12-28-2015 Council Packet - Laserfiche WebLink

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has provisions for a reasonable build -out of the city. The proposed franchise ordinance also has provision for defense and indemnification of the City and the NMTC regarding this issue. The second issue is whether the CenturyLink Franchise contains a reasonable build -out schedule. The franchise ordinance recognizes that CenturyLink has already constructed a legacy communications system throughout the City, which is capable of providing telephone and internet service. The build -out provisions in the franchise are related to upgrades of the legacy system to make it capable of providing cable service to all city residents. The Initial Minimum Build -Out Commitment is 15% over two years. The City may consider whether this requirement is reasonable. CenturyLink claimed in its application that it initially would be providing service to a greater portion of the City. During negotiations however, CenturyLink was concerned about having too high a commitment in the franchise ordinance and that cities in Minnesota and elsewhere would use a greater commitment as a new standard. CenturyLink refused to increase the initial minimum build -out commitment above 15%. However, the provisions related to quarterly meetings and additional build -out based on market success are designed to quicken and increase CenturyLink's initial build -out commitment. The franchise also has provisions requiring that residents of the City be included in an equitable initial build commitment and that a significant number of households below the medium income of the city also be included in the initial build -out. CenturyLink must also use its best efforts to complete its initial build faster than two years. Another issue related to the reasonable build -out is whether the penetration rate triggering additional build -out is reasonable. CenturyLink claims that it needs a penetration rate of 27.5% in order to commit to an additional mandatory build in the city. This penetration number is based on internal CenturyLink return on investment models. Given Comcast's penetration rate in the City is around 40-50%, a penetration rate of 27.5% may be difficult to obtain and, therefore, it is possible that CenturyLink may not be required to build -out more than its initial commitment. Economic redlining or "cherry picking" was identified as a concern through the public hearing process. As the Report noted, cherry picking is prohibited by the Federal Cable Act. See 47 U.S.C. § 541(a)(3). The proposed CenturyLink franchise prohibits cherry picking, identical to the Comcast franchise. To ensure compliance, CenturyLink has an additional $500 per day penalty/liquidated damage for violating the build -out and economic redlining provisions of the Franchise. The Report also described the State's level playing field statute, which requires competitive cable franchises not to be more favorable or less burdensome than an incumbent's franchise as it relates to franchise fees, support of public, educational, and governmental access television and the area served. CenturyLink is required to pay a franchise fee of 5% of its Gross Revenues (Identical to Comcast Franchise). The Franchise Area is the entire city (Identical to Comcast Franchise). The Public, Educational, and Governmental ("PEG") Access Requirements of the CenturyLink franchise meet, and in places exceed, Comcast's franchise commitments. The CenturyLink PEG commitments are summarized as follows: • Number of Access Channels. CenturyLink will provide 12 Access Channels (greater overall number of Access Channels as Comcast).