06-11-2014 Council Agenda - Laserfiche WebLink

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May 23, 2014 Page 13 Formal franchise renewal section of federal law at issue in the rulemaking). Leading up to the 621 Order, many cable operators had expressed their concerns about unreasonable demands that LFAs around the country were making of cable operators as a condition for obtaining a franchise. And in the 621 Order, the FCC set clear limits, grounded in section 621 of the federal Cable Act, on LFA demands. The FCC ruled that payments required of a cable operator by an LFA to support "reasonably adequate" PEG capital expenses do not count toward the 5% franchise fee cap set forth under federal law. But payments required of cable operators by LFAs to support PEG operating expenses do count toward the 5`6 franchise fee cap. "Thus, if an LEA is already charging a cable company a 5% franchise fee (which the NSCC member cities do), then the LFA cannot demand any PEG operating support as a condition for obtaining a franchise. 'i'he NSCC's RFRP explicitly asks Comcast subscribers to pay for all of the NSAC's rignt/icant capital and operational funding demands in addition to paying the maximum -permitted franchise fees. This is problematic and unlawful on several levels: First, the NSCC's capital demands call for funding levels far above what is necessary for reasonably "adequate" facilities—which is all the law allows. The NSCC demanded a ten fold increase from current capital -funding levels (from $.27 per customer per month to $2.36), plus an additional funding for the cities (or $1.57 per customer per month). Comcast, meanwhile, has offered PEG fees amounting to $.44 per customer per month, or $1.6 million in PEG capital support to the NSAC—which nearly doubles current capital funding levels and is based on the NSAC's last three years of capital spending. Comcast also will provide $3.2 million in capital funding to the cities, which pays for nearly all of the RF.RP's significant demands for capital grants to individual member cities. Comcast calls for the NSCC/NSAC to fund a small portion of its capital funding demand with a portion of the NSCC/NSAC's $2.1 million reserve that it has accumulated from an apparent surplus of past PEG fees paid by Comcast and its customers. (The NSCC disputes that it has this much in reserve, but it has not said just how much the NSCC and NSAC do have in reserve.) Comcast's proposal also allocates cities' PEG funding pro rata based on each member city's number of subscribers within the NSCC franchise area—a principle embodied in the cities' own JPA. And while Comcast has taken the NSCC's capital needs at face value for its proposal purposes, during a judicial process these alleged needs will be held up to a microscope. Comcast expects that a detailed, unbiased review of facilities and equipment will show the that staff's demands exceed any reasonably adequate community need documented by the NSCC. "Thus Comcast's offer through this formal process is especially favorable.