COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - Room 401, City Hall Philadelphia, Pennsylvania Thursday, February 1, 2001 2:20 p.m. - - - BILL NO. 000452 - an ordinance granting permission to RCN Telecom Services of Philadelphia, Inc., to construct, own, operation, maintain, replace and remove a telecommunication system in, over, and under the public rights of way and streets of the City of Philadelphia and operate and maintain a video programing service over such telecommunication system, pursuant to provisions governing open video systems in the Telecommunications Act of 1996, under certain terms and conditions. - - - PRESENT: COUNCILMAN JAMES F. KENNEY, Chairman COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK DI CICCO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 I N D E X BILL NO. 000452 JOSEPH JAMES, Deputy Commissioner Dept. of Public Property ........................ JOHN PITTS, Area Vice President, RCN ........ 36 SCOTT BURNSIDE, Senior Vice President, RCN .. 40 THOMAS STEELE, Vice President, RCN .......... 48 EDWARD MOONEY, Local 1300, CWA .............. 67 CARL SINGLEY, Council to RCN ................ 105 DOROTHY BRUNSON, President, Channel 48 ...... 126 3 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
The hearing on Resolution 000773 that was scheduled immediately following this hearing will be recessed until next Thursday, February at 1 p.m. 6 Ladies and gentlemen, can I have your 7 attention, please. We have a quorum. Would you 8 please refrain from conversation. I apologize for the delay. As I mentioned earlier, Resolution No. 10 000773 dealing with the Philadelphia Gas Works will be heard on Thursday, February 8 at 1:00 p.m. Council Committee on Public Property and Public Works is now in session with a quorum represented by Councilmembers Blackwell, Nutter, Councilmember Clark, Reynolds-Brown and I am chairman James Kenney. We are now going to conduct or hear testimony on Bill No. 000452, which is an ordinance granting permission to RCN Telecom Services of Philadelphia, Inc., to construct, own, operation, maintain, replace and remove a telecommunication system in, over, and under the public rights of way and streets of the City of Philadelphia and operate and maintain a video programing service over such telecommunication system, pursuant to provisions governing open video 4 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 systems in the Telecommunications Act of 1996, under certain terms and conditions. The Chair would call Mr. Joe James from the Department of Public Property. Councilmember Rizzo is also in attendance. Good afternoon, Mr. James. Could you identify yourself for the record and proceed. I believe for the purposes of offering an amendment that the City and Public Property and Law Department is suggesting and also for the purposes of kindly reading into the record the amendments that I myself have requested that have been discussed with the Law Department and agreed to by the Law Department and I believe by the RCN Telecom Services of Philadelphia. So for those purposes, please identify yourself for the record and proceed. DEPUTY COMMISSIONER JAMES: Good afternoon. My name Joseph James, Deputy Commission for the Department of Public Property. Good afternoon. Good afternoon members of the committee. The department has at the first hearing presented an amendment which was a clarification of the construction schedule after coordination with 5 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 the Department of Streets, and that was submitted at the first hearing sometime ago. I don't recall the date at this particular time. At this point in time, the Department is prepared to present a set of amendments that are before members of the committee that have been reached through a successful discussion with representatives from RCN Corporation, Members of Council, and the Law Department. I will try to be as concise as possible on those amendments. Hopefully, you have them before you.
Before you begin, does every member of the committee have copies of the amendments? There should be two sections. One is about four pages, five pages long, and the other is a -- that's the other one. Please proceed. DEPUTY COMMISSIONER JAMES: These are proposed amendments to Bill No. 000452. The first amendment deals with Section 1, Subsection D of the final OES agreement of Article 1, Section 5, the Cable Television Franchise. This amendment is to limit the proposed term to seven years given the proposed seven-year construction with an extension of additional eight years upon certification of 6 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 completion of construction. The purpose of this is to ensure that the construction is completed, is certified by the Department of Public Property through the Commissioner before the extension of the additional time. Under this agreement, if RCN is only -- has an OVS agreement which is initially proposed, then they would be extended from a seven-year initial term for three additional years for a total of a ten-year agreement. If they are successful in obtaining a cable franchise which has a 15-year term in it, they basically have a seven-year initial term for them to them to complete the construction schedule and upon certification obtain automatically the additional eight years for the full 15-year term. The next amendment is under Section 3, Subsection A, Franchise Application of Article 1, Section 5 for the cable television franchise. This allows the City to negotiate additional terms and conditions in the subsequent cable franchise agreement as deemed necessary for the safety and welfare of the public and ensure that the construction will be completed and terms will be renegotiated if the franchise is transferred. 7 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Next is under Section 4, Subsection A-1 of Article 2, Section 2, System Construction. This requires submission of plans from RCN with construction multiple sections of each franchise area at a time certifying that is done without regard to any social, economic, or demographic factors. Section 5. This is under Article 2, Section 2, System Construction. And it requires an annual construction progress report as well as financial statements regarding the construction project's financing and this will be submitted to the Department of Public Property as well as to Members of City Council. Under Section 6, there's an amendment requires a separate construction bond, insurance coverage, and local offices for each franchise area. And what this particularly says is RCN shall also maintain a local office with a local Philadelphia telephone number in areas where they would apply for a cable franchise for the purposes of providing customer service and bill payment and billing inquiries as well as customer complaints. The next amendment is under Section 7, 8 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Article 2, Section 13, Fiscal Reports. This requires annual construction progress reports as well as financial statements regarding the funding as we just talked about. It requires RCN to maintain records and make available to Public Property and Members of City Council and the public all requests for service and their disposition. That is the extent of the amendment.
Mr. James, Deputy Commission James, did you review the amendment, the Department's amendment in conjunction with the Street Department's? Has that been read into the record? DEPUTY COMMISSIONER JAMES: The first amendment which deals with the construction schedule were read into the minutes at the first hearing.
Fine, okay. Thank you. Is there anything else you want to add relative to this particular issue while you're sitting there? DEPUTY COMMISSIONER JAMES: No. I think there's been a lot of discussion about the negotiations to date, and I think in these further 9 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 amendments. What we've been able to do is fairly well amplified. The understandings between the City and RCN on how they would handle their construction and the insurances that the City would want to obtain to make sure in fact they do complete it, they do provide it in such a way that all the customers are served within the particular franchise areas that they apply for. And in supplemental testimony there was some additional corrections or modifications in some statements that I made initially in the first hearing and, hopefully, Members of Council had a chance look at. But basically it was, again, correcting the misnomer that they would have to -- RCN as part of this agreement would have to apply for and obtain the authorization from cable franchises in areas that they would like to apply for. And into that, they would have to build out the entire franchise area as part of their obligations, very similar to the incumbent operators. Thank you.
Thank you. Councilman Nutter, you have questions for Deputy Commissioner James.
Yes, I have a few, 10 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 yes. I was going to ask you later about this particular issue, but why don't we kind of pick up where you just left off and I'll go back to some of the other questions that I have because I thought what I just heard you say was somewhat different than what I recalled or from what I understood back in the first hearing in October. I thought my understanding at that time was the applicant would be able to provide certain services for a certain amount of time, and if they did not have a cable franchise by another certain time or they hadn't been awarded one or hadn't applied for one, I thought there was something about some two-year issue that they would then not provide cable television services. Is that what was discussed back at the October hearing? DEPUTY COMMISSIONER JAMES: I believe that's how it was discussed at the original hearing. And there was a reason for my supplemental testimony, and hopefully a correction of that.
Well, I'm sure I did not explain it too articulately just now. So why don't you tell me what the testimony was back then 11 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 and then tell me what the testimony is today. DEPUTY COMMISSIONER JAMES: I think the most distinguishable difference between my original testimony was that RCN under this authorization under this bill as an OVS interim agreement would not be able to provide video programing in any area of the City unless they had a cable franchise.
Can you hold on for one second? DEPUTY COMMISSIONER JAMES: Sure.
For some reason, we're have a little bit of trouble hearing you up here.
You know what I would suggest? I recognized this the last hearing we had yesterday. Would you mind going to the other Chair. I think that maybe a little clearer microphone. Glad we got this new system. DEPUTY COMMISSIONER JAMES: Hopefully if I can try to explain this. At the first hearing, we had a discussion regarding RCN's ability to offer video programing services in parts of Philadelphia if they needed a cable franchise to do that or could they do that under OVS agreement that we're 12 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 proposing. We propose that under the bill RCN would have authorization to become an OVS operator in Philadelphia and to provide telephone and video services as they're right under their OVS certification from the Federal Communication Commission. RCN in both the City --
I thought certain obligations kicked in as soon as you started video programing, or at least certain rights by the City kicked in as soon as anyone started providing video services. DEPUTY COMMISSIONER JAMES: Right. In the bill, there is a number are provisions for RCN to provide us services similar to a cable franchise, certain obligations like public education on government access, 5 percent gross revenue, and other stipulations very similar to a traditional cable franchise. And the reason for that is that if that RCN under this authorization never obtained a cable franchise for any particular area under the traditional cable franchise, they would still be able to provide video programing services. They would still be under obligations very similar to a cable franchise. It's just that the OVS agreement 13 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 would become a permanent OVS agreement, but there were provisions in the agreement that said after this authorization would occur, 120 days after it, they have the ability to apply for a traditional cable franchise. And so far, they have expressed an interest to do just that and have identified the two specific areas that they have identified as part of their build-out schedule for Areas 3 and 4. If the City decided not to grant them those cable franchises, they could still provide video programing services, they would still be able to meet there obligations as far as the company is concerned and being in this particular business, and the City would still be available to those rights that are identified as far as the gross revenues, the pay, and other obligations that they've already committed to. I believe in my testimony in the past, I suggested that they would not be able to provide video services if they didn't have a traditional cable franchise; and that is not correct.
Why is that not correct? DEPUTY COMMISSIONER JAMES: Because 14 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 their OVS certification from the Federal Communications Commission gives them the right to be a video programing, that's what it's intended for. And they have a right under that to provide video services as well as telephony services to customers in the areas that they're certified.
Why did you say what you said back in October? DEPUTY COMMISSIONER JAMES: I think I was excited. I think I spoke too soon and did not think it out.
You get excited. DEPUTY COMMISSIONER JAMES: Yes, I get exited occasionally.
In front the Public Property Committee you were excited? DEPUTY COMMISSIONER JAMES: You know, I have those days. (Laughter.)
There are more exciting committees around. All due respect to the chairman of the committee. Well, this was a little while ago, so what is the difference materially between an OVS 15 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 agreement and a cable franchise? What are the benefits to the City? What are the benefits to the applicant? And what are the liabilities or risks to either under either scenario? DEPUTY COMMISSIONER JAMES: Well, the benefits for a company to become an open video service provider was established as part of the Telecommunications Act of 1996 to allow basically telephone companies to get into the video business so that we would have competition between the traditional phone companies and the cable providers. And to allow companies to do that, there was, well, not a lot of regulations for them to do that. It didn't require them to go through similar process to get a cable franchise. It basically gave them a very simpler manner of becoming certified at the federal through the federal Communications Committee on those issues that we traditionally also review as a cable provider as far as their technical ability or their financial ability and their ability to operate a particular franchise. So for a company that's -- a newly formed company, in particular --
A company that's a 16 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 what? DEPUTY COMMISSIONER JAMES: A newly formed company like a competitive local exchange provider. It gives them the ability to offer a bundle of services, and that is particularly what RCN is attempting to do. So from an RCN standpoint, I would think it would be to their benefit, and so that's the course they've taken, to become that OVS and get that OVS certification. With that, they still have to come to a local municipality where they want to and obtain an agreement. They don't have to obtain a traditional cable franchise agreement. They can obtain an OVS agreement. And there's not a lot of structure to that to say that basically they have to perform everything that they would have to a cable franchise except an institutional network is the normal provision that they're not required FCC that they have to give to a local municipality to operate. And it also gives them the cover of the federal mandate in case a municipality is inclined not to give them an agreement, that they have this authorization they're entitled to be here, they're entitled --
The municipality is 17 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 not inclined to give them what kind of agreement, an OVS agreement? DEPUTY COMMISSIONER JAMES: An OVS agreement or a cable franchise agreement to keep them from entering the market. The federal government wants them in the market; they want them to operate; they want them to provide competition. So a company coming in, they might select, of course an OVS. For a City, the cable franchises provides us the traditional model that we're most accustomed to and it provides us and to a certain extent to a cable provider, even an OVS provider, a certain amount of certainty. The regulations have been established over time, they're clearly spelled out, they talks about terms and conditions and guidelines and what things you can ask for and what you can't ask for. So a company, and even in the case of RCN, would want to eventually to have cable franchise because there's a lot more certainty there. And the OVS, there's not a long history, there's not a lot of established record of rights and responsibilities that you would find more certainty under the cable franchise. 18 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 So for the City standpoint, as other cities have done, in this particular case, RCN, they've gone into the model of offering an interim agreement to get them started so the City does not delay them and does not stop them in the market and does not fall under any kind of federal mandate, and allows them the opportunity to migrate into the traditional cable franchise.
Why not start out getting a cable franchise? DEPUTY COMMISSIONER JAMES: I believe it's something that has to be looked at by both parties depending on that municipality, what works for that municipality and what works for RCN in that particular market. In some cases, going right to a cable franchise would probably be the best outcome. Some cases, maybe we want to see them prove themselves and let them establish themselves under the interim agreement and then let them migrate into the cable franchise once we've had an opportunity to better understand what they're doing to do and the services they're going to provide. So for a City, it's kind of we get the best of both worlds. We have an interim agreement. 19 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 They've guaranteed to build out construction in the interim agreement, they're guaranteed to provide us provisions very similar to a cable franchise under that agreement, and they still have the right to opt out and get a traditional cable franchise.
Have you done any -- other than your, I guess, two times now before the committee, you're not excited today, are you? DEPUTY COMMISSIONER JAMES: No, I'm much calmer today.
What's been the department of information that's been shared with regard to the whole OVS versus cable franchise arrangement. OVS came out of the '96 cable act? DEPUTY COMMISSIONER JAMES: Telecommunications Act.
The Telecommunications Act. DEPUTY COMMISSIONER JAMES: Yes.
And this was the first of its kind here; is that correct. DEPUTY COMMISSIONER JAMES: This is the first in this market, yes.
And other than the 20 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 two hearings that we've now had, has there been any discussion about OVS to the broader Council body here? Has there been any briefing about this concept and how it came to be and what it's all about? DEPUTY COMMISSIONER JAMES: I don't believe we provided the Council any direct briefing on the subject.
What are the downsides for either party? DEPUTY COMMISSIONER JAMES: Well, I think downsides are the same whether it's an OVS or it's a cable franchise. There's the risk of any kind of business venture in the magnitude of the construction that's going to occur, whether or not they're going to be successful, whether or not they're going to be profitable. And the risk to the City is the disruption and, you know, the uncertainty they may not be successful and how that would impact the City if they're not.
How would that potentially impact the City. DEPUTY COMMISSIONER JAMES: Well, 21 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 potentially, we could have construction occur, we could have a lot of disruption and a lot of wires placed above ground and below ground and never have an operator who would complete it. So there would be some certainly detriment to the infrastructure and the City to be disrupted and not have the services delivered. The similar risk that occurred, you know, basically in 1984 when we first started cable that there was a risk that all four of those providers would not have been successful and the risk was basically somewhat the same. Today, the only difference is the economics associated with the companies that are trying to do it as an overbuilder.
What's an overbuilder. DEPUTY COMMISSIONER JAMES: An overbuilder is someone who builds on top of an existing, in this case, operator within the same market, within the same area.
Let's talk a little bit about your testimony. The first page of testimony I have which has both the Commissioner's name and your name on it, I was kind of struck -- I 22 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 mean, I read a few testimonies from time to time, but yours has kind of trifecta of words that draws a little bit of attention. It says on the first page, "This testimony is submitted to clarify, supplement and amend the testimony of Commissioner Andres Perez and Deputy Commissioner Joe James in response to questions presented by committee members during the committee's public hearing on the bill on October 31, 2,000." What all needs to be clarified, supplement and amended, and what happened since that time to cause those three things to come into play? DEPUTY COMMISSIONER JAMES: I think in the area of clarification, the testimony went back to, once again, to redress if it had not been clear the first time in the testimony that was given before about what are the things the City's going to obtained from this agreement. What are the benefits to the City that were going to arise by providing RCN this opportunity. There was clarifications to questions like, as I mentioned before, answers I gave in the previous testimony that were not quite correct. And hopefully, we've corrected them by giving the question and the appropriate response 23 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 that should have been made at the time.
On , the testimony reads, "RCN has agreed to terms that are in material respects equivalent to the terms and conditions of the City's four cable franchises." If you say they're in material respects equivalent, does that mean that there are any material differences or are there any differences? DEPUTY COMMISSIONER JAMES: There are some differences in the timing of certain payments under certain obligations, very similar to what we did with the Urban Cable franchise where all of the payments for, let's say, meeting their obligation to the School District doesn't occur all at the first payment, that we allow them to split them over payments. The same thing as obligations we made to PCDC or government access, and even in areas of the public access obligation that the timings for their payments would probably not occur at the same time as the payments from the other operators, thereby extending the money that would be available for the construction and providing of the service. So those are kind of material changes -- and basically, the agreements are equal in that they have the same 24 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 scope of services that are being -- and provisions that are being derived from, whether they're 4 percent gross revenue, the ability to obtain revenue 5 from cable modems, the ability for us to obtain money for the School District, the ability for money from government access channels, the government access channel allocations, to School District allocations channels, and the college and universities in there. There's even a commitment for the institutional network that are, again, it's not equal to the same obligation, but none of the agreements are actually identical. They're equivalent based upon what we've termed to be the best value that they could provide to us under this agreement.
On , there's a statement that says "None of the original franchisees was required to construct more than one franchise area of the City, let alone the entire City or to do so within these completion times." This is at the end of a paragraph talking about some completion dates. My recollection back at the time maybe, though, that I don't know if anyone was asked to or 25 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 would have been allowed to. Is that correct? DEPUTY COMMISSIONER JAMES: In the original four franchise when they were awarded, there were proposed timetables by the applicants when they would have their system completely constructed. Those were the schedules that we were basing, basing upon our monitoring of their completion. They then came back and asked for extended times because they could not complete it in the time frames that they asked for, and the City provided those extensions. So what we were trying to say in the statement is there was no requirement by any one of those four to build the entire City or to have their construction completed within a four-year period of time. They proposed times and we accepted those times. But when they needed extensions, we gave them extensions.
Has there been any suggestion or requirement that RCN build the entire City? DEPUTY COMMISSIONER JAMES: Well, there has been discussion about the build-out schedule that they have proposed. There may be some inequities in it because it doesn't encompass the 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 entire City or it only starts in a certain cable franchise area and not in all four franchise areas at the same time. And, you know, that's their opportunity to propose where they would like to start and where would they like to build. And what we tried to provide in the testimony is that it's not that similar from what occurred in the past. Business is asked to start where they wanted to start, and we basically allowed them to start where they wanted start.
Well, I understand that. What I didn't understand about the statement or what the point was, again, was that I don't recall any of the four franchisees being required to do anything City-wide. I thought that there primary, if not only, obligation was to build in their area. DEPUTY COMMISSIONER JAMES: That's correct. And what the testimony is trying to indicate is that now we have -- that did occur in the past. Now we have a new entry who wants to come into the market and he wants to select where he wants to start. There has been statements made in the press about them not accomplishing the entire 27 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 City and there may have been some concerns, I don't recall all the comments made by the committee members at the time of the hearing in October, but suggestions that why aren't they building the entire City, why don't we have an obligation for four franchises from them all at the same time. We merely tried to amplify what had occurred and what we think materially the significance of those two construction schedules that were permitted.
Okay. The Chairman's been most gracious with leeway. I ask one question and then yield back. On , it's a statement here that says, "Therefore if RCN offers video programing over the Center City network or anywhere else in franchise Areas and multiple dwelling units to select neighborhoods or areas to individual customers or anyone else it is obligated to apply for a cable franchise for the entire area within 120 days after offering video programing in the area." Does that mean that they are not required to apply for a cable franchise if they're offering the video services in Areas or 4? DEPUTY COMMISSIONER JAMES: No, I 28 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 believe the statement is written as such to indicate that we already have a commitment from them that they are going to do Areas 3 and 4 and are going to apply for cable franchise in those particular areas. So what the intent of the comment was --
Just 120-day? DEPUTY COMMISSIONER JAMES: Right, with 120-day. And we were trying to address the other two areas that were not committed to initially.
Thank you, Mr. Chairman. Councilman Nutter actually asked some of my questions.
Councilman, I apologize. I did not look at your papers this time, but I apologize to you.
I know it wasn't intentional. 29 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 One of the latter questions with respect to the remainder of the City, as you will recall in the hearings being a councilperson who does not represent either Area 3 or 4, I obviously had some concerns. During that discussion, there was actually information came out kind of on both sides as it related to the rates. I think there was some conflicting testimony, one that indicated that the rates had to be set rates across the board, and I understand, and please correct me if I'm wrong, there is no requirement that has a set rate across the board, not only between franchisers but within the one franchise there apparently could be different rates in different areas. Is that my understanding? DEPUTY COMMISSIONER JAMES: Councilman, that is the my understanding, that the flexibility in the rates are determined by the provider and they have the latitude to set the rates as they deem appropriate based upon their cost in a particular area. So it could be higher cost within the same franchise area. They possibly could charge different rights. Would not seem to be likely, but it's possible. But certainly across all four 30 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 franchise areas, the rates are not necessarily uniform.
With respect to Areas and as it relates to RCN's ability to ultimately get to that, assuming best case scenario that they're able to make it more competitive in and would obviously be to the advantage of or probably would be required of other franchise in that area to lower their rates to become competitive with RCN if in fact what they say is true. My concern as it relates to 1 and 2, how do we achieve what best case scenario will happen in 3 and 4 in terms of get being able to get competitive rates? How in terms of a time frame, how do we get there? I just don't think it's appropriate for people in 1 and 2 to not have these enhanced services at a lower rate in those two areas.
Before you answer, let me just piggyback on that a moment, and I know there's no real answer to this question. But one of the things I've had discussion with other councilmembers, Councilman DiCicco included is what effect does the rates in the monopolized areas of and 2 have from an upward standpoint relative to the 31 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 price war that apparently will go on in and 4? I 3 mean, I know Comcast won't answer that. RCN can't answer that, and we don't really have a crystal ball, but at some point in time if the competitive pricing in and create a problem in 1 and 2 where Comcast or whoever the provider is needs to absorb that cost somehow. I'm worried about cable rates in those areas going up, frankly. So that was just an addendum to Councilmember Clarke's question. DEPUTY COMMISSIONER JAMES: Councilman, there is no real answer to that question because we don't have the opportunity to be able to make that -- to control the ability for them to move into the other areas. I would think, this is just my view, that making them successful in Areas 3 and 4 further creates the opportunity for them to move across to Areas 1 and 2. Very similar to what Comcast started out in Area 4 and became very successful. When there was opportunities and the economics were there they move and acquired the other areas of the City to their benefit. And that doesn't necessarily mean that the rates have lowered in Areas and which they acquired after they had 4 initially. I think it's a business decision and the real driver behind 32 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 all this, yeah, it's enhanced services, but when it comes down to it, it's just entertainment. And it's the cost of providing that entertainment which is driving their cost.
I hear what you're saying, but I recall, again, in earlier testimony this there was this whole issue about why and were selected. First we were told essentially that the plug was a little closer to the Princeton office. And then we got a little beyond that. We started talking about 3 and 4 possibly being more lucrative early on in the process than 1 and 2. When you talk about that being the case, I'm not sure that they would fill the need to go to 1 and 2 if 3 and 4 is in fact as lucrative as they indicated in earlier testimony. And I'm just saying as a person who represents those areas, I don't think that it's fair for us not to be on a level playing field as it relates to cable serves and enhanced services. And I think the City should take a more proactive approach as opposed to just kind of waiting and seeing what happens with the RCN if they ever decide to come down to and based on the economics. I don't know there's the wherewithal 33 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 within the City to do that. Or do we go out and solicit individuals? I mean, what are we going to do about that? If this happens, I'm going to start getting some calls. DEPUTY COMMISSIONER JAMES: I can only say that is probably one of the main reasons that it's taken us so long to get this point at the table because we in the Administration who were in negotiations with RCN had this as a major concern for us is how do we draw RCN into making a larger commitment and providing services across the board for the entire City. And that took a lot of negotiations even to the point where they're going to start in 3 and 4. We by no means at all took that issue lightly. We were very concerned that you would have the same concerns that you're expressing right now, and certainly in the concerns that we have as people who live in the city is that if there's going to be an opportunity for competition and lower rates, everyone should have that benefit. This is the best deal that we could create at the time that we were able to bring to the table. Hopefully we will continue to encourage them into 34 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 move in those areas. But I don't know if we have the administrative or regulatory authority to force them into areas where they're not willing to go.
I guess because of the Telecommunications Act and we essentially have know wherewithal to say that you can't just select this very lucrative area without -- DEPUTY COMMISSIONER JAMES: I thank if you look at the businesses in general, look at all the different telephone companies that there are. There's over 33 competitive local exchange companies that have identified Philadelphia in a marketplace and I can tell you they're all in Center City. There's on competition for your home service right now. Nobody's offering it and I don't see anybody stepping up to it, but there's 33 companies that have identified Philadelphia as the place to do business and they're all in the core of Center City. So either the Telecommunications Act doesn't have, you know, everything in it, it certainly provides competition. But companies, just like dot com companies, like everybody, they're going to have to generate a profit first before they can expand. The ones who expand without generating a profit and 35 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 don't have the customer base don't last very long. Even though they're starting in Areas and 4, those areas 3 and 4 have always existed and have always been lucrative to whoever had them. That doesn't make them a safe haven and only restricted to the incumbents. Everybody has to have an opportunity and they have, as a business, have a right to make a selection where they want to go.
Thank you very much. I understand there was an appeal filed in March of 2000 with NLRB; is that true and what is the status? DEPUTY COMMISSIONER JAMES: I'm sorry, Councilwoman, I'm not familiar with.
The National Labor Relations Board. DEPUTY COMMISSIONER JAMES: Well, I'm not familiar with any of the labor relations issues RCN is involved in. 36 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
Councilmember, I'm not sure whether we're going to have testimony -- no, we're not going to have testimony.
Councilwoman Blackwell has a request that a representative from RCN approach the table, whoever you believe is appropriate to answer this particular question.
Good afternoon, Councilwoman. I believe you're referring to the -- I'm sorry. I am John Pitts, P-I-T-T-S.
Thank you. Identify yourself for the record and proceed. Thank you.
My name is John Pitts, P-I-T-T-S, I'm the area vice president for RCN. Councilwoman, I believe you're referring to the 37 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 matter concerning RCN and the CWA in the Lehigh valley system?
It is correct that we did appeal a ruling from the NLRB. The current status of that -- and the particulars are in my testimony from October 31st. The current status of that is that we have sent a letter to the CWA requesting that we both drop litigation and move to a fair and open election in the Lehigh Valley. And we have just recently received a response from the CWA agreeing in part to our recommendation.
That's a very important issue to us, and I understand Councilman Cohen has a lot of issues with regard to this whole issue concern. As you know, there's been a lot of talk in the past about racial disparity in your building plan, and certainly we want to make sure that you're a young company that RCN is and that all people certainly in Philadelphia are protected. Let me ask. It's been said that because of financial problems RCN has decided not to go into have other markets. What is preventing you or 38 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 encouraging you to stay committed to Philadelphia?
Councilmember Reynolds-Brown has follow-up to Councilmember's Blackwell question.
You indicated in your response that you sent a letter to CWA requesting that both of you drop your cases, correct?
And that they -- did you use the word "comply" or "support" your recommendation? Which was it?
The letter requests that we both -- suggests that we both drop litigation and move to a fair and open election. And the letter that we received from them just a few days ago, it agreed to generally that statement with some stipulations, and we're formulating a response to their letter.
You faded on the tail end of your response. 39 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
They're letter -- we received a letter from them a few days ago agreeing to the concept of dropping litigation and moving to an election.
Thank you very much. I was unclear on what you were referring to when you say recommendation. Thank you. Thank you, Mr. Chairman.
Can I add something? Of course, we have to work on the hows and the wheres and so on.
Thank you. We had followed up asking due to financial issues just the status of where they are in terms of preventing or encouraging a stay in the City. Where is RCN now? We have a lot of concerns in this Council and there are people on both sides of the issue because we're really not sure that we're clear. It's a union town. We want to expect our unions. We still hear all the rumors about RCN not really being committed to the whole City but only 40 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 being committed to certain people in certain areas. And those are legitimate issues for us. So we want to know exactly what your plans are and what your commitment is to Philadelphia, to certain areas and to all of it.
I'm Scott Burnside, Senior Vice President for Regulatory and Government Affairs for RCN. Let me start with the macro and move to the micro answer to that question.
I will. I will do that. From a macro prospective, I want to talk about the general economic conditions and how they have changed over the last couple of months and even over the last year with respect to investment capital and new business interests. And from that perspective, I'm talking from macro perspective. As you probably are aware, RCN and other companies in its so-called sector economically, we're very fortunate, those of us who had a business plan that was of some interest to Wall Street and 41 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 we're able to collect or attract a substantial investment to start this business. It's a business with a very high barrier of entry. After all, what we're doing, essentially, is competing with two or three of the most entrenched monopolies that this country's ever seen, that being the local exchange telephone companies and the entrenched unregulated cable monopolies. And to do that, we need to have a substantial amount of capital to build a network. We were able to raise and continue to raise that capital, but without any do doubt, there has been -- whether we use, as I hear on television, the R word or not, we're in a economic downturn. And obviously, that means from a business perspective, there is much less investment capital available. And so what we have done, as any prudent business would be do, is adjust its business plan and its trajectory of growth accordingly; and we've done that. We have pulled back in markets or new markets that we had been seriously exploring, places like Denver, Colorado, and Houston, Texas, and so on, and concentrated simply on the markets where we have already committed to. And certainly -- Now I'm moving, I guess, from the macro 42 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 to the, micro. With respect to this market, clearly RCN, taking the Greater Philadelphia market as a whole, has already made a substantial commitment. We have something in the neighborhood of 6 different agreements or licenses to operate in 7 suburban communities and want very much to have the 8 same opportunity to operate here in the City itself. 9 So I think with respect to any references about RCN 10 so I think with respect to any references about RCN 11 slowing down its growth, that I hope explains the 12 rationale and exactly what has gone on as we've 13 adjusted to this economic condition we find 14 ourselves in. And we're very hopeful, as I think 15 most people are, that once the economy turns to some 16 degree, the investment bankers in Wall Street will 17 again reinvest or additional investments in 18 companies who have survived this downturn; and we 19 fully intend to be one of those companies. So I 20 think from the perspective of the overall business 21 plan, that addresses our current environment and 22 situation. 23 Now, with respect to of the City itself, 24 I think that Mr. James's explanation to Councilman 25 Nutter about what our plans are and how we plan to 43 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 go about it and the protections and safeguards in the license that has been negotiated over some long period of time gives both the company and the City a reasonable, if you will, win-win agreement because it has to be that way. And I would only have added to his -- and perhaps this is to some degree addressing your question, that if RCN is successful in doing what we are prepared to sign for here in the City, the opportunity to go on beyond that, obviously, becomes much easier because we will have then achieved some economic base. We're building a very brand-new high technology network, one that doesn't exist today. That's the good news. The bad news is we don't have any customers yet in Philadelphia.
And to establish a customer base with the investment necessary and the infrastructure, the head end, the telephone switch and all of those things in place, the opportunity and ability to go into the other parts of the City became very attractive to us. But we simply can't digest the whole thing all at once. And I think that is pretty much what Mr. James was saying and I think that's what I would say. I'm not sure if I've answered all of 44 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 your questions, but if I haven't, I'm not sure I remember exactly what else I need to tell you.
In light of your recent -- and the statements you just made concerning your financial concerns, do you foresee a problem in obtaining construction and performance bonds in order to ensure competition in the initial phases of the project?
None whatsoever. This company is very well capitalized and, in fact, is prepared to weather a much, much longer storm with respect to a downturn in the economic conditions than any of us believe is reasonable. We're fully funded out through a five-year business plan and with the ability to attract, hopefully, new investment over the next couple years, we'll be back on the growth projectory that we were on. But if not, we have a commitment and we we're not making any commitments that we can't fully honor. So I'm very confident that what we're doing here in Philadelphia can be accomplished with all of the safeguards that have been built into the agreement.
Thank you. Thank you, Mr. Chairman. 45 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
I'd like to follow-up for Commissioner James on the amendments to the OVS agreement. And it follows the financial condition of RCN. Here, obviously, you must have had a concern because it says here, "Given RCN's recent financial problems, we wanted to increase their financial commitment to ensure the project would be completed and make this arrangement more equitable to the commitment of the other franchise-holders." The construction and performance bonds, could you tell us the value of those construction and performance bonds, and are they adequate in the event that -- DEPUTY COMMISSIONER JAMES: Councilman, you have to excuse me on the actual numbers. I don't have the actual numbers for what the bonds are. I would say just off my memory, the construction bonds are based on the total amount of money that's required for them to build out. It's like a percentage like most bonds. It's based on the amount of dollars that are going to be expended along with the insurance. We would obtain a 46 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 sufficient amount to cover the construction that they're planing to do as well as a performance bond to make sure that we have sufficient capital through a bond. If RCN would not be able to complete it, we would have money to be able to go out and hire someone to complete the construction or be able to sell off the assets that are already in place.
Wouldn't it be -- isn't it important for a decision-making process to know exactly those numbers before we make a decision? DEPUTY COMMISSIONER JAMES: I'm not saying I don't. I just don't have them in front of me and I don't recall them off the top of my head.
Could you please comment on the fact -- in your opinion, the performance bonds and construction bonds would be established to sufficiently cover the completion of the construction and bring the system's construction to completion, if they walked, who would operate a system we just built? DEPUTY COMMISSIONER JAMES: We had this discussion with one of the previous franchise or along the same lines and their ability when Urban 47 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Cable took over from Time-Warner and the Wade franchise. We asked for additional construction bonds and there were discussions that if they were unable to fulfill their obligations for the build-out, the City would have to take over that and operate it either by finding an operator through a bid process or looking for a company that would want to acquire that particular franchise and then operate it.
Because this isn't the typical technology that you say to a cable company, hey, we need you to jump in and operate. This is a different animal, from what I understand. It's just not -- there's not a lot of people walking around to do this. DEPUTY COMMISSIONER JAMES: Basically, the technology operates very similar to what's out there today, either from the incumbent cable operator or from the telephone company. It's a fiber network and it's a matter of technology as far as the switches that operate it.
Before we lose track of the questions, could you comment on how and amounts of the performance the construction bonds? 48 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
I don't recall the exact amount. But I know that in reading through the franchise and what was required, it was in the range of the performance bonds that we were required when I was a cable operator here in the City, so we didn't have any concerns about the amount.
I mean, really, I can't imagine we could sit here and you're planing a project and know that you're going to need construction and performance bonds and you don't have a clue what those numbers are.
Well, then tell me. Tell me how much these performance and construction bonds are going to be.
My name is Thomas Steele, Vice President with RCN. I've had the advantage of being able to check the agreement while the gentlemen were talking at the table. The 49 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 construction bond is $3 million, and there's also a Section in the agreement which gives the City's risk manager the ability to a require the limits on insurance and/or the limits on the bonds required by the agreement to be increased by RCN from time to time to reflect the increased potential liability. The only restriction there is it has to be consistent with standards that are at work in the cable industry.
Excuse me now. You're talking about a construction bond of $3 million. That sounds to me very, very lean. How much are you planing to spend -- let's talk about Area 1. What is your investment in Area 1? Any of the areas, just give me an example. It's $3 million it's tough to build an anything today for -- I just can't imagine $3 million being enough to finish a project that could be how many millions, how many millions of one of the projects going to be?
So we're halfway through the project, $125 million project, and you expect the City of Philadelphia to finish it for $3 million. 50 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
It was president my expectation that that's what the bond was designed to do. DEPUTY COMMISSIONER JAMES: The bond provides us insurance in case there's a default. It's set at a number that's very similar to what the other operators had when they obtained the cable franchise. It's not really our expectations that we will have to acquire this and operate it. $3 million is enough for us to find a company to complete it. $3 million may be enough for us to sell off the customer base that they have already built to date, but it's certainly not intended to recoup the $125 million if that's what they're planning to spend on the construction. Bonds are just not designed to be the full face value of the construction. It's a percentage of whatever that capital is. Again, it has insurance, it has a performance bond, and it has a construction bond. So we have at least three vehicles to use if we're ever put into that position to have to take it over.
And the amendment would b3e that requirement for each of the franchise areas? 51 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 DEPUTY COMMISSIONER JAMES: Each franchise area, that's correct.
Thank you, Mr. Chair. I have a question for Mr. James and also a couple questions for RCN. Under the Federal Cable Act, does that mean now that Philadelphia is open or will be open to all different types of companies coming in to do cable? DEPUTY COMMISSIONER JAMES: Under the Telecommunications Act in '96, it allows any parts of the country for a company to get started as an OVS operator and to go into that market if they meet the requirements of the FCC.
So is in the only OVS company that has approached Philadelphia to want to provide cable services1? DEPUTY COMMISSIONER JAMES: Yes.
Do you have an idea of how many more companies are out there? 52 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 DEPUTY COMMISSIONER JAMES: When we first had the opportunity to meet with RCN, we had the similar question, and I think from our research there was only about three or four companies nationwide that were in different markets that were trying to do the same type of effort. There was companies in, I believe, Georgia, might have been in Florida, in the midwest area and the California. I can't recall the specific jurisdictions. But there were not a lot of companies that were taking this model and was trying to become an overbuilder.
This question is for RCN. Since part of Area and are in my councilmatic district, I have questions that pertain to programing and service. What is the difference between you, a OVS and let's just say Pop Vision? Are you familiar with Pop Vision?
Yes. Pop Vision came into town and it's the only company I know other than Comcast and then part of Wade is also in my area. And Pop Vision came into town and people jumped at it purchased Pop Vision, and it was awful. 53 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 My concern is that people get quality service for their money. So I really want to know about your track record and the type of programing and service that you provide.
Well, we're operating in 7 towns in Delaware County right now, offering a high 8 how quality of service, full range of video 9 programing, telephone and high speed internet. What 10 we are proposing is to bring that same level of service into Philadelphia. It's a much more robust offering than Pop Vision. It's everything that people are used to in the area of programing. Any channels that are being offered now, virtually all of them are on our lineup as well. There's some limitations with Pop Vision that with us delivering our product fiberoptic and some co-ax cable. We don't have those limitations.
So when it rains, your service is still there, it doesn't go in and out?
When you set your cable system up in Chicago and Boston and New York and Washington, D.C., are you doing the entire 54 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 cities? And how long have you been in existence? Or are you only doing certain areas slowly the way you're doing here in Philadelphia, moving into the entire city slowly?
I'll try to answer that. In the markets that you identified, I think the first one was Chicago, Chicago is somewhat similar to Philadelphia in that it is divided into multiple franchise areas. We actually started in Chicago with one area and have just recently, just in the past couple of months signed a deal with Chicago, after having had a couple of years start in that first area, to do three other areas. So I think there is something of a similarity. The only thing I would point out to you that with respect to Chicago, RCN acquired a small company that was doing exactly what we're doing, but only doing it in Chicago. With respect to Boston, Boston is different in that it only has one franchise area. The footprint of Boston, the physical footprint of boston is not nearly as big as the City of Philadelphia. And for that and I guess other reasons, they chose in the City only to have one franchise. So obviously when we did an agreement in 55 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 the city of Boston, it covers the whole City. We have also -- we also started out there with an interim OVS agreement very similar what we're doing here.
So you're providing cable to the entire city of Boston at this time?
Well, not yet. That goes to sort of the second part of your question. We've been in business since 1997 and we're in the middle of a seven-year build-out schedule for the franchise in Boston. Now, I also wanted to point out one other distinction you raised. In the City of New York where there are five boroughs and I think, I'm not sure, but I think nine franchises all tolled, we are operating there strictly under an OVS agreement. There is no transition to franchise and we, therefore, we have no commitment to build out the whole City. And the reason that's germane is that the City itself, the Department of Information, Telephone and Technology, the acronym's DOITT, felt that it would have been virtually impossible to hold a company to a build-out schedule for, let's say, 56 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 all of Manhattan where there are two franchise areas in any time comparable to what was in the existing franchise agreement and they decided that some competition in some areas was better than none. And I don't want to put words or thoughts in their head, but I think if you ask Mr. James's counterparts in the City of New York that that was the thought process behind granting an OVS agreement to RCN. And by the way, just as a footnote, we are now in some very preliminary analysis of whether or not it makes sense to change that OVS to a franchise. That will take some time and negotiations, but gives you, I think, as best I can sort of a walk-through the major RCN markets. We're also operating in San Francisco -- and what else didn't I touch on? And Washington, D.C. as well.
So you've been in business since '97 and you're providing services. Have you provided us with information around customer satisfaction surveys and all those kind of things?
So you know what 57 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 happens. As Councilpeople we get all the calls. If you're good, we'll get calls; but if you're bad, we'll get a whole bunch of calls.
I fully understand that, Councilwoman. I'm not sure if that was asked.
While John is going through that. If you would permit me one observation along those lines, because I think if I've had the experience of dealing and doing business in all the cities we just talked about, that question has come up in one form or another virtually in every community, big or small. And it's a very good question, but part of the answer, part of the answer is that will help relieve and does relieve -- we have prove of that. Helps relieve those calls that you get because in markets, although there are not many today, in markets that in fact have competition where there is cable choice, customers -- and we have most of that experience, by the way. Where that happens, customers don't call you as frequently with bad service or complaints; they simply call the competitive alternative. And that's ultimately the underlying desire of the 1996 Telecommunications Act 58 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 that promoted local service telephone competition and direct competition with the incumbent cable operators.
I think Councilman Clarke asked this question. I'm not really sure. How much is your basic service? How much would it be? Is there some rough estimate?
And that includes just basic, no HBO or anything like that?
No premium channels, but I guess what would be considered basic and expanded basic here, the ESPNs, the CNNs, and 3, 6, and 10, 17, 29, so on.
Thank you, Councilwoman. Councilmember Cohen, did you have some questions regarding the labor issues?
Not just on labor. 59 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
And I don't mean to diminish the significance of labor issues. I'm a Councilman-at-large, and therefore, I'm very unhappy when I hear you say -- that means, not only that I am free from being prosecuted, I'm at large in the other sense, politically representing the entire City as there are a number of other councilmembers. (Laughter.)
I'm looking around, I'm not alone in that. So I assume the other Councilmembers-at-large, and if not, I certainly am unhappy that you only contemplate, as I understand it in the first seven years dealing with dealing with only maybe half the City. However, since I'm a democratic ward leader in the Northwest and my home is there, I'm at least pleased that my home area is part of Councilwoman Miller's district councilship. She's my District Councilwoman. So I'm please that that's included, but there at least I want to know is service going to be made available to the entire 60 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 district at one time or will it be piecemeal? Will I get complaints from members of my ward who cover a portion of the district that Councilwoman Miller represents as a District Councilwoman? Will they get service at the same time that everybody else in that district of Councilwoman Miller, or will there be different parts of the district that get service under your program at different points of time?
Our plan is to construct starting from the north, east, and proceeding west. We have a schedule and a map that we submitted at the hearing and with the application. After an areas has been completed the construction process, then we would start selling and the installation process while we're proceeding to construct in the next area. So we come on in phases throughout the whole period of the seven years of construction.
Well, except I don't know what you mean by area. Does area cover the whole district?
No, it's not tied to councilmatic districts. It's more of what is a manageable area of construction.
In the Northeast an 61 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Northwest, how many areas will there be?
We can -- let us refer to the maps. We've submitted maps in a number of submissions.
Are there 10 different areas, for example? I'm just speculating. 11 I'd just like to have an estimate. 12
If each area comes on 14 time separately and there are 20 areas, then there 15 will be 20 different times when service will be made 16 available in the larger territory that you expect to 17 cover during the seven years. 18
We would probably activate 19 areas when construction is underway, a different 20 area every three or four weeks. So we would be in one neighborhood or one section of a neighborhood which might only be maybe 300 homes or 400 homes and they would be told that there area would be available for service within a few weeks. And then within a few weeks after that, there could be 62 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 another or 400 homes on adjacent streets. So the 3 process is continual where we're continually activating nodes, doing construction, offering service, and then moving on to the rest of the paper. So it's sort of a fluid process.
But within that seven-year program, there may be many different times when service will first become available to a segment?
One of the District Councilmembers don't appreciate that, that they think those of us that cover the City never get these complaints, but we do, and the major complaint is "That street three blocks away got paved yesterday. Why isn't our street included?" Or they went down around the corner instead of proceeding straight down the avenue to cover the area. How do we explain -- am I right, Councilman DiCicco?
It was much quieter before anybody got any improvements. But as soon as the improvements begin, everybody wants them and that's a understandable human reaction. How are we 63 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 going to be in any way able to say that what's happening is happening fairly?
I think that, you know, my answer to that, being a long-term operator in the City of Philadelphia, I understand the realities of construction and causes of concern, information is the best way for us to address that. And what we've been doing in the other areas that we operate in is we have town meetings and we would go out and talk to the community to help with their expectations about our progress. We use the newspaper. Small newspapers will put streets maps and show streets and say, in three weeks' we'll be in this area. Or by six months these areas will be covered. And we found that that helps a lot. It reduces the number of calls to offices like yours and helps us so that when we're on the street doing construction, people know that we're coming and it also helps us in the sales effort, to be quite frank.
Let me ask you this question, which will no link my questions with labor questions. Will you be what appear to be, to me at lease, more reasonable if we call you and say, "We see the schedule, but frankly we think there's a 64 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 better schedule or fairer schedule," will be prepared at least to listen and then explain why your system is better? Or may be even say, "Well, yeah, you know you got a point there. Let's look at it and maybe we're going to change it."
Because in the labor area, I don't know whether I can take from your statement today that you're considering a reply to that CWA letter offering another election and let's put an end to lawsuits. Does that fairly what the letter said?
Their letter was in response to our letter asking to drop the lawsuit.
They did? 65 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
I think that we need to respond to the details of their response. I think that we're in a good place, and you may want to ask them if they think the same thing.
Well, if they testify, we probably will. We are interested, to whatever extent we can have an influence, to promote a friendly amicable relationship between business and labor. Many of us happen to believe that an economic climate is strengthened by a strong labor movement, you know, putting for the vigorously the feelings of working people. To me that's self-obvious when I hear Greenspan talk about he worries about purchasing power, and I've never understood a company that thinks it helps the purchasing power of the community by bringing about layoffs or by insisting on low wages. It seems that policy seems to me to be self-defeating if purchasing power of the consumer is an important aspect of the economy. From what I hear from Mr. Greenspan and everybody else that discusses it, the 66 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 single most important factor is consumer purchasing power and even the belief, of the perception by consumer that their income is going to be steady, reliable, and sufficient to enable them to purchase. So I'm really very confused by business organizations that are hostile to labor groups. Seems to me in the interest of economic development, they ought to be favorable. But in any event, we are concerned about the climate in Philadelphia. Some people think it's a parochial interest. We don't think so. We think we're promoting healthy economic climate when we bring about good relations between labor and business. And so we encourage you to do whatever your company can do, and we say the same to the union, to bring about that kind of understanding. And, frankly, I've been to your previous material. I did not understand why you seem to be placing so many obstacles in the way of union representation. Sooner or later it's going to happen, and I think everybody is helped the sooner it happens and in the more friendly background. What is your sense? Does it seem as if you're on the road to settlement of that problem? 67 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 I know it's not in Philadelphia, but it affects the same top people of your company are concerned and labor operations, whether it's in Philadelphia or outside. Does it seem to you that from your point of view the climate for the friendly amicable labor relationship is developing in the proper direction?
I can only state my view. In my opinion, we've asked for a fair and open election to have the employees determine whether they want to be represented by the CWA. They have choices: The CWA or no union or at union or maybe even the union that they had up there for years. What we want to do is set the rules for a fair and open election and then abide whatever the outcome of that is. And if the CWA wants to do that, then we're in agreement and then we'll move forward.
Why has it taken so long able to get an agreement? Technic a who is qualified to work.
In the interest of dialog, can we have representatives from the CWA here at the table, please?
I think that's a very fair approach. 68 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
My name is Edward Mooney, I'm the vice president of Local 1300 of the CWA.
Thank you. To clear this up, and as Mr. Pitts just stated, what the company wants is they want to know if the employees in this area want to be represented either by no union at all, their former union, the Twin County Operating Employees Committee or their current union, the CWA. As we have contested all along, the Twin County Operating Committee, as Mr. Pitts just acknowledged, existed in the Lehigh Valley prior to the CWA ever being contacted. There was a union there, an established union with a contract in place. What happened was they contacted the CWA. They wanted help in --
They were the stewards of that organization, the Twin County Operating Employees Committee. Said they wanted help in administering their contract to better know how to 69 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 bargain with the company. We agreed. We sat down, met with them, discussed the possibilities and what we need to do, which is called in the union an affiliation. I myself as a member of the CWA, formerly my union was called the Federation Telephone Workers of Pennsylvania. When we decided as the FTWP to become the CWA, the employer under the law has no place in that process. Union members themselves voted from the FTWP to go into CWA. This process was the same. The Twin County Operating Employees Committee, the members who are covered under that existing contract, they have the vote to come into the CWA. They exercise that vote. It was affirmed by the majority of the members there. And was the vote unanimous? No, it was not. But I can't tell you the small percentage of union votes in the country today that are unanimous. Now, what happened after that is the company took up the torch on the side of the minority, the group that lost that said they didn't want to be in the CWA and decided to file all these lawsuits and all these charges and then ignore the 70 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 contract. In their letters they say they're abiding by everything in the contract except the grievance procedure and acknowledging the stewards that are elected. Without that, they have basically no 6 contract because if the company does something which we believe is a violation, we have no way to enforce it other than labor board charges. The company sends us a letter, which we re-voted internally twice already and notified the company of that, so they're aware of that. They want us to withdraw all the litigation, withdraw all charges. The company has the ability to have all that go away if they just sit down, acknowledge the bargaining agent and bargain a new contract. We don't have to withdraw anything. The other problem is if we go to the National Labor Relations Board, had they followed the process that we put in place, which was affiliation, and these employees were not happy with the CWA, between 90 and 60 days before the expiration of the current contract, they could have filed for decertification of the CWA. Because of all the violations and the NLRB charges, that thing could never be entertained by the board; it would 71 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 have been tossed out. That's why it never happened. So if in fact they did not want the CWA as thier bargaining agent, that has nothing to do with the employer and everything to do with the members. We're finding hard to believe why an employer is involved in this. That's our problem. And in response to the letter the sent us, we did say again we will agree to a vote of the membership. The company has to stay neutral because the company would have been neutral in the original affiliation, as they should have been. And they have to be neutral in this. These employees, these members in that area already chose to be a part of a union. If they didn't want to be part of a union, they would have decertified the Twin County Operating Employees Committee prior to the contract being in place. That's all we're asking for. We want them to have their right. Their right was the CWA. Now we ask the employer to sit down and bargain a collective bargaining agreement. That's it.
Obviously, I disagree with Mr. Mooney on the events that led us to where we are 72 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 today. But it does appear that we at least agree as to where we are today. I think that suffice it to say if we're able to come to an agreement on the terms of an election, there will be an election fairly soon and we will let the employees decide going forward how they want to be represented.
I'm not sure I'm clear. Let me boldly put forth what I think the conclusions both sides are. Seems to me the communication workers is saying it wants an election in which it is you vote either for the communication workers or for no union. The company seems to be saying if the union is accurate that they want to ballot that list communication workers, the independent union or no union. Is that an accurate picture or am I wrong on that?
No, Councilman. In our opinion, the option of no union is not even available because if they wanted no union, they would have decertified the Twin County Operating Employees Committee. Then, what the question comes back to is, CWA or Twin County Operating Employees Committee, in which case the company has no part in 73 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 that process. As Mr. Pitts stated, we're close to where we want to be. This is where we tried to be sitting at the same table to work out an agreement. This is the closest we've ever gotten, by the way, and I want to thank you for it.
Let me ask you the same question I asked the company representative. In your opinion, are you moving toward a settlement of this problem so that you can move forward to determine what the employees have a right to do, and that's to make a decision?
From our point of view, at least after the two years or so, they've actually responded to a letter or have initiated a letter, so we're pleased with that. We just hope that in their letter it's phrased in the way, and the company can speak for themselves what their own intentions are, it seems to us that the company wants to have anything washed away as if this did happen, as if none of these problems existed. In order to do that, what it does, it leaves ourselves open. If all the charges are gone, everything's washed away, and then they begin this process all over again, I'm 74 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 looking at another two-year process to get these issues rectified. Where right now I have a case that's already been decided in our favor sitting in front of the National Labor Relations Board in Washington waiting to be affirmed. And in spite of all of that, to get to an end to this, we still agree, we will still forward and have that bargaining unit vote again on their commitment to union membership and the commitment to the CWA.
How long will it take the company to answer the letter that the union sent in reply to the company's letter?
Can I make a request, Chairman, that I answer this question on this matter. And it appears that we're straying into an area that I would ask the Chairman if --
If in your opinion, this is sensitive legal issue or proprietary information, certainly we can't you force to answer. And use your own judgment as to whether you think that's appropriate or not.
I would just ask it it's appropriate for us to go very deep into the granularity of this issue here? 75 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
Well, I can't limit Councilmembers' questions. But I also can't force you to answer in an area that you believe is sensitive or to a disadvantage to your company.
I don't want to seem like I'm evasive or I don't want to be forthcoming, because I do want to be open and honest about it. We feel that we're at a place now where maybe we can reach an agreement. What I don't want to do is I don't think it's fair for us to play it out here. I think the proper place for us to negotiate this would be --
I don't disagree. The only concern that I have as Chair of the committee is allowing Councilmembers on the committee and Councilmembers in general to ask whatever questions they want, but also -- and the reason I brought Mr. Mooney up here was to make sure the record is clear. I always feel it's easier when you're reading the record to read people's discourse at the same time as opposed to waiting until you're through and have him come up. It's hard to mesh the record, in my opinion, from reading the record in the past. So I'd rather have an answer, question, 76 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 rebuttal, you know, that kind of stuff. But anything that you feel that is inappropriate to answer or sensitive, please just make that claim and we'll move on.
Okay. Let me answer then. Our goal is to come to a resolution as quickly as possible, and I think that probably at this point we may agree on more things than we disagree on which, I think, is a good place to be at this point.
On that optimistic, I'm prepared to end this line of questioning. I would hope that that optimistic note is acted on by both sides so that we really get a sound conclusion quickly. Thank you. I think it's in everybody interest.
Thank you, Mr. Chairman. Gentlemen, to follow-up on Councilman Cohen's line of questioning around labor, at the last public hearing, Councilwoman Tasco, myself, and 77 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 a number of members here raised questions, not necessarily concerns, but questions regarding women and people of color at all ranks within the company. So as a follow-up to that, has there been a second look at how you will do business along those lines here in the City of Philadelphia? Two questions: What's your track record with regard to those issues in other communities? And what will be your plan of action with regard to recruitment of women and people of color at all lines of that ladder?
Yes, Councilwoman, we did include our track record in the other major markets, which I believe is a good track record. It's in the handout that we submitted just following the October 31st hearing. And our goal is to -- we have a newly formed office of diversity compliance at our corporate office, and the main focus of that department is to look at our hiring practices and promotion practices across the whole company to make sure that we are reflecting the communities that we serve and that we are getting as diverse as possible. And being the area vice president, I can tell you personally that I am very much committed to 78 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 diversity at all levels and I will see to it that we follow that model.
Councilwoman, specifically, it's Section No. 4. I don't know if you mentioned that or not. It's Section No. 4 that has to do employee diversity. You can refer all of the details which I think are pretty well spelled out with respect to what John just said in a more general way.
Councilmember Nutter -- I'm sorry, Councilmember Miller.
Thank you, Mr. Chair. I'd still be interesting in seeing some written information along the lines of customer satisfaction. You have anything written since 1997?
Customer 79 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 satisfaction surveys, do you have anything written? Do you any results? I know your answer was competition is good. I understood that. But have you taken any customer satisfaction surveys? And if so, do you have written results?
We are measuring our overall customer satisfaction benchmarking --
I know you're still kind of new, but still, I know you have something.
We do. We have a whole program devoted to measuring and improving our customer satisfaction across our whole company. And we didn't submit that because that was not a request at the prior hearing.
I'd like to get that. Thank you. What do you plan to do after year seven? In year seven it just stops or you're only 80 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 interested in what you're doing on the map from one through seven?
Well, that's a construction schedule. We plan to operate all the areas that have been constructed. But I would think that between now and then there may be some discussions about the other areas; that's one possibility. Another possibility could be that you're involved with another one of the overbuilders about those areas. But it's a sizable area. So I think we'd have our hands full in year seven in operating the areas that we had just completed constructing.
What made you decide to do the areas that you decided? What made you decide to start with Area 1? MR. Pitts: Not to start in Area 1?
I'm talking about on your map, year one. Year one. I'm sorry.
The reason that we chose 3 and 4, and it was a long process as partially Joe James described, but after we got to the point that we were talking about two areas and not all 4, we had to decide which two areas. There were a number of factors. One, Councilman Clarke talked about, 81 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 you know, being close to the plug. There were some technical issues, but there also was the issue of Areas and as already being established as one area with Comcast having operated those areas together as one company, you know, with one company for many, many years, it seemed that if we had to choose two areas that that had already been established and that there probably wouldn't be much discussion. We weren't quite right in that estimation that there wouldn't be discussion. In terms of the order, we tried to just choose an order that sort of logically progressed just so we could have contiguous construction. Also being cognizant of the different neighborhoods to make sure that we wouldn't be leaving any particular group till later in the construction process. We wanted to be fair and go across a diverse area of neighborhoods in what could be considered fair by anyone who looked at it. So we started at one end and we moved across to the other, and we thought that it proceeded in a way that was without regard to who lived where or what.
Councilwoman, excuse me. Just to add to what John said, in the written 82 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 response from the previous hearing, Section B Paragraph No. 3, which is the technology explanation goes into just a little bit more detail again and more specifics on what John just described. So I would just refer you to that if you want some additional information.
There is an issue of where our sonant ring would enter the City and so on. And as Scott Burnside described, that is in that section 11 that he mentioned.
Because, you know, it's not diverse. You just mentioned that it's kind of diverse and diversity was included in the planning. That is not really -- when I looked at the map, that's not a representation of diversity. Are you -- where are you closest to Philadelphia right now? Are you in Bucks County or Montgomery County.
See, that's what I -- there's some comments up here, but someone told me that you were coming the way you were coming in because you were already connected or wired in that 83 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 particular section geographically. But you're all the way up here in the Northeast and then Delaware County us all the way over there on the other end. This doesn't kind of make sense to me.
I understand the confusion. The sonant ring that will feed Philadelphia, it comes from Bucks County. It swings around. Like we have a ring that, I think I described it in my testimony before, that circles the entire area, and we would be heading south from Bucks County down into Areas 3 and 4. And we have to do that to -- the technical reason is probably, if I had to rank them, probably at the low end of the reasons why we chose it; it's just one thing. We were asked why, so we gave you all the reasons. But I think probably the larger or what I would rank the first reason would be that it had already been established as one area. And if we were going to build two, building two that were already considered to be or operating as one area seemed to make more sense than two independent areas.
Councilmember Miller is yielding to Councilmember Nutter.
Thank you. Mr. 84 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Pitts, I have no idea what you were saying. On a couple of occasions you used the phrase "one area." What do you mean by that? I don't understand that.
For many years as -- again, this was during discussions and trying to figure out what we would bring forth. For many years Areas and have been operated by one company, Comcast. And from our view, that in itself, whenever I would -- as an operator in the City of Philadelphia, we would refer to Area 1, Area 2 and then 3 and 4 as one area. Even though they're two areas, because there's one company, you know, one management team, that it was referred to as on area. So when I say that, it had already been established as one operating entity, that's what I mean. That one company was already operating it. If we had to choose two areas --
What's that got to with where you come into the City and how you determine where you're going to put up service and any of that? What difference does that make?
Well, if we start from the point of view that we're not going to build all four that we're going to build two, then the question is, 85 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 well, which two? So we bounced around. We first talked about what Areas 1 and 2.
I don't understand the building two strategy which is a part of the next round of questions, but you can go ahead.
We decided, you know, would it be Areas and 2, would it be areas and 4? One of the reasons that and made more sense than 1 and 2 was because of what I just said, that we figured that it was already established as one operating entity already. So for another company to come in and ask to operate in that same entity seemed -- I didn't think that there was much push back there because it was already established.
What about and 3, what about and 3? Councilwoman, I appreciate the extended yield. I guess what I'm not understanding in terms of where you lay cable or fiberoptic or wherever it's going or wherever it's eventually going to be, what different does it make who the operators are, is it considered one area, is not one area? I don't necessarily know that we technically 86 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 consider it one area or not. What difference does it make to you?
I think this process illustrates part of the reason why we had the kind of discussions and came to the conclusion that we did. Regardless of what area we chose, what two areas, someone would ask the question, why these two areas? If we chose 1 and 3, we would be answering the same question, why 1 and 3. We -- and I know you're going to get to why we chose to do two areas instead of four, but once we decided that it was going to be two areas, then we had to decide what two areas are logical for us to build. And under scrutiny, what could we have an answer for. And it just seemed that it made sense that if we had to choose two, that we would --
You didn't choose your areas based on what you thought was going to be the best answer to give us in a public hearing. You chose your areas based on some array of circumstances, opportunities, situations, demographics, who's going to sign up, who's not going to sign up, who's going to pay a bill, whose not going to pay a bill, and a whole host of other 87 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 factors having nothing to do with anything you might have to answer for us one day.
I beg to differ, Councilman. We figured that this is a political process and we would have to answer to -- I mean, I've operated in the City prior to working for RCN. We would have to answer for why we chose those areas. So we were very sensitive to not being accused of doing this and not being accused of doing that --
So when you put all of that together, it's a multi-billion dollar company, investors all over the country and Wall Street and whole host of things, and what it finally came down to was, "Well, we have to have a good answer for the Philadelphia City Council and we figured we'll just do and because, well, we always considered them to be one area and it's one company so that makes sense so we'll pick 3 and 4." Is that how it goes?
That sounds like a strange answer if we didn't think that any combination of the four areas would have been okay for us. And we did think that. We would have been fine with Areas and or Areas 2 and 4, but we felt that we had to 88 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 come up with a combination that made sense. But in terms of our strategy of wanting to get into a high dense area and offer all three of our services --
Did you do like focus groups on trying to figure out which two if you put them together would be more likely that people would think made sense or be politically acceptable?
Right. Not focus groups, no. Internally, we discussed. We had to submit something. We would have been -- originally, we talked about all four areas, originally. But we agreed, we came to a mutual agreement that it was going to be 2 instead of 4.
Let me say this, though. But you're after all of this back and forth, because I think I've given you about a half of dozen opportunities. You're going to not say that at least some of the elements in terms of making this decision did not entail the demographic population of the area served, the income levels 89 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 involved, proximity of neighborhoods, and who you would have the opportunity to go head to head with; are you telling me that none of those factors came into play in terms of making this decision? It's a yes or no question.
We felt that -- a number of things. One, there was a technical consideration and that's in our response to you. The area of it's a political process so we had to have a logical reason for choosing two areas and we didn't want to be accused of two areas at the expense at some other areas. Also, we think that if you look at Areas and that if you look at the entire area that it represents a cross-section of the City so that we didn't think that we would be accused of trying to avoid a certain area or certain areas of the City. 90 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
How about this. You said it about a half dozen times about this oh so political process. You know, I guess that's a fair statement. We happen to be politicians and I guess we act in a somewhat political fashion. What's the political dynamic or political benefit of you doing and versus 4 and 1, 2 and 3? I mean, what difference does it make? Don't you think you end up answering all the same question?
No, I don't, Councilman. We were concerned that, say, if we chose Area 2 that we might be accused of going after a new company in Urban Cable Works that wasn't established and we might have answer question of why were we going after them. We thought --
Are you talking Area 2 that's Urban Cable Works which is a subsidiary of a little firm up in New York called Time-Warner, you were worried that somebody might be upset that you competing with Time-Warner?
These were discussions that go back two years now, over two years.
I don't no that Urban Cable Works existed two years ago. 91 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
They were in transition because when I was still at Greater Media --
So you didn't come to Area 2 because you were afraid that people would be upset that you were coming into Area 2.
People would ask, well, why wouldn't we pick on some our own size, for lack of a better term. I know --
Well, I meant that in terms of my knowledge of operation of the City in --
Who is the operator of the area, Time-Warner, correct?
Well, my view from being an operator in the City all these years is that in terms of who had the highest penetration, in terms 92 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 of, you know, that there were some concerns. And we didn't want -- maybe we made a mistake here, but I'm telling you our thought process. We thought there could be concerns that we were going after a company that may be less able to handle competition head-on than Comcast would. That was one issue. I mean, there were a number of factors. We didn't want to go into an area where it might be considered that we were avoiding certain demographics.
Did you ask anybody while all y'all was sittin' around thinkin'? Did you ask anybody, all these people that you were worried about possibly accusing you of all these savory competition-type charges? Did you contact anybody and say, "What do you think about this?"
Councilman, we would have -- I'm submitting to you now that regardless of what areas we chose, we would have to answer to somebody, "Why didn't you choose the other areas?"
All right. Councilwoman, I appreciate the yield. 93 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Thank you.
Did you do the demographics of the areas that you chose by year 1, 2, 3, et cetera? Did you do demographics? You looked at the demographic, am I not correct, of year 1?
You looked at demographics of year and year through 4? Certainly, you couldn't have found a whole bunch of diversity.
Diversity is just an issue for me. I mean, all this indicates that diversity was not a part of why you chose where you start from year 1 through year 4. I just really want to make that statement because this is what you've chosen. Politically, if you'd asked me, if I'm going to be concerned about competitive prices, then I want to see it spread out in the income brackets in my councilmatic district. And certainly, this is not an example of getting all of my citizens in my district to have the opportunity 94 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 to participate in competitive pricing. So politically, that's where I would have come from. I don't have any more questions. Thank you.
Thank you, Mr. Chairman. Mr. Chairman, I apologize for having to step out of the room for a moment. I had a meeting across the hall. But as I come back, it's quite amazing to me that we're talking about this whole issue of placement and I hear another story. Earlier on we talked about the power line and the connection to Princeton. Then I thought we kind of concluded that it had something to do with the economics of the deal in the first phase. Now I'm hearing there's certain political considerations. And I'm wondering as a Councilperson for a district that's not represented, are you now telling me that the politicians associated with and don't have the level of influence of the politicians in Areas 3 and 4? I mean, what are you talking about? I don't understand.
Councilman, that is not a 95 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 correct conclusion. We simply chose to do two areas. I, for one, wanted to compete directly with Comcast, and a lot of us did and we chose those two areas for all of the reasons we've just explained. And if you want to add a couple more, it's easier to construct in those areas. We did all of the homework we could do. Economically we couldn't do more than two areas. We chose Areas and for all the reasons we've talked about. It has nothing to do slighting you or any other representative from districts other than 3 and 4. But all John was saying is that no matter what process you go through, it's a political process. And we knew that we would have tough, tough, tough questions regarding why it was we only chose two out of four and why we chose the two that we did. I think we've answered that in a number of different ways. I don't know what other information we can give you.
That's my problem. You've answered it in so many different ways, I don't know which one to believe.
We gave you a number of answers all pointing to the same decision.
I'm afraid I 96 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 disagree with that conclusion.
I understand that, but I'm telling you we had a number of issues, construction issues, technical issues, political issues, economic issues. We've gone through all of them. You can arrange them in any way you want --
Would it be possible for you to do this for me then: Can you arrange them in whatever order that you may choose as it relates to levels of priority? I'm assuming when you make determinations as to what you do from a business sense, you prioritize them. Would it possible, so I can have a sense of what went into this decision-making process? Because at some point, I'm going to ask Mr. James, assuming this will achieve the level of better service and level of competitive nature of the company will reduce these rates, I'm going to ask Mr. James and the City of Philadelphia to get proactive in other areas, particularly in and 2 so we can get some competition that people say ultimately will drive down the rates. It will be helpful to us if we know what, in fact, will create that environment that makes people make these 97 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 decisions. So if you can somehow list them in order of some priority or categorize them so I'll understand what the correct nature of the business decision is.
Councilman, those reasons that we have given without any particular reference to order here in this process, because the questions weren't coming in any particular order, are all answers in Section 2. And I think if you read those responses, you will see, and I think they are properly ranked --
I didn't recall the political decision being in Section 2.
I think there are references. I may not use the word "political," but there are reasons listed that I would consider --
I'll ask you like this: Can you do me a favor as we move ahead? Can you incorporate a summary of the decision-making process as it relates selections of areas from a business standpoint?
I think there is a summary, sir, Section 2. If you read that and determine that that's not enough -- 98 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
My point is that I'm hearing things that I didn't hear before. And I'm asking you -- you know, because at some point we're going to have to come to some conclusion on this issue. I'm asking you for me as a favor, because you don't have to do anything, right, I'm being told by the Telecommunications Act that nobody has to do anything, right.
As it relates decision-making process, I just ask you if you kind of prioritize this whole process, because I don't know. I'm probably the only person in this room who does not have cable. I don't have cable, so this is about the business of the people that I represent, it's not personal because the rates right now for me are free.
Let me try it one more time, all right, in terms of prioritization. If you were an engineer, if you were engineer or a technician, you would prioritize it by saying, "I can't build it unless I come in in a logical fashion." That says from that priority, the sonant 99 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 ring has to come in from Bucks County, that's priority No. 1. If you are a government affairs guy or a regulatory guy, you say, "We have a lot of concerns with respect to how people accept the decision to build only two." So it might be if you're one of those guys, that's your No. 1 priority. And if you are a construction guy --
Are you saying all these different people are in your company?
All of these thought processes go into making up this company. If you're a construction guy, you say, "Where can I build this thing quickest? Because the pressure's on to build it and get customers up." And you say, "I can more easily build it in this section. There's lots of underground in this Section. And then if you're marking guy, you say. "I don't want to go downtown the City because that's where the offices and buildings and businesses are and our market is the residential market. So depending on who you are, that's how you prioritize. And the composite of all of those discussions added 100 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 up once we realized that economically we had to make a choice how we made. Now, I don't know how else to tell you.
So these various priorities within the company pretty much reflect the different nature of the responses to our various questions over this last year?
But I think the question was asked and it was asked for us to elaborate and our response in Section 2 lays out the competitive considerations, the demographic considerations, and the technical considerations, and I think overall the order that they're in are the prioritized order. And, again, it's one-page and one-paragraph summary I think clearly states our position there.
Thank you. Based on your priority list and let's say that we didn't want to do this. You hear the concerns at this hearing. Could you revisit your plan and still do the build-out and do it in a way that would satisfy the concerns that you're hearing today? Technically, again, you're trying to make the best business 101 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 decisions you can, but now maybe the person that you've gotten political slot making the decision is a little weak and didn't give you really enough information on how to come here today. What could you do to tweak this priority list to accomplish what you're hearing in your concerns.
Two separate issues. If we're talking about do we want to revisit areas of 3 and 4, I would say we would not want to do that. If the question is the construction schedule, and I think that would address some of the concerns where we're starting and what's in year one through -- that is something that -- I think, as it exists, the agreement calls for us to submit a construction schedule after signing of the agreement. And at that point, we would negotiate that construction schedule. So that is open to tweaking.
You said something that put my antenna up, "after we sign the agreement." What kind of construction schedule could you give us to assure us that after the --
I don't want to -- Joe James may have something to add to it, but --
Again, you're hearing 102 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 the concerns here, and honestly, once it's done, we need to have some confidence that this is going to -- DEPUTY COMMISSIONER JAMES: If I can just jump in for a minute. The way the agreement is set up, Councilman, and it's very similar to what's been done what the other providers, is that once --
Could I stop you just for a second, Commissioner? DEPUTY COMMISSION JAMES: Sure.
Why do we always have to refer back how we did it. This is a new deal. I don't think that we have a book of rules on how to do this. If we do, I've never heard of it. Do we really -- is what we did any past any concern of ours here? DEPUTY COMMISSIONER JAMES: Well, yes, it is. It's only rom a sense that we want to ensure equity because everyone refers to this whole discussion regarding a level playing field. So we want to make sure that everyone understands that we're trying to make this as level as possible.
By law, is equity required? 103 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Again, just tell me. Do we have to look back in this deal at all? DEPUTY COMMISSIONER JAMES: No, we don't have to look back. But to satisfy some of the concerns that are always expressed is to make sure -- about the issue about parity and the issue about equal distribution of the benefits and the opportunity, we're trying to make it as level as possible so that we don't create an undue burden upon the operator who is attempting to construct or the operator that is currently in place. The only point I was trying to make is that our process in the Department of Public Property is to request from the operator to submit a detailed construction plan. That detailed construction plan happens after they have the authorization to proceed. Where we get down to real specific minute details about the routes, about the areas they're going to pass, about the specific distribution system they're going to use, and we can get into those issues that we talk about as far as making sure -- if there has to be a modification in their plan because they want to go any specific route that somehow creates an undue equity issue, we can make that modification before 104 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 they are able to proceed.
If that plan did not satisfy the Department of Public Property, could you stop the process? DEPUTY COMMISSIONER JAMES: Yes, we can because the process is for them to submit to us a detailed plan within the six months from the date that this authorization and the bill is passed.
And you're not satisfied, what happens? DEPUTY COMMISSIONER JAMES: We enter a set of discussions and modifications because they can't pull their permits to do their construction until we sign off on their plan and give them the authorization to proceed. What we further have done is that in our process, we're providing details down to the Council level about the activities that they're operate under construction, that's part of the amendment which is to give you the assurance that you know where they're going and that they've been approved where they're supposed to go. And if you have a concern about the route that they're taking and you would like them to make an adjustment, we have the opportunity to make that 105 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 change before we create an inequity. It's not a perfect plan, but it's an attempt to interject the department in the process as a regulator to regulate their activities ensure that there's fairness and equity in their build-out in their construction schedule.
Before I recognize Mr. Singley, I'd just like to compliment you on what I call the David L. Cohen slide. I saw you at the back of the room, and then in the middle of room, and then the front row, and you finally made it up here. I was wondering exactly when you were get there. And for eight years, seven, eight years I watched David L. do that same thing. As things were going down hill, he just started moving forward and forward. So the Chair recollect Mr. Singly.
Thank you very much, Mr. Chairman. My name is Carl Singley. I'm Council to RCN, and I suppose I learned that at the feet of the master. I have heard, and one of the reasons 106 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 that I elected to come forward is that in an effort to assist RCN in answering the questioning that have been posed by the committee, both today as well as in the previous hearing, I thought I understood someone to say that there are concerns. And I don't know that the concerns have been clearly articulated from this Council. Now, the reason I chose to come forward is that I think that there may very well be some type of undercurrent that has not been clearly articulated that suggests that perhaps RCN's decision about what areas they would build in what order may have in some way been influence by improper considerations. Because I think I heard it earlier said the phrase "racial disparity" was used. I think what I have heard certainly during the earlier hearing that somehow the determination that was made by RCN to build out the areas that they wanted to build and the order in which they build it may have been based on those improper considerations. If in fact those are the concerns, as Councilman Rizzo and others expressed, if you are concerned that perhaps that might have been a consideration, I think in fairness to RCN they need an opportunity to have it expressed in that way and 107 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 to address it directly. Now, between the past hearing, the previous hearing, and today's hearing, we were given a significant number of questions. We have addressed fully each and every one of those questions. Today for the first time, they now find themselves put in the position that they are asked to justify the business considerations or the business decision that was made as to what areas. So I thought that if perhaps that is in fact a part of the undercurrent and unease that we hear, then I'd like to know that and I'd like for them to be given an opportunity to respond to it directly.
Well, let me say for the record that you are correct, there are a number of extensive questions that have been asked of RCN through the course of this very lengthy process. Understand from a historical standpoint, I think the record should understand it, too, is that two years ago I was not Chair of the Public Property Committee. I don't believe anybody on this panel was -- I was a member of the Public Property Committee, but not the Chair. And the first foray 108 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 into the Rendell administration, which had been clearly explained in the recent "Inquirer" story, may have created this impression that somehow when it finally got to us, we had been part of this two-year loop. We received the legislation sometime, I guess, mid-May, went out in summer in mid-June, came back to a major problem with the City and that was the issue of construction sports facilities which took up an inordinate amount of our time, and then had a hearing in October. As a result of that hearing, you are correct, there were a number of questions raised. But I think it's important for the record to understand, from our perspective, we're not professionals in this business. We don't understand the industry as the people at the table understand the industry. And we are given the responsibility of trying to make a decision that's both fair for the citizens and cable viewers of the City of Philadelphia along with the company that wants to enter into this marketplace. So I guess our questions arise as a result of ongoing dialog. Sometimes that happens. I mean, as Chairman of the committee, I am happy with the way in which RCN 109 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 responded to those questions from the October 31st hearing and have been happy with the cooperation I've received on some of the amendments that I've asked for. However, as chairman of the committee, I am only one member. There are other members at this table who, during the course of the hearing, questions are raised, we go in different directions, other questions are raised. I mean, that's part of the good and bad of the public hearing process. Issues are discussed in an open foreman and sometimes they go in a direction that we don't anticipate. As chairman, obviously, any Councilmember of this committee can asked any question they want. I do think I understand you'd like perhaps members to be a little more specific as to what -- if the concerns are those of demographics and ethnicity and income, that we air them. That's up to each individual committee member. But I think it's important that we understand that I've tried and I think the members of this committee have tried to perform in a diligent way to examine this issue which is very, very complicated and important and expensive issue, and to do the best we can to move 110 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 it in a position to be approved at some point in time. That's where I am as chairman of the committee. I think the record needed to reflect the fact that despite the consternation and perhaps the frustration of this company in dealing with the City of Philadelphia as a whole, it's not all been a Council issue. It's been an administration issue, actually the last administration's issue, for a year and then the new administration's issue year, and then finally we've had it in reality for about six months, five or six months. So I think I do understand where you're coming from, but I want you to understand that we're doing our best to understand and move this thing forward.
I do understand, Mr. Chairman. And if I might just for a moment, there's been a lot of discussion fairness, fairness to the consumers, fairness to those persons who are potentially affected by the matter that is pending before you. But I come to you to talk about basic and fundamental fairness to this company. Now, there is, as you have heard us articulate in other forums, a belief that this company is being subject to a double standard. When 111 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 I hear questions being asked, for example, as to why you chose this location, what did you consider, what were the demographics, it is clear to me that that is a legitimate inquiry that this body is entitled to make. By way of analogy, for example, if a Fresh Fields made a decision to open a new supermarket in Center City, if they made a decision to open a new supermarket in Chestnut Hill, if by chance they had to come before a public body to seek public approvals and then would be grilled and examined on the business considerations that went into the choice to locate a business in Center City Philadelphia, in Northwest Philadelphia, and the implication being that you chose areas that were economically profitable to you. We think that that is legitimate prerogative of a business. Here we have a company that seeks to come into Philadelphia and has been for the last two years to build a project that's going to be in excess of $200 million and questions get asked as to their business motivation. We certainly understand that that's your right, that is your prerogative, and we understand that. But what our appeal to you here is the fundamental fairness. 112 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 And lastly I'll say, because I don't think my clients expected me to say this at all. But I think one of the concerns, obviously, is the implication is that if we can't bring competition and reduce rates to all of the citizens of the Philadelphia, that perhaps we shouldn't bring them any of the citizens of Philadelphia. I don't think that that is your intention, but that would be the implication of a line of inquiry that suggest if you're not building out the whole City, then there are some folks who are disadvantaged and perhaps nobody should get the benefit of the competition and the reduced rates.
I do understand your position and your analogy to Fresh Fields. However, I'm sure you will agree that cable TV not the same as arugula. There's a little more involved in high speed internet service, telephone service, cable TV service. I think part of what has Councilmembers concerned is that the reasoning behind having this company come in is competition and ultimately stabilized or reduce rates. And I guess because some of them are district council people, there is a parochial view that we agree with that, but we want 113 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 our people to experience it too. I don't think it goes as far to the extent as saying we don't anybody to get it if our people can't get you. But you can also understand why Councilmember Miller or Councilmember Clarke or somebody may get a call and say, "You know, I been talking to my cousin across town and their rates actually went down $5 a month. Why can't we have that?" So I think that's what these questions kind of come from, is that people want to know, -- well, for example, why year one and two it seems to be a more economically advantaged area that we're building in and we really don't start getting some people modest or low-income means until year three. And then we don't even get to some other modest or low-income people until year six. I think their questions as to what the business decisions are relative to that I think are germain. And I do understand and take account of what you've had to say. Councilmember Clarke.
Thank you, Mr. Chair. 114 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Mr. Singley, I understand your concern for your client and being before us today, but you need to understand the concern for the 150,00 constituents that I represent in an area that is not being discussed here for the potential cable franchise that allegedly may make more competitive rates. I am going to ask the questions as it relates to a business decision to anyone who comes before this body if I think it effects my 150,000 constituents. And I don't think that you would expect me not to.
So I'm trying to get a sense why you feel we're somehow bing unfair. As Councilman Kenney said, we are novices at this; at least I know I am. I don't even cable, to show you how much I know about it. I have to ask these questions because if in fact this happens and if in fact the residents in my district are forced to pay higher rates, they're going to want to understand why I didn't ask these types of questions and why they're not getting the rates that they're getting. So I hope you understand why we ask these questions here today and will continue to ask these question 115 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 regardless who is at that particular witness table.
Absolutely, Councilman. And I wouldn't presume to tell this body how to do its business. But I would urge the body and just reemphasize the fact that we recognize that for this committee, this has been relatively new process. But for these for this company, it has been a two-year other deal. And given the reality of who this company has elected to compete against --
I'm new here, Mr. Singley, so I wasn't here for the two years. I'm done. Thank you.
As Councilman Clarke said, I also appreciate, Mr. Singley, your concern for your client, but I think you've also simultaneously made the case that they have certain rights to make certain decisions and we certainly have certain rights to ask certain questions. I think you've known me long enough to know that I'm going to ask whatever question I want to ask. 116 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
Thank you. When the map was presented and decisions have been made, I do again agree with my colleague Councilman Clarke that it does raise a question as why did you decided to do X versus Y. And we have to assume that business people have good business reasons for doing certain things. If it answer makes sense, we move on to the next question. If it doesn't, you'll continue to pursue it. One of the items that we've discussed up here is, has been said different times during the 15 course of this exchange back and fourth is, you know, the company tried to make some quote/unquote political decisions or deal with the political process. As some of my colleagues have said, people ask us different questions than they're ever going to ask the representatives of the company because more than likely, they will never talk to the representatives of the company. And that's no 24 disrespect to RCN because on most days, they probably don't talk to the senior vice president of 117 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 Comcast or the senior vice president of Time-Warner, Urban Cable Works or anybody else. But they can call us. And if you don't have the answer and you had an opportunity to get one, then I think that that responsibility falls on us. So I don't know the answer to that particular question. It is clear, though, that moving down from the Northeast, there's a year one, a year two, a year three, and then simultaneously year three skips to the top end of North Philadelphia, skipping over a couple areas. I don't know, you know, what the technology is that allows for that to happen, but it certainly seems to indicate that other variations on this same theme might be possible. Look, I appreciate the company feels that they've been going through a long drawn out process. I said it the other day, I think I've said it privately, I'll say it again publicly. That time was on somebody's clock. I'm not taking responsibility for that. That was in another forum. I think that we have tried to deal with this in as timely a fashion, all other things considered, as possible. You are now here and we've had this opportunity on a second occasion to get into this. 118 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 But, you know, I don't have any control over what you did or didn't do with the City Administration. And as far as our process is concerned, quite honestly, you haven't been with us that long. In addition, I will also say that at some level it has not been helpful, some of the comments that have been made, if not at times some of the threats. I don't respond to threats at all under any circumstance. Haven't in the past, won't today, won't in the future. So if we're going to deal straight and be realistic about this, we can go through the Q and A process. We'll ask our questions, hopefully you'll answer as many of them as possible, and we'll move forward. Now, can you tell me about any variations on this build-out plan?
Let me try to take a shot at it, John, and then you can pick up. As Mr. James said, Councilman Nutter, that the finite details of the construction plan within Areas and can be adjusted for a number of reasons.
Can, can be adjusted. 119 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
Can be adjusted. And I can tell you from experience they will be. There will be lots of reasons over the next seven years as to why our plan isn't in sync with what the City wants. But to forecast exactly what all of the details of the construction plan will be prior to even having a license to come into this City is just not economically feasible. That's exactly why the language in the agreement is written as it is written, to give the City once the agreement has been inked or the license has been issued, the authority and the responsibility to look at the detailed plans and adjust them to whatever conditions are influencing that. It may be something as simple as, let's say, the City of Philadelphia is fortunate enough -- and I say fortunate enough, not everybody may agree -- is fortunate enough to have another political convention four years from now. And in the midst of that, any street construction may have to be adjusted to accommodate whatever was going on. And that's just one example. There maybe others. You may have interests, you personally, 120 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 and you convey them. This is the second point I wanted to make. You will not lose the opportunity to have input through the document, through the license. But in addition to that, you will not lose the opportunity to communicate with the company, just like you can communicate with existing companies in this City. Anybody in their right mind trying to operate a business like we're attempting to do in this City has to be available on a regular basis. And to that end, you will have that access, obviously.
I understand that Mr. Burnside. I don't mean to talk across you, but I think what you have to understand about us and what we do, for the most part, this is pretty much the last time we will see you folks. You'll be around, you'll build whatever you're going to build, you'll send to billings to customers, you'll have operations, you'll have buildings and all of that. From a process standpoint, this is the last time we will see you. All the other agreements and everything else you signed, most of your dealings will be with the Department of Public Property going forward. And so not only by way of the company, but 121 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 also certainly your time here in the City. Again, I appreciate the two years and I don't discount what two years mean. You've been in business for about three or four years. You've been in this process for about two. You seek to do something which very well could be a good thing. We're in a public hearing process reading documents, talking to people that we really don't know. You may have actually signed an agreement with us, and you will then go away. So whatever's going to happen and whatever's going to be said more often times than not is going to happen right here in this process. And if a person is handed a piece of paper and it says this is the build-out schedule, from our perspective, more than likely that's the build-out schedule. If there are options, if there are variations, I'd certainly like to hear about them. DEPUTY COMMISSIONER JAMES: Councilman, if I could just interject for a second. The way the agreement is structured does not preclude the opportunities for RCN to come back to this table. As explained in the agreement, they've already expressed the intent to obtain a traditional cable franchise, which means they will be back here again 122 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 before you for Areas and to obtain that franchise, hopefully, with a detailed construction plan for the areas with you having, again, and the full body having again to ask those specific questions and have a better understanding of their capabilities and what they want to establish. So the process does not presume that you will not have the opportunity, hopefully, when they will come back for Areas 1 and 2 as well.
I understand. But I think, Mr. James, you are very much aware, and certainly Vince Costello and other folks, about the realistic nature of what any opportunity there is to move a cable company to do certain things or perform in certain fashions. We had the issue last year, and apparently it's an ongoing issue this year, with the -- last year it was Time-Warner and Channel 6. And this year out of last year it's Comcast and Channel 6. Now, these are mega companies. They'll always take our phone calls, they'll always try to be responsive. Whether something actually happens or not is a whole other story. We can deal with the Comcast/Channel 6 issue at another time in another forum. 123 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 I also understand, though, that RCN has apparently some unresolved business with a local television station Channel 48. I'd like to get an understanding if what's going on in that situation. DEPUTY COMMISSIONER JAMES: To the first point, we do look forward to them coming back for a cable franchise. And that cable franchise from RCN for Areas and has to be granted by City Council; it cannot be granted by the Administration so they do have to come back before you because they can't get the 15-year term that they really want and the certainty that they will get through a cable franchise. They were not obtained in this interim agreement.
I understand that. Is it also true, though, if they never come back, they get 10? DEPUTY COMMISSIONER JAMES: They would have the ability to get 10, yes.
Without ever coming back to the door, correct? DEPUTY COMMISSIONER JAMES: I don't think 10 works for their funding, but, yes.
I understand that. 124 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 DEPUTY COMMISSIONER JAMES: I think that's a debatable issue over what certainty they prefer, but the opportunity is preserved if they want to get the cable franchise. On the second issue, on the issue related to WTGW, Channel 48 --
WGTW? DEPUTY COMMISSIONER JAMES: WGTW. I don't watch it that often, but Channel 48, there was the issue about the channel allocation prior to this hearing. There's been further discussion with representatives from Channel 48 and from RCN. And to my understanding, and Mr. Pitts can speak to it, that there is no issue related to their placement on the Philadelphia system and that that issue is not an issue that's open right now that they have any contentions about as far as where they're going to be located once they get on the RCN system in Philadelphia.
Well, when did the issue get revolved? Because it did not appear to be resolved yesterday. DEPUTY COMMISSIONER JAMES: Well, from the discussions, I understand, there was just a 125 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 misunderstanding over the channel number. But that seemed an easy conclusion once they had an opportunity to talk this afternoon.
Mr. Chairman, I get the impression that that is necessarily the case, at least if my ears are serving me correctly. Just so that the record is very clear, Channel 48 is located in my district on Main Street, and I'd like to get a better understanding of what's going on in terms of whether the station is going to be carried.
Just let me make a suggestion. Again, similar to what we did with the labor issue, in the interest of having a coherent record, I believe Ms. Brunson is here. You want come forward? You may proceed.
There are two issues that were pending. One was -- both of them related to channel placement of Channel 48, one of them on our Philadelphia market systems and the other in our Lehigh Valley market systems. The agreement was in Philadelphia for us to put them on Channel 18. I believe that was to be done as of January 1st, and that has been done -- December 1st; excuse me. So 126 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 as of December 1, 2000 in the Philadelphia market, Channel 48 is now on Channel 18. It was on Channel 16. There was a discrepancy before this session started of whether that it happened already but it has happened and I believe that they know that. The issue that is still outstanding is a disagreement about the placement of Channel 48 on our Lehigh Valley systems in the Allentown area. There's a request to put it, I believe, on either 48 or 18, and there's some technical issue there that we need to resolve before we can agree to do that, and I think that issue is still open.
Ms. Brunson, would you please identify yourself for the record and make whatever comment regarding this particular situation you feel is appropriate.
My name is Dorothy Brunson and I'm the president general manager of Channel 48 television. RCN has been very convenient in isolating the issue. But there is a federal law which allows me the right to be on their cable system. They have abridged that right. And since October of 1999, I have been trying diligently to be 127 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 placed on those cable systems on my right channel. All of the cable systems have complied, and as recent as December 14th after numerous FCC cable -- let me read it. My attorney sent me a fax. That the Cable Service Bureau authorized RCN to place me on their cable systems at my appropriate number for the last year and a half. And for the last year and a half, RCN has refused to do so and very conveniently within the last few weeks they placed me on Channel in this market because they knew 12 they were coming before this body. But it has been 13 a two-and-a-half-year fight, and only one portion of 14 that fight which has been authorized and granted by 15 law to me has been adhered to by RCN. They have 16 appealed, kept me courts, asked for extensions, 17 filed that it was too expensive, and I have at least 18 seven inches of papers documenting that RCN has refused to carry me on their entire system.
So you've had your own two-year odyssey in terms of trying to get something done.
Well, I disagree with some 128 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 of the particulars.
In this market, we've been operating since March of 2000. And when we initially launched the system in March of 2000, we put Channel 48 on Channel 16. And I don't know --
I'm not sure. I think that their desire was to either be on 48 or to be on a lower channel.
Generally people want to have like the channel number that goes with their chance. Do you have 6 on 6 or do you have them on 16?
No, we have 6 on 6. But the request was either to put them on 48 --
I requested 48. They came to me throughout approximately August of this past year and asked could we negotiate. I said most 129 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 certainly. What would be most convenient to you? They said that we could do this on Channel 18. I then agreed. At least with the being very 5 similar to the 48, that that would be somewhat of a 6 compromise. It is only within the last several 7 weeks that that was finally accomplished just in 8 this market. But prior to RCN come being in to the 9 Philadelphia market, they are in the surrounding 10 areas as well. And since our signal covers those 11 areas, the Federal Cable Commission has authorized 12 and the Federal Communication Commission, must carry 13 on your channel in those areas that you cover. And 14 those, they have failed to deal with me at all on 15 and they have fought me in court even though I 16 received approval by law to be carried as recently 17 as December 14th of 2000 again when I challenged 18 their appeal to be put on those cable systems on my number. They have since repealed for that. Yes, they did put me on it Philadelphia within the last few weeks.
So in looking at the chronology, we launched in March, we launched on Channel 16. We got a complaint. We compromised, we 130 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 agreed to put them on and we came up with a date that we would do that. In the Philadelphia area, it was a matter of making an adjustment in the head end. In the Lehigh Valley system, it's a much more complicated issue and that was filing for some relief in that regard because moving them from a V band channel to Channel 48 would require us to trap everyone that doesn't have the level of service that where Channel 48 resides and because of the technical considerations and the amount of truck roles that it require, we asked for some relief and we were trying to work through that process, which the law allows us to do. I would ask that since we have resolved the matter of Philadelphia with Channel 48, that this body would allow us to, in a forum that probably makes more sense than here, for us to come up with an agreement on how we can deal with it in the Lehigh Valley.
Ms. Brunson, did you tell me that all the other cable systems are carrying you?
Yes, sir. 131 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
In Philadelphia and outside of Philadelphia. At one time, sir, there were 45 different cable companies, and on 45 different cable companies we were carried. Of course, there's been major consolidation. On all of those systems without any hesitation, we were put on Channel 48. In one or two we accepted Channel 11 which was what I suggested to them as a compromise. 12 Albeit, even though they're willing to 13 talk now, there has never been any dialog, and I 14 have consistently been put into courts to try to 15 defend my position as it relates to the systems just 16 in Princeton and other surrounding areas. 17 Prior to their having entered into the 18 Philadelphia market, it has been a very tedious, very long, and very expensive process.
I may have missed 132 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 this, but could someone explain the rationale why you would want -- why you would not Channel 48 on 48? What's on 48 that's prohibiting you to put Channel 48 on Channel 48?
In this market, Cartoon Network is on 48. And moving it to as we 8 compromised was a relatively easy thing to do, like 9 many of the other operators, and we did that. 10 In Lehigh Valley system, our Allentown 11 market is a legacy system; it's not a brand-new 12 system like our system is here it. And there's some 13 other issues. It would involve us going -- because 14 we have different level of services in the field. 15 So in order for us to ensure that everyone gets 16 Channel 48 and does not get the other channels that 17 they don't pay for because they don't subscribe to 18 that level service, we would have to install traps on thousands of customers' homes that don't have traps now. We were trying work out a way not to have to do that. And let me just say that the issue of must carry or retransmission was talked about before. That's a contentious issue between broadcasters, and it's not particular to RCN, and 133 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 we'll work through this issue like we came up with a compromise and we worked it out in Philadelphia, we'll work it out in the Lehigh Valley as well.
Thank you for explaining that. It's clearer now to me exactly what the situation is. There's other television station over the air, I believe, 33 -- I'm talking about the one Philly News.
The way I understand the rules are that the broadcast channels are to be on their designated channel or another channel that you agree to. We tried to do that. I think -- now, I don't wan to -- I wasn't associated with the Lehigh Valley through the whole history of this situation, but I don't think that it was from day one that one side wanted one channel and the other side said no 25 and that they stayed there. I think that the 134 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 request changed a few times. That's the way I understand it, anyway. But we are where we are. There are no issues with channel placement in the Philadelphia market.
So Channel 51 will be on Channel 51 in this market? DEPUTY COMMISSIONER JAMES: Excuse me, Councilman. Channel 51 on the cable system is the School District channel.
I realize that, but I know that there's some conversation between Comcast now to try to do a swap for -- I mean, really, it's really inconvenient if I want to see something that's on 51, I don't have a clue where to find it unless I go to the menu. DEPUTY COMMISSIONER JAMES: I don't want to confuse you. The plan that's been submitted for the channel line-up mimics, again, the incumbents and puts Channel 51 on the School District channel. If that should change as a compromise with Comcast, and that would probably change in the RCN plan, but right now it's the School District channel.
But from what I understand, there is some conversation to work that 135 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 out like you worked it out with Channel 48.
I don't I really want to get to this nitty-gritty, but I recollected getting a letter from an individual that complains that Channel 51 wasn't on 51 and then I found, as you just described, that it's the School District channel and I learned that there is some negotiations to try to rectify that situation. DEPUTY COMMISSIONER JAMES: If 51 moves, then they will move it.
Thank you very much. While we have a quorum I need to do a housekeeping bit of business. I want for just short period of time recess the committee hearing. (Public hearing recessed.) - - - 136 2/1/01 - PUBLIC MEETING - BILL 000452
I want to convene the public meeting. I want to recognize Councilmember Nutter for the purposes for approving the amendments which have been offered earlier in the hearing by Deputy Commissioner James.
Mr. Chairman, just so I'm certain, there were two packages, as I can best understand, of amendments. One is amending various sections of the bill, and the other it says substitute for Appendix J to the current Exhibit A to the bill the Appendix J which is attached here to. Mr. James, does that comprise all of the amendments? DEPUTY COMMISSIONER JAMES: That's correct.
They've been distributed to members of the panel and also to the stenographer.
Mr. Chairman, I move that the first set of amendments, which is amending Sections 1, 2, 6, 3 and a variety of other sections, that set of amendments be adopted.
Is there second? 137 2/1/01 - PUBLIC MEETING - BILL 000452 (Duly seconded.)
There are none opposed. The amendments as offered by Mr. James in earlier testimony moved by Councilman Nutter are approved. We now recess the public meeting and return to our public hearing. DEPUTY COMMISSIONER JAMES: The appendix which was submitted back in October J needed to be --
Let me re-recess the public hearing and reconvene the formerly recessed public meeting to recognize Councilmember Nutter for an additional motion on an amendment.
Thank you, Mr. Chairman. I also move the adoption of the second set of amendments with regard to Appendix J. I move that those amendments be adopted as well. (Duly seconded.)
Moved and seconded. All in favor? 138 2/1/01 - PUBLIC MEETING - BILL 000452 (Aye.)
There are none opposed. The amendment to Appendix J are approved. We now recess the public meeting and return again to the public hearing. (Public meeting recessed.) 139 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 (Public hearing resumes.)
I think we were just having a discussion or there was some back and forth on the Channel 48 situation. What's the end of that? What's the end result?
The Philadelphia issue is resolved and we need to work towards a resolution 11 with Lehigh Valley. It's a more complicated issue that cannot be resolved at this table today.
How long would estimate that's it's going to take? Why is it complicated for you?
Because of the cost involved and the trapping issue. And I'm not fully versed on where we are with that, so I wouldn't want to make a guess on time here and have it be as a part of the record.
Have you been in regular discussions and conversation about this?
There have been others in my 140 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 company that --
Well, I have not been involved in it. But I will get involved. I will put that into the record.
I would hope that you would certainly understand -- I mean, it's a very serious issue for me.
I said I would hope that you would have some sensitivity that it's a very serious issue for me. Ms. Brunson and the company, good corporate citizen here, she's a constituent in the district that I represent, and it seems to me that you should be able to get this resolved.
But it also puts me in a difficult position as it relates to the matter in front of me. If you haven't been having discussions. It's a very serious issue. You're able to resolve it in one particular location. Can't seem to resolve it somewhere else. They're 141 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 not having this problem anywhere else. And now you've come before us and you want to do certain and other things, and that causes me a problem.
Well, let me clear that the Philadelphia market issue has been resolved. There is not issue with channel placement in the Philadelphia market.
I understand that, but you still have an unresolved issue, whether it's Philadelphia-based or not. It's a Philadelphia company, they're in the district, and you're before us. What I want to know is how we're going to get to a resolution of it.
I think the first step would be for us to sit down at the conclusion of this proceeding and try to work out a resolution, and I'm prepared to do that.
A day, couple days, take a week? I mean, you've got to give me a little bit better than that.
See, the resolution, it's a 142 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 process, it's not an event.
The resolution involves a process, not an event. It's not a flip of a switch in the head end. It's a process of visiting thousands of homes and making some changes. So even if we agree to it in a short period of time, we then would have to agree to over what period of time we complete that process. I'm willing to enter directly into those discussions and try to move it to a quick conclusion.
Okay. I hear your testimony. I'm not pleased with it, not satisfied with it or anything else, but I hear your answer.
Councilman Nutter, let me see if there's a way to clarify this. We are not at all contesting the right of Channel 48 to be on the system in Allentown or in the Lehigh Valley. They're already there. We're not contesting that. So if there's any misunderstanding about their ability or legal rights to be on the system, let there be none. They are on the system.
Well, what's the issue then? 143 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
The issue, as Mr. Pitts explained to Councilman Rizzo, is an issue of technically, if you will, I hate to use the word obsolete, but an older cable system that in order to comply with the demands of the broadcaster, there are certain and expensive and --
It's RCN's, but it is a system that was acquired by RCN. When John said it's a legacy system, that perhaps was misleading. We refer to systems that we've acquired, older technology systems that were built by other people or owned by other people, both, and are not built along the same technical standards that we're building our network today. So that network up there was an acquired or, as we say, legacy system and there are some technical difficulties in accommodating. There's no question that we will work out the details, but it's not possible to sit here and tell you exactly how long it's going to take, whether it's a day or a week or a month. So I just want ot make sure that you're clear about what the argument is. 144 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452
Well, I guess, let me just then say this in response. You've expressed a certain level of frustration about your desire to make something happen. You've expressed it in a number of ways, some direct, some indirect; some nice, some not so nice. And that's okay. Now, someone else is in a situation where they've been sitting around for a couple of years trying to get something resolved, and now all of a sudden it's, well, you know, we're working on it. We'll try to work it out we'll try to get to it. We'll try to work it out. We'll try to get to it. There's 10 different ways maybe to address it. There's all these technological issues that we have to get into and, you know, we'll deal with it when we can. Do you expect me to take that?
I've given you the best answer I possibly can give you. Whether you accept it or not, is entirely up to you. But they are the facts. It is the situation. And I understand the frustration. At least I think I understand the frustration that Channel 48 has had. I have had really very little personal knowledge of the problem. I can only give you from John's word and 145 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 my word a commitment that we're trying to get it resolved or will get it resolved. And I think the other thing that I think needs to be said in the record just for the benefit of this issue, is the fact that we quickly fixed the problem here in the Philadelphia market when the issue was raised. I think that ought to be at least deserving of some credit and indication that it is in our best interest as well as Channel 48 to get this thing behind us. So I'm not going to explain, because I can't, what all the details and ramifications that were involved in this two-year or however long the issue went on. I have no idea. But I'm telling you that we can and are committing to you to fix it. Don't know how else to explain it.
Well, I want to care about that issue like you want us to care about your issue. That's all I'm asking.
What you can do is tell me that you're going meet with the lady as quickly as possible, you're going work out whatever 146 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 the problem is or lay out a schedule that's going to lead to a work-out in a reasonable period of time, and then you should bring that back to us as a part of this entire package and say "We had an opportunity to sit down. These are all the issues. We think we have a schedule that leads us to a path to get somewhere, go get a resolution to that particular problem because we care about that problem like you want you to care about our issue.
And if I saw that, then I'd know that somebody was taking the situation seriously.
Are you making any decision on this process in front of you contingent on resolving that problem? Just so I understand.
I need more a specific answer. Is the fix of this problem as we've described it contingent on moving forward here in Philadelphia?
Let me say this to 147 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 you. You're eagerness to solve this particular problem will certainly influence my eagerness to deal with your issue.
Well, I don't know how else to say what we've said a couple or three or four times. We are going to fix the problem. But in this forum, I cannot and will not commit to exactly how long it takes because I simply don't know.
I didn't ask you to commit right here and now. What I asked you to do is go and have a series of meetings and come back to us and tell us what came out of it.
And I'm telling you we are going to do that. I've said that three or four times.
I'd like to thank the committee for the opportunity to stand before you. And I'm sure after this event that we will have some dialog. We have not been able to have any up until this point, and I hope that this will precipitate it so that we can come to a conclusion. I'm not 148 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 unreasonable, as I was not in dealing with the Philadelphia situation. As soon as they came to me with their problem, I proposed a compromise and within the last few weeks they've been able to satisfy that. I am not unreasonable. I am someone who can be worked with and will do everything I can to resolve the problem. But I have to get to the table to be able to do that. And over two and a half years I have not even had a response, much less getting to the table. So I want to thank you for this opportunity.
Thank you very much. We are now after 5 o'clock. The Chairman of the committee polled everyone on the panel that's been here today, and the sentiment amongst all of the members of the panel is that this is not the day that they intend move this particular piece of legislation out of committee. Therefore, as Chairman of the committee, what I'd like to do is announce that we're going to recess the hearing until February at p.m. in this Chamber. And the reason for that date, there are two dates, the only two dates available next because of the budget is February 26th or February 28. We're choosing 149 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 February 26th at 1:00 and we will recess until that time.
Mr. Chairman. May I, first of all, express my sincere disappointment in that decision, obviously. But also ask you and anybody else on the committee what specific information you would like us to provide you in the interim or at that hearing.
What I would suggest -- obviously, there's been things that have been raised today that are very clear from the record. My suggestion, and again, there's really no 14 need to come and talk to me. What I would do is I would make arrangements between now the 26th to talk with various members Councilmember Miller, Councilmember Blackwell, Councilmember Reynolds-Brown, Councilmember Clarke, Councilmember Nutter and Councilmember Rizzo to see what specific issues there are. I mean, there are a number of substantive stuff that was raised today that obviously is on the record for discussion. But my suggestion is to arrange those meetings as soon as possible. Hopefully, by February 26th at o'clock we will have some resolution. Thank you very much. 150 2/1/01 - PUBLIC PROPERTY PUBLIC WORKS - BILL 000452 (Council adjourned at 5:20 p.m.) - - - 151 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of February 1, 2001, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS ___________________________ Lisa C. Bradley, RPR and Notary Public