legitimate fashion, come back to this Council with a bill that would be acceptable to this body and laying out what the response is to the many issues that were raised appropriately at that time. I believe that those issues have been addressed, and I'm sure we'll hear more testimony, both from the City Administration, as well as the franchisee and Time Warner, as well as citizens, and I am hopeful that the members of this Committee will not only recognize the quality of the work that all of those individuals have engaged in but, upon hearing that information, would subsequently support the transfer of the franchise and approve this bill to move from Committee to the full Council. 6 11/3/05 - PUBLIC PROPERTY - BILL 050858 I will await probably Mr. James and City representatives to put on the record what those agreements are, the significant changes that have been made since we were last together and in public hearings about how the franchise will operate and even new ideas about how to provide a high quality of service that the constituents in the Area II deserve. So I am in full support of the proposed transfer. There are some amendments which need to be offered. I have those amendments. They've been agreed to by all of the parties in this matter. So I am enthusiastic about where we are today, and it's only because of the work of the individuals you'll hear from, but also the seriousness with which this Committee and the full Council took this matter some number of months ago. So thank you, Mr. Chairman. We have made a tremendous amount of 7 11/3/05 - PUBLIC PROPERTY - BILL 050858 progress.
You're welcome, Councilman. We would like to call our first witness. Mr. Joe James, Deputy Commissioner. Mr. James, do you have anyone else from the City or the Administration? Good afternoon. Please state your name for the record. DEPUTY COMMISSIONER JAMES: Good afternoon. My name is Joseph James, Deputy Commissioner for the Department of Public Property. I provided a copy of my testimony to the Committee. I'd just like to enter it into the record. Councilman Clarke, members of the Committee, I am Joseph James, Deputy Commissioner of the Department of Public Property. P. to Time Warner Cable. Pursuant to the terms of the City's Franchise Agreement with cable television providers, a transfer of the franchise from one owner to another, or a change of control of the franchisee, requires that the City be notified of the proposed transaction and provide consent by ordinance of Council. The Federal Communications Act also provides that information about the proposed transaction be provided to the local franchising authority and establishes a framework for the review and consent of the locality. As I testified at the January 26, 2005 Committee hearing on Bill No. 20 041071 that was introduced December 9 of 2004, Urban Cable Works notified the City of the proposed transfer and provided the City a copy of the required Federal Communications Form 394. In 2004, the City requested 9 11/3/05 - PUBLIC PROPERTY - BILL 050858 additional information with respect to the transaction, and the franchisee and the transferee responded with additional data, which was reviewed by the Department, as well as by the Law Department and the City's cable television consultant, TCS International. This information was provided to members of the Committee of Council last year in white binders, and based upon the materials submitted and discussions pursuant to the transfer and recommendation of the City's cable consultant, it was and remains my recommendation that City Council give its approval for this transaction. However, due to a number of substantive issues that largely related to the performance of the Urban Cable Works, Bill 041071 was not approved by City Council. Bill No. 050858 was introduced October 20 of 2005. The new bill before the Committee now reflects terms for an agreement that will best serve the needs 10 11/3/05 - PUBLIC PROPERTY - BILL 050858 of the community, strengthens the ability to enforce compliance with respect to performance obligations, and also incorporates side agreements which Urban Cable Works entered into in 1999. Recent discussions with Time Warner resulted in a side agreement that will redeploy the cable modem obligation from Police and Fire facilities to a comparable number of recreation center sites within the Area II franchise. The commitment along with others will be documented in the Assumption Agreement, a form of which is Exhibit C to Bill No. 16 050858. Time Warner has a history of involvement in the operation of the Area II franchise which dates back to the 1990s when Wade Cablevision became a subsidiary of Time Warner. In 1999, Time Warner joined the Inner City Broadcasting Corporation to create Urban Cable Works partnership and, with the City's consent, transfer the Area II franchise to the 11 11/3/05 - PUBLIC PROPERTY - BILL 050858 partnership. Time Warner's role has been that of a minority partner, holding only 40 percent of the partnership interests. The majority 60 percent interest including the greater general partner shares have been held by entities controlled by Inner City Broadcasting Corporation. P. The two-part transaction which is now proposed formally involves both a change of control of the franchisee and an assignment of the franchise to a new cable provider. In the first step, Time Warner Cable will acquire all of the general limited partnership interests in Urban Cable Works that it does not yet own.
In the second step, Urban Cable 12 11/3/05 - PUBLIC PROPERTY - BILL 050858 Works will be merged into Time Warner Cable, which will be the surviving entity and, therefore, the new franchisee. Time Warner Cable is a Delaware corporation formed in 2003 in conjunction with a reorganization of the parent company, Time Warner Inc. Cable Television Holdings. Time Warner Cable either operates directly or through subsidiary cable systems with 10,898,000 subscribers in 27 states, making it the nation's second-largest cable operator in terms of subscribers served. S. Securities and Exchange Commission for the fourth quarter or 2004, Time Warner Cable was the single biggest generator of operating income of all Time Warner business segments. The company's three main product lines are video, including both traditional cable television and advanced digital video services, such as digital video, high-definition television, 13 11/3/05 - PUBLIC PROPERTY - BILL 050858 video-on-demand, subscriber-video-on-demand and digital video recording, high-speed data services and digital voice-over IP local telephone service. The information provided to the City in the form of FCC 394 in 2004 remains sufficient for the Department to ascertain Time Warner's financial, technical and legal qualifications to provide cable services to the City's franchise Area II. In conclusion, the terms to which Time Warner is committed are acceptable to the Department. I respectfully ask the Committee that the rules of Council be waived to allow this bill to be reported out of the Committee and have its first reading at the next Council session. Thank you.
Thank you, Mr. James. Any questions of this witness 14 11/3/05 - PUBLIC PROPERTY - BILL 050858 by members of the Committee?
On of your testimony, you say that Time Warner will redeploy the cable modem obligation from Police and Fire facilities to a comparable number of recreation center sites within the Area II franchise. Would you explain that to me, what that means, and also does Time Warner pay the City for using these facilities? DEPUTY COMMISSIONER JAMES: In answer to your question, in 1999 when we went through the cable franchise renewals with both Comcast and Urban Cable Works, we negotiated an obligation under the Institutional Network Provisions in the franchise that allowed the cable providers to provide cable modem service 15 11/3/05 - PUBLIC PROPERTY - BILL 050858 at no cost to the City at certain City facility sites for the City to use as an alternative means of reducing its operating costs for providing high-speed broadband services. And when we originally negotiated, it was intended to be used mainly for Police and Fire as an alternative means of providing them services. Through a period of time since the renewals, we've attempted to deploy those in Police Department and Fire facilities, but found that because of security concerns of how we have to actually incorporate them into our network, we found it not really feasible. We entered into an agreement with Comcast, which is similar to the agreement that we're now making with Urban Cable Works or Time Warner, to allow us to redeploy them in a place that it's more manageable for us to use their service, allow certain departments, in this particular case Recreation, who has 16 11/3/05 - PUBLIC PROPERTY - BILL 050858 a greater need for providing services to their constituents who use the recreation centers, at a cost that the department itself, Recreation, or the City would not have to absorb. So, in essence, what we're saying is, there's a number of facilities. Recreation has a need. They want to do more. Let's provide them a service at no cost to the City to allow them to have cable modem services to provide broadband services to kids.
You can tell I don't know too much about the technology. Okay. DEPUTY COMMISSIONER JAMES: That's okay.
I don't think you're alone, Councilwoman. Councilwoman Miller.
Yes. Good afternoon, Mr. James. DEPUTY COMMISSIONER JAMES: Good afternoon. 17 11/3/05 - PUBLIC PROPERTY - BILL 050858
Just as a follow-up to Councilwoman Tasco's question, do you have a list of what recreation centers will receive this modem? DEPUTY COMMISSIONER JAMES: We're still developing a list with the Department of Recreation. We have right now in the process ten sites that we're working with Recreation to deploy the cable modems. Two of them actually fall into the Time Warner area. The remaining eight are in the Comcast area. And I can provide you a list. I can submit a list to you of the sites that we currently have. Recreation has a huge inventory of recreation sites.
Right. DEPUTY COMMISSIONER JAMES: They're still dealing with the ability to manage the ongoing operation of the computers that they would deploy in there, so they haven't really formulated 18 11/3/05 - PUBLIC PROPERTY - BILL 050858 the list beyond these initial ten sites. Part of it is kind of a pilot list, see how it works out, let's see whether or not we can really manage it, does it really provide the services that we hope and, then from there, put together a priority list for the remaining sites that we can accomplish.
Would that also include the recreation centers' ability to receive Internet? DEPUTY COMMISSIONER JAMES: Well, yes. The cable modem service -- I'm sorry. I didn't know how to explain. The cable modem service is basically Internet service. It's high-speed Internet service. So that they can use it for a number of different services that they provide for the different constituents who would use it, but it's mainly Internet service.
Does that also mean that they'll be able to watch cable TV? Is that the same? I'm not 19 11/3/05 - PUBLIC PROPERTY - BILL 050858 real technical either. DEPUTY COMMISSIONER JAMES: No. 4 I think most of the recreation centers already have cable TV. So this is in addition to the cable TV component.
Yes. The Recreation Commissioner selected the recreation centers? DEPUTY COMMISSIONER JAMES: That's correct.
We have a new recreation center that we're opening in Dorothy Emmanuel, and we're in the process now of trying to deal with the whole issue of cable capability, and if that service is available, it would be nice since the facility is going to be cable-ready or at least be cable-ready, we can use it at that site. So I'll talk with him about that. 20 11/3/05 - PUBLIC PROPERTY - BILL 050858 DEPUTY COMMISSIONER JAMES: I will certainly take it back to him as well.
You mentioned something that interests me, the new technology telephone over IP. Is there any application for us, as a government, to utilize that for our long distance or whatever other help that could be to reducing our costs? Where are we with the utilization of that technology? DEPUTY COMMISSIONER JAMES: Councilman, we are in the early stages of trying to explore the feasibility of using voice-over Internet protocol or voice-over IP services. Today a number of companies, and Comcast is one of them, Time Warner, as well as Verizon and most of the phone companies, are all implementing some version of voice-over IP services. 21 11/3/05 - PUBLIC PROPERTY - BILL 050858 It has some challenges. For some of the issues that have come up, mainly access to 9-1-1, it really makes sense that it's more of a fixed location, similar to traditional phone service so that we have a fixed address and location, but the mobility of the technology allows, of course, individuals to move just about anywhere, and that creates a number of problems or issues related to calls to 9-1-1. But what we are trying to do from the Administration side in my department is, we're trying to put up a pilot to kind of see the feasibility. You need to understand, we've had some experience with some voice-over IP telephone systems and they do have a lot of different attributes that you have to deal with, and they're not as easy to manage, because you're using that same network that you're using for your data communications and you have to deal with prioritization, and it does pick up some 22 11/3/05 - PUBLIC PROPERTY - BILL 050858 echoes. There's a lot of different things that impact the usage of that service.
So you're looking at it and you're -- DEPUTY COMMISSIONER JAMES: We certainly are.
-- considering an application for it? DEPUTY COMMISSIONER JAMES: We certainly are.
Thank you, Councilman. Mr. James, given the fact that this was essentially phasing out the last of the minority-owned cable franchises in the City, where do we stand in terms of having adequate minority participation as we move ahead in this particular industry in the City of Philadelphia? DEPUTY COMMISSIONER JAMES: Well, it's hard to kind of answer your question, because in the evolution of cable television to the City certainly 23 11/3/05 - PUBLIC PROPERTY - BILL 050858 back in the early days as proposed and had consideration for a franchise that really reflected a minority component, either an ownership or participation at a higher level, and through changes in, I guess, both law as in businesses in general, that has started to not become the primary component in today's world in cable television. As cable television in general in the entertainment industry, a lot of it is huge mergers, a lot of consolidation. There's been a lot of changes at the FCC that allows for a lot more consolidation by single owners for a lot of these different entertainments. I think where we kind of fall today in the minority component is the enforceability of the minority participation in the franchises for services to those companies. If they're going to be consolidated and they're going to be merged into large corporations, we need to make sure that 24 11/3/05 - PUBLIC PROPERTY - BILL 050858 we have language -- and I think we do have language -- and targeted goals for services to small business and local business owners participating to provide services, as well as employment opportunities at different levels that more reflect the community of the people that are being served. And I think we have that in the franchise. I think what we've intended to do in the Assumption Agreement is add some stronger language that talks about enforceability along those lines. And I think what we're doing at least on our side is, we're trying to do a better job of track the participation, ensure that there is a participation and make sure that the entity responsible for compliances is trying to do everything they can to be compliant.
Yes. I was going to ask these 25 11/3/05 - PUBLIC PROPERTY - BILL 050858 questions of Time Warner, but maybe since you're drafting the language for this contract -- is that what you're saying? DEPUTY COMMISSIONER JAMES: What I'm saying, Councilwoman, is the original Franchise Agreement which we renewed in 1999 has significant goals for minority participation, women participation and local ownership participation. I think what we have added in the agreements is more enforceability or strengthen the enforceability to ensure that whoever is running the franchise is meeting all of the goals, including a participation goal. And our Cable Area Manager has a specific focus to make sure that we are monitoring and tracking and reporting that information.
So we do have someone here from Time Warner who is going to testify, right? DEPUTY COMMISSIONER JAMES: I believe the Time Warner folks are here 11/3/05 - PUBLIC PROPERTY - BILL 050858 and can speak to it specifically.
Any other questions of this witness by members of the Committee?
Could you hold on one second? I just want to say something briefly.
I'm going to have to leave the Chambers, to the members of the Committee. I'm going to have to leave the Chambers on Council business. I would like to turn the Chair over to Vice-Chair Councilwoman Miller, but I will be back.
Madam Chair, before Mr. James leaves, although 27 11/3/05 - PUBLIC PROPERTY - BILL 050858 I'm sure he's going to stay here in the room, if it's appropriate for the Committee at this time, there is an amendment to be offered, and I mentioned earlier in my comments that I have copies of them, but the Committee may want to hear what the substance of many of these amendments are, which I think are part and parcel to this particular agreement and why it should be supported. I'll leave it to the Chair if you want to hear that now and get into that conversation, and then, of course, you're going to have the Time Warner and Urban Cable Works folks.
Many of these items in the amendment -- and when you have it, I'll ask you to take a look at what's referred to as Attachment A, which is toward the back. Many of these items are new or have been revised through the negotiation process. Again, 28 11/3/05 - PUBLIC PROPERTY - BILL 050858 many of these issues have been the subject of ongoing, at times somewhat intense or aggressive, conversation. Mr. James might be in the best position to go through some of the highlights, but these items in Attachment A seek to address many of the very serious issues that members raised and had concern about when we were talking about this proposed transfer maybe about five months or so ago.
Is there a marked-up version of this as to what went in or what came out, or is the whole agreement an Exhibit C the amendment?
Mr. Sutton might be able to tell you. I think Attachment A was shorter last time out.
Absolutely. 29 11/3/05 - PUBLIC PROPERTY - BILL 050858
I'm Robert Sutton from the Law Department. You wanted to get a clarification on exactly what changes are made with this proposed amendment. Okay. This is what the amendment is, is a substitute Exhibit C, which is the Assumption Agreement that would be entered into by Time Warner Cable with the City to assume all of the obligations under the current Franchise Agreement. The Exhibit C Form of Assumption Agreement itself is almost exactly the same as what was provided in the earlier version with the bill when it was introduced. The one change is a change in Item 4, which just changes the deadline from December 1st to December 15th of 2005 for a provision of some updated 15-year projections with respect to the anticipated performance of the franchise. So the Assumption Agreement itself remains largely the same with that one change. 30 11/3/05 - PUBLIC PROPERTY - BILL 050858 Then there's an Attachment A to that Assumption Agreement. The Attachment A is entitled Additional Commitments of the Transferee, and this is very similar to what was provided earlier, but does have an additional item No. 11 on the second page, and that refers to the agreement that was mentioned earlier to provide cable modems in recreation centers instead of the Police and Fire stations. That change is actually anticipated to be made by a letter amendment to the Franchise Agreement with the current franchisee, but this also requires that in case that is not done at the time of the transaction when the transfer of the franchise is made, Time Warner Cable also agrees to enter into such a change to make sure that the recreation centers are provided the cable modem service. In addition, there has been a minor change with respect to two other 31 11/3/05 - PUBLIC PROPERTY - BILL 050858 items in Attachment A that just refers to, in the first item, Channel and also 4 in the eighth item, Channel 8. 5 Time Warner Cable is, as they 6 will discuss later, they are also 7 entering into an arrangement with Comcast 8 to carry the CN8 channel that Comcast now has as Channel 8 on its systems in the City, and Time Warner is going to be providing that same channel on its Channel 8. The current programming on Time Warner's Channel 8 is going to be moved to a new Channel 88. So this just indicates that there's a change because of that planned transaction. And then there is also attached to this a Form of Letter Agreement, which is the agreement that will provide for the change in the obligation to provide cable modem services to the recreation centers, and the form of that letter is provided here. It was not earlier provided in the originally introduced 32 11/3/05 - PUBLIC PROPERTY - BILL 050858 bill, because there was no reference to it in the Attachment A. Those are all of the changes.
Councilman Kenney, if I could just add to that, I think I could walk you through each of the items in Attachment A, as well as 9 a side letter that Mr. Sutton referred 10 to. I think across the board I could 11 tell you that any number of items on Attachment A are new and I can tell you what they are, and even some of the items that had been in Attachment A have been enhanced since we were last here. For instance, the Community Advisory Board section last time made reference to holding meetings on a quarterly basis. I believe it did not also require that at least one of those meetings would be public, the advertising of all of that information on Channel 64, which is a government access channel, and at that time Channel 8, which as Mr. Sutton was describing is, now for the 33 11/3/05 - PUBLIC PROPERTY - BILL 050858 first time ever, subscribers to Time Warner will be able to see the same programming that three-quarters of the City presently sees on CN8, which carries local and college sports that are regional. Many of our constituents, their children may participate in those activities, but if you live in Area II, you cannot see them because they're literally on another franchise's main channel. As well as some local programming and news shows all will now be on this franchise, which has not existed in the past.
Excuse me, Madam Chair. Councilman, does that also include the Flyers and Sixers and Phillies?
So it's not only regional sports, but it's professional sports?
Yes. 34 11/3/05 - PUBLIC PROPERTY - BILL 050858 Everything that's on CN8 in three-quarters of the City will now be in Area II as well as a result of an agreement that has -- there's been ongoing discussions between Time Warner and Comcast for some time. That agreement has now been consummated. So everyone in the City will see whatever is on CN8, you'll see in Area II as well.
Aren't some of the main sports on CN8? DEPUTY COMMISSIONER JAMES: I think it's CN8. I think it's CN8. Let us get back to you to make sure we put it on the record, but I believe it's CN8.
With regard 35 11/3/05 - PUBLIC PROPERTY - BILL 050858 to a big issue last time, and I do not believe this bullet was on Attachment A in the past, there was the whole issue about subscribership and penetration rates. Time Warner has agreed they will use every best effort to be consistent with industry standards. Marketing of the franchise, this is a discussion about making sure that similar to another big-name cable company that is based here in Philadelphia that Time Warner will do all that it can to promote the fact that they're in the cable business here in Philadelphia. Item No. 4, customer service standards, this is to ensure that everyone knows what the customer service standards are, both new customers as well as an advertising on the system as to what the FCC mandated customer service standards are, which people will be able to see on a regular basis. Employment opportunities, a 36 11/3/05 - PUBLIC PROPERTY - BILL 050858 specific commitment to promote, to the greatest extent possible, and as well as job fairs and other outreach activities that Area II residents would have an opportunity for employment. An enhancement to their already-existing internship program, which in the past was restricted to college students in colleges and universities within Area II has now been expanded to include high school students for the first time as a result of this agreement. Time Warner has also agreed to enhance their community involvement, and they have certainly been active in the community. The enhancement here is that they will also support school-age children in the attendance at art and cultural events, sports team sponsorships, much of what they had been doing as well, but also helping to sponsor free or low-cost attendance at art and cultural and theatre 37 11/3/05 - PUBLIC PROPERTY - BILL 050858 performances, college and professional sporting events and similar activities for all Area II school children. Community affairs coverage, again the issue of the agreement between Comcast and Time Warner for CN8 carriage on the Urban Cable system or Time Warner system. Reports on a regular basis for franchise operations to be available to anyone who requests but also a copy of the report automatically going to each member of City Council. You'll hear more about this from Time Warner and Urban, but there are already requirements in the Franchise Agreement with regard to support for education here in Philadelphia. Time Warner has agreed subsequent to this transaction to enhance that support for school-age children. Again, the cable modems, we don't need to go through all that. The name of the franchise moving from Urban Cable Works, Time 38 11/3/05 - PUBLIC PROPERTY - BILL 050858 Warner is the operator and they will, on their screen and on bills, utilize that name. Lastly, I guess soon to be rolled out, if not already rolled out, but as a part of the discussions, in a separate side letter, Time Warner in an effort to address many issues that we've talked about with regard to digital divide and access to the Internet is offering a service primarily geared toward low- and moderate-income residents for cable service through a modem at a reduced price. It is faster than dial-up and offers many of the same content provisions as their already premium RoadRunner service. So those are some of the highlights of the changes that have taken place in Attachment A and have been topics of discussion and negotiation.
In regards to the Community Advisory Board, there always was a Community Advisory Board, but I don't know that they actually met.
That is correct. Well, let me put it this way: I don't think the full Community Advisory Board had any meetings. I think there were a couple meetings scheduled and a couple people came and there was some discussions, but there's an enhanced commitment by Time Warner to make sure that not only that they have the meetings but that people show up and participate and then get information back out to the community for what's going on with the franchise.
Okay. Thank you. Any other questions? (No response.)
Thank you. 40 11/3/05 - PUBLIC PROPERTY - BILL 050858 Thank you, Councilman Nutter.
Any other questions? Mr. James, do you have anything to add? DEPUTY COMMISSIONER JAMES: No. 9
Any other questions of these witnesses by any Committee members? (No response.)
Thank you. Thank you very much. DEPUTY COMMISSIONER JAMES: Thank you.
The next witness on the list is Regina Martin, General Manager, Urban Cable Works of Philadelphia, and anyone else you want to bring up to the table with you. Good afternoon. Please identify yourself for the record and proceed with your testimony.
Good afternoon, 41 11/3/05 - PUBLIC PROPERTY - BILL 050858 Madam Chairman, members of the Committee and other members of the Council. My name is John Fogarty. I am an attorney with Time Warner Cable. I'm here today with Regina Martin, who is the General Manager of the Urban Cable Works system, and Larry Jarrett from the Urban Cable Works system. First, we would like to express our appreciation to Councilman Nutter and his associates, to the staff of the Department of Public Property and the members of the City Attorney's office for their time and effort in working with us to address the issues which are in the ordinance before you today. I will briefly explain the transaction which is before you for consideration. P. It is a partnership in which two subsidiary companies of Inner City Broadcasting Corporation; namely, Urban Cable Works of 42 11/3/05 - PUBLIC PROPERTY - BILL 050858 Pennsylvania, LLC and Urban Cable Works General LLC, own a combined 60 percent interest. The remaining 40 percent interest is owned by Time Warner Cable Inc. By agreement, Time Warner manages the system. , now held by the Inner City subsidiaries. Upon closing of the purchase, Time Warner Cable Inc. , which will then hold the franchise directly. Information establishing the qualifications of Time Warner Cable to hold the franchise has been provided to the City. Time Warner has had an interest 43 11/3/05 - PUBLIC PROPERTY - BILL 050858 in the Area II system for almost ten years. From 1996 through 2000, the system was wholly owned by Time Warner, and from 2000 to the present, Time Warner has, as just described, held a 40 percent interest in and managed the system. Thus, the proposed transaction will not result in changes in the management or staffing at the system. Over the years, we've made significant investments to the Area II system in order to provide the advanced services now available to our customers. Ms. Martin will provide further details about these improvements. Since we last appeared before you, there have been developments which we would like to discuss. Time Warner has agreed that in a subsequent transaction, the Area II franchise will be transferred to Comcast. That transaction is not before you for consideration today, so I do not propose to discuss it in any detail. There will 44 11/3/05 - PUBLIC PROPERTY - BILL 050858 be time for such discussion in the future after the filing of the appropriate papers. Time Warner has also discussed with Councilman Nutter and his representatives several additional issues raised by the Councilman regarding particular community needs of the Area II franchise and how Time Warner might best address them. Those issues are addressed in the ordinance before you and in a letter sent yesterday to Commissioner Joan Schlotterbeck. Based on our discussions with Councilman Nutter, Time Warner has decided to offer in the Area II franchise system a version of our RoadRunner high-speed cable modem service at a price lower than the price for the standard service. As the Councilman mentioned, our hope and expectation is that this will give the people with more limited resources an opportunity to purchase Internet access service. 45 11/3/05 - PUBLIC PROPERTY - BILL 050858 We've also focused in these discussions with Councilman Nutter on the importance of customer service, and the proposed ordinance before you reflects our commitment to providing superior customer service in our franchise area. In addition, we have agreed, as Councilman Nutter mentioned, to include high school students, as well as college students in our recruiting efforts for our internship programming and allowing these students to have hands-on experience in local programming, operations, finance, marketing and our Human Resources Department. And as Councilman Nutter mentioned, there are several other issues which are addressed and are before you, which we'll be happy to answer any questions you have about. I'd like to turn over the microphone to Ms.
Martin, and she will be giving you a summary of some of the things that have been happening in the 46 11/3/05 - PUBLIC PROPERTY - BILL 050858 system, and then after that, we're certainly available to answer any questions you may have. Thank you.
My name is Regina Martin and I am the General Manager of Urban Cable Works. Good afternoon, Madam Chairman, members of the Committee and City Council. I would like to thank you for the opportunity to speak in support of the transfer of the cable television franchise to Time Warner Cable. The Area II franchise of Philadelphia has been managed by Time Warner Cable, the second largest cable operator in the country since 1996. As the General Manager of the system, I have been employed by Time Warner Cable for over 20 years and have had the opportunity to serve in the City of Philadelphia since February of 2002. 47 11/3/05 - PUBLIC PROPERTY - BILL 050858 Our area, as you know, encompasses West Philadelphia, Roxborough, East Falls, Manayunk, Overbrook, University City, Southwest and North Philadelphia. Over 50 percent of our 130 employees reside in Area II. Minority employees account for 89 percent of our work force. During the past three years, there have been tremendous changes in the services and the operations of the system. We have invested over $62 million to upgrade the system and support the operation. This investment has provided residents with a two-way digital cable system. Through the use of digital technology, our customers have access to over 250 channels, including video-on-demand, digital video recording services, 14 high-definition channels and high-speed data services, including wireless high-speed data. Our focus has been on growing the business, introducing new services, 48 11/3/05 - PUBLIC PROPERTY - BILL 050858 improving the customer operations and being a good corporate citizen. We remain committed to utilizing our best efforts which are consistent with standard cable industry practice to increase our customer base. In addition to traditional marketing, we conduct ongoing audits of the system to identify any theft of service issues and work to convert these homes to paying customers. Our promotional tactics include local radio, community and university newspapers, press releases, cross channel spots and direct mail. We have partnered with a number of organizations over the years, including the Negro Baseball League Memorial, West Philadelphia branch of the YMCA, American Red Cross, Parkside Day at the Zoo, Women Making a Difference Annual Conference, Canal Days and the Arthur Ashe Annual Tennis Benefit, just to name a few. In addition, a Community 49 11/3/05 - PUBLIC PROPERTY - BILL 050858 Advisory Cable Committee has been established. The Committee meets quarterly and reviews the operation, community events and any community concerns. Operational improvements include expanded phone and installation and service hours, which include Saturdays and phone hours until 9:00 p.m., as well as working to retrain our staff to better meet the needs of our customers. We maintain an on-call staff to assist with any system outages seven days a week. Billing enhancements allow customers to make payments on their accounts hours a day. 18 In 2004, during the Customer 19 Satisfaction Surveys conducted by C&R 20 Research, Philadelphia's customer 21 satisfaction scores was one of the most 22 improved of the Time Warner divisions. 23 We truly appreciate the 24 opportunity to serve the residents of Area II and the opportunity to provide 50 11/3/05 - PUBLIC PROPERTY - BILL 050858 our customers with technically advanced products and services for a variety of their information and entertainment needs. We, of course, are in support of this bill to transfer the franchise from Inner City to Time Warner Cable. And I am happy to entertain any questions that you may have.
Thank you, Madam Chair. I recognize through Mr. Fogarty's testimony that the discussion of Comcast's ultimate or potential acquisition of this is not for discussion, but the question I have is, why would we go through this process twice? If Comcast was ultimately interested in acquiring, why would they not acquire it and then come before us for approval? Why do we need to go 51 11/3/05 - PUBLIC PROPERTY - BILL 050858 through this approval process now and then -- I guess it's a relatively short time from now we're going to be going through it again with Comcast.
Because, Councilman, these are two separate transactions, and this agreement for the transaction that's before you today was entered into a considerable time before there was any agreement with Comcast with respect to the transfer of the franchise here. The people who are the owners now of the 60 percent partnership interest have an agreement with Time Warner, that Time Warner will purchase and buy them out, and they're obviously expecting to receive compensation for that interest, and that agreement was reached, I believe, in August of 2004.
Okay. So the agreement between Time Warner and Urban Cable Works is --
The agreement 52 11/3/05 - PUBLIC PROPERTY - BILL 050858 that is before you today for the purchase of the Inner City partnership interest in Urban Cable Works, that agreement might have been before -- the 394 was filed, I remember, in August of '04.
Yeah, but the agreement with Comcast, which is tied to a much larger deal involving also a company called Adelphia, that was not reached until April of 2005. So we have to go through this step and --
So the 60 percent ownership of this entity now wants to get out?
And any direct conversations with Comcast outside of this particular transaction would take them longer to get out?
Yes. The deal with Comcast was done after this deal was negotiated, and the anticipation was that 53 11/3/05 - PUBLIC PROPERTY - BILL 050858 this deal would close and be done, and the deal with Comcast is based on that assumption. And so for us to take this first step, I think certainly Public Property and the City attorneys would believe that your consent is required for us to do it and it's a necessary first step. So it's a matter of the way the two transactions are structured and it's a matter of timing.
How old is the agreement between Time Warner and Comcast?
Okay. All right. I don't think it's a huge deal. It may be a huge deal, the deal is huge. It's not a --
It's a natural question as to why do you have to do it twice, but, I mean, yes, you will probably have to be sitting here not too 54 11/3/05 - PUBLIC PROPERTY - BILL 050858 far in the future considering that other transaction, but this has to happen first.
I'm aware of Comcast's performance in other areas of the City and are very happy with what they do, but all of the items that were negotiated in this deal, I assume, are going to stay in place through the next process. I mean, all the enhancements --
Right. All the commitments that have been made in the agreements --
-- those will be the obligation of Time Warner to meet and to live up to for as long as we hold this franchise, and that is something we are committed to do.
Ms. Martin, just part of your testimony 55 11/3/05 - PUBLIC PROPERTY - BILL 050858 described your geographic area.
I don't know whether you know it. I didn't know it for a long time, but you're also in the Germantown section.
Those are in my district, so I just wanted to make sure that you guys know that you actually have some customers up there.
Yes. I think we've supported a couple of the community events in Nicetown particularly.
Good. And the other thing -- and because I do have constituents that have Urban Cable, on the second page of your testimony you talked about the Customer Satisfaction Survey. 56 11/3/05 - PUBLIC PROPERTY - BILL 050858
And that the area here in Philadelphia was the most improved of the Time Warner divisions. So on a scale from one to ten, improved from what to what? Because I've heard things like you call for customer service, no one picks up the phone or the phone has to ring so many times, particularly people that have moved from the Comcast area to another area, Germantown, and are used to Comcast being -- and I'm not really trying to compare you, but when you're in the habit of getting certain types of services, Comcast is on call hours a day, seven 19 days a week. And so I'm just trying to 20 see what the change will be. 21 On a scale from one to ten, if 22 five is the norm, you were improved from 23 what to what? 24
I don't have those exact numbers. What I was saying is that 57 11/3/05 - PUBLIC PROPERTY - BILL 050858 we were one of the most improved divisions in this Customer Satisfaction Survey. Time Warner corporate conducts the Satisfaction Surveys for all of the divisions, and in the quarter in 2004, we were one of the most improved. Exactly from what to what, I don't know, but from particularly the phone issue that you mentioned that you've heard from constituents, what I can tell you, that in 2002 when I arrived, we were answering approximately 32 percent of the calls within, say, 90 seconds -- or 30 seconds. Excuse me. And then from 2002 and then through the end of 2004, we had gone from 32 percent to about 85 percent of the calls were answered within 30 seconds. So the concerns that you heard, I definitely heard when I arrived here, and so we worked to improve that and we were able to make some significant improvements in that area.
Well, 58 11/3/05 - PUBLIC PROPERTY - BILL 050858 that's very good. Because when people are paying for a service, they want to be able to pick up the phone, call someone and have them answer.
So that's really important. Okay. Those are the only questions I have. Does anyone else have any questions? (No response.)
Well, he was Time Warner. John Fogarty was Time Warner.
Are you 59 11/3/05 - PUBLIC PROPERTY - BILL 050858 Time Warner?
You are Time Warner. I'm sorry. I have a couple of questions about how you operate once you get this franchise, and I want to know what effect will this transfer have on local minority vendors that have existing contracts with Urban Cable Works.
We would continue to work with the minority vendors that we have been working with. As John had mentioned, Time Warner has managed the system for a number of years, so those relationships we have and we will continue working with them.
That should be seamless, no change. 60 11/3/05 - PUBLIC PROPERTY - BILL 050858
So have you taken efforts now during this transition period to maintain these contracts and assist these vendors?
How many local minority vendors have contracts with Time Warner?
We work with approximately 12 different vendors that we do business with.
What are some of the vendors or some of the contracts?
Some of the business -- Wilco Corporation being one of them. We also do work with --
Wilco provides cable drops and installation services also, and they have employees that assist with that. 61 11/3/05 - PUBLIC PROPERTY - BILL 050858
Do you have other companies that do the same thing, kind of dropping cable, other companies? How many companies do that for you?
We have a company called Baker Installation that does some installation work for us, and we also on the construction side do some work with a company called Black Box, is a company we use on the construction side. And some of that work, of course, from the installation and even cable is done in-house also.
Some of the other vendors, the Philadelphia Tribune we spend monies with. The Red Wing Shoe Store we spend. Scott Cable I think I had mentioned.
Well, our 62 11/3/05 - PUBLIC PROPERTY - BILL 050858 technicians are required to wear steel-toed boots.
Yes. And Diamond Transportation, which is a courier service we also use. So those are some of the ones I have listed here with me.
And you will continue to honor the existing local minority vendor contracts with government entities?
If the transfer occurs, will Time Warner provide basic and advanced cable services to all Area II residents, including PHA tenants?
We currently also in an agreement with Wilco provide cable service to some of the PHA properties. 63 11/3/05 - PUBLIC PROPERTY - BILL 050858 So that's another relationship that we have with Wilco, who I believe has the agreement or franchise agreement to provide cable service to the PHA properties. So we worked out a partnership with them.
Thank you. Are there any other questions? (No response.)
Seeing none, thank you. Thank you for coming in. Joanne Bell and Salvatore DeBunda. Good afternoon.
Please identify yourself for the record and proceed. I didn't see any testimony. 64 11/3/05 - PUBLIC PROPERTY - BILL 050858 Did you give us --
We're going to make a short statement and then our attorney will then make another statement in the record.
Good afternoon, Madam Chairman, members of the Committee, Councilman Nutter. My name is Joanne Bell and I am the Secretary/Treasurer of Philacom Cable Group, LLC, which is the local cable partner, percent owner, in 15 Urban Cable. I'm here today to speak on 16 behalf of Willie Johnson, Chairman, and 17 the members of Philacom Cable in support 18 of the transfer ordinance. 19 And I'm going to now turn it 20 over to our attorney, who will be more specific.
Thank you. MR. DeBUNDA: Good afternoon, Madam Chairman and other members of the 65 11/3/05 - PUBLIC PROPERTY - BILL 050858 Committee and Councilman Nutter. I'm Sal DeBunda from Pelino & Lentz. I'm attorney for Philacom. When we appeared before this same Committee some six months ago, we had expressed concerns with certain aspects of the transfer relating to the fact that we had not received certain documentation in connection with our investment, with respect to the service that was being given in Area II, because we were a part owner, and also with respect to the treatment of Philacom as a member of that company. I am here to say happily that we have received the documentation that we were looking for, that we are very pleased with the work that Councilman Nutter and other members of this Committee has done in getting the service issues corrected, and I'm pleased to tell you that there's been an oral agreement with respect to the handling of our situation, which we hope to soon have 66 11/3/05 - PUBLIC PROPERTY - BILL 050858 into a written form. And, therefore, I am enthusiastically here supporting the ordinance that's been proposed here. On a personal note, I also want to say to you that I was actually counsel for Jim Wade when he first got this franchise, I'm sorry to say, years 9 ago, and I'm here to now see this move on 10 to a different plateau, and I personally 11 want to endorse this also. 12 Thank you very much for your 13 time. 14
Thank 15 you. I was not here 20 years ago. 16 Okay. Thank you. Thank you 17 for coming in. 18 MR. DeBUNDA: I will not say 19 who was. 20
Is there anybody else here that wants to testify on this bill? (No response.)
Seeing none, we will now move from the public 67 11/3/05 - PUBLIC PROPERTY - BILL 050858 hearing to the public meeting. Councilwoman Tasco.
Madam Chair, I offer an amendment to Bill 6 050858. (Duly seconded.)
All in favor of voting positive for the amendment to Bill No. 050858? (Aye.)
I move that Bill 050858 be reported out of Committee with a favorable recommendation as amended and that the rules of Council be suspended so that this bill can have 68 11/3/05 - PUBLIC PROPERTY - BILL 050858 its first reading on the next session of City Council. (Duly seconded.)
It has been moved that Bill No. 050858 as amended be reported out of this Committee with a favorable recommendation and further that the rules of Council be suspended so as to permit first reading at our next session. All in favor? (Aye.)
Thank you. Thank you. This ends our public hearing. (Committee on Public Property and Public Works adjourned at 3:25 p.m.) - - - 69 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 November 3, 2005, 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.)