COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

March 28, 2006

BOARD MEETING DATE:

April 4, 2006

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

Executive Summary - Execution of a Cable Franchise Agreement with Comcast, and Direction to the Director of Public Works on the Distribution of Public, Educational, and Governmental (PEG) Access Capital Grants Being Made by the Cable Provider – County Wide

Recommendation

Adopt resolutions:

1)

authorizing the President of the Board to execute a 15-year, non-exclusive Cable System Franchise Agreement with various Comcast companies, and a side letter (the two comprising the “Agreement”) which includes the provision for financing and construction of a fiber network (INET) to specific County facilities/campuses to be determined by the County within 90 days of the execution of the Agreement;

2)

authorizing and directing the Director of Public Works to:

a)

make payments to MCTV, the PEG provider on the Coastside, in an amount not to exceed $83,000 from PEG Capital Grants that are to be provided by Comcast as a condition of the Agreement;

b)

develop a proposed program for the expenditure of the remaining PEG Capital Grant funds for the acquisition of PEG capital equipment by PEG television providers (i.e. MCTV or Pen-TV (the PEG provider on the Bayside)) or by the County; and

c)

work with the County Manager and the Director of the Information Services Department to develop a priority list of County facilities that could be connected to the INET, and report back to your Board within 90 days of execution of the Agreement with said recommended priority list.

Background

Previous Board Action

1.

Entered into cable franchise agreements with the predecessors of Comcast for cable service to various communities in the unincorporated areas of the County.

2.

Became a member of SAMCAT in order to collectively negotiate new cable franchise agreements with Comcast.

3.

Entered into an agreement with MCTV in 1995 that designated MCTV as the PEG access provider for the Coastside and provided funding for the services provided by MCTV.

History

The County, in cooperation with SAMCAT and seven cities, has been negotiating a new cable franchise with Comcast for the past four years.

Concurrently, SAMCAT developed the concept of a fiber network (INET) with Comcast that can link the franchising agencies’ facilities and which can be used to broadcast and receive voice and video via Comcast's fiber network. The INET can also be used for live broadcasting over PEG television.

Discussion

The Proposed Agreement is comprehensive and includes:

Ø

Subscriber Related Provisions such as bill paying, handling of complaints, service calls and resolution of complaints;

Ø

PEG Related Topics including channel capacity, funding for necessary equipment, and cabling to permit the operation of the PEG Channels.

Ø

INET Fiber Network including construction credits in the amount of $620,208 to finance the cost of constructing the network to serve County facilities if desired by your Board; or the conversion of the credits for PEG capital equipment for use by PEG providers or the County.

Ø

PEG Access Capital Grants in the amount of $379,908 that must be used to support local PEG providers (i.e. MCTV on the Coast and Pen-TV on the Bayside) or by the County to support PEG Access. Distribution of the PEG Access Capital Grant money is at the discretion of your Board.

The Agreement also provides an Unrestricted Technical Grant to SAMCAT of $280,000 which can be used to help defray the costs of negotiating the new franchises and will be apportioned to the eight (8) agencies based on population. The Agreement also does not preclude the interconnection of cable systems in order that PEG TV can be broadcast through out the County.

MCTV made requests to clarify that the MCTV/Comcast agreement is not being superceded by the new franchise. We believe this issue has been resolved as this has been confirmed by the attorney for SAMCAT.

MCTV has requested Capital Grants in the amount of 22% of the value of the credits that are being made available to the County, since the funds are derived from subscriber charges and 22% of the subscribers reside on the Coastside. We are recommending that your Board authorize a payment of $83,000 to MCTV (approximately 22% of the cash amount proposed to be made available to the County by Comcast ($379,908)). We are also recommending that you direct us to return with a policy on how your Board wishes to distribute the remainder of the funds, as your Board’s decision on funding the INET will impact the amount of funds that could be made available either to MCTV or Pen TV.

All seven cities covered under the franchise area have executed similar franchise agreements.

Resolutions have been approved as to form by County Counsel.

Fiscal Impact

Under Federal Law, Comcast is entitled to recover its costs associated with the franchise from its subscribers. The Agreement allows for Comcast to start recovering the capital grant and INET costs after January 1, 2007, at a cost recovery rate not to exceed 55 cents ($0.55) per subscriber per month should Comcast exercise this right. This rate is less than 1% of the average cable bill.

The Agreement also allows Comcast to pass through to the subscribers a 7% “Cost of Capital” on the grants and construction credits specified in the Agreement, which cannot occur prior to January 1, 2007. This is essentially an interest charge on the funds to be provided, and will accrue until the funds and interest are recovered though subscriber fees.

The County has received through previous franchise agreements, and will continue to receive through the proposed Agreement, an annual franchise fee of 5% of Comcast’s gross revenues for the use of the public right-of-way. These funds have been used to fund SAMCAT, Pen-TV, MCTV, county staff time spent on cable TV issues, and General Fund expenses.

There is no direct impact to the General Fund by your Board adopting the recommendations as presented. There may be some impact to the General Fund associated with the INET if your Board determines to connect County facilities to the INET, and depending on the use that is made of the INET.