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12 NORTH SUBURBAN COMMUNICATIONS COMMISSION CABLE FRANCHISE RENEWAL FACT SHEET What does the cable franchise renewal process involve? The formal franchise renewal process is one of administrative litigation. The process itself is spelled out in federal law in Section 626 of the Cable Communications Policy Act of 1984 (the "Cable Act"), and it is designed to protect the rights of the incumbent cable provider while also ensuring that a community's present and future cable -related needs and interests are satisfied, taking cost into consideration. Formal franchise renewal begins with the cable provider notifying the franchising authority of its desire to renew its cable franchise agreement. The franchising authority then begins by evaluating the cable provider's performance under the existing franchise, including the engineering of the cable system, and by ascertaining the cable and communications needs of the community. This typically involves hiring experienced engineering, legal, financial and ascertainment consultants and can take 6 to 12 months (or more) to complete. The franchising authority then may request that the cable provider submit a proposal showing how it will meet the needs identified in the ascertainment. The formal process also requires public input on the cable provider's past performance and on the needs ascertainment While federal law also permits the use of informal franchise renewal negotiations with the cable provider at any time (including simultaneously with the formal process), a franchising authority must be prepared to follow the requirements of the formal process because either side may choose to return to that process at any time during the renewal proceedings. Typically, the renewal proceedings alternate between the formal and informal processes several times. Can we negotiate with more than one cable provider? The federal franchise renewal process is intended for the franchise of the incumbent cable provider. None of the franchises of the NSCC member cities are exclusive, however, so member cities may negotiate a new franchise with another cable provider at any time. That having been said, cable system overbuilds are not common because the new provider must invest a significant amount of money in the construction of a network with no customer income until the new system is built. In the meantime, the incumbent controls 60-65% of the market, and satellite providers have most of the rest. Overbuilding is a very difficult and expensive proposition requiring very deep pockets and long-term commitment. In recent years, the only providers that have tried overbuilding are traditional telephone companies Verizon and AT&T, neither of which have landline telephone companies in Minnesota. Furthermore, both have halted all new construction in order to concentrate on the systems they have already built. Meanwhile, Qwest has shown no credible interest in constructing an advanced wireline network that can compete with Comcast's cable system in the NSCC's member cities. Can we simply extend the existing cable franchise? This is a possibility, although the incumbent provider is not likely to want to do so. A typical goal of providers in franchise renewal is to eliminate and/or trim back obligations in the current franchise agreements, including the Institutional Network, the number of public, educational and government (PEG) access channels, and the financial support of those channels. Nevertheless, the commission will explore that option with the company. Why should we have the NSCC and its staff handle our franchise renewal, rather than doing it ourselves? First, cable franchising and renewal law is very complex, involving the interplay between federal, state and local laws and regulations with 30-40 years of legal and legislative history. It also is constantly changing and evolving. Second, Comcast is the largest cable company in the United States (if not the world) and has a full-time