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Summary of Proposed Franchise Agreements - Verizon
Release Date: August 03, 2006

The Greenburgh Town Board will be holding a hearing on a proposed agreement that will enable the town to have cable TV competition. Verizon is seeking a franchise with the town. The hearing will be held on Wednesday, August 9th at 7:15 PMat GreenburghTown Hall. If you are able to attend the hearing to express your thoughts on the proposed franchise and on the concept of cable TV competition – it would be appreciated.  I have been pushing for cable TV competition since the early 1980s. I believe that competition will result in better service, more options for customers and hopefully more competitive rates. The following is a summary of the proposed franchise agreement.  The Town Board has the option to vote on the agreement at the August 9th meeting or to put the vote off till our September meeting. Cablevision is also in the process of concluding a proposed franchise agreement with the town.
PAUL FEINER
GreenburghTownSupervisor

SUMMARY OF PROPOSED FRANCHISE AGREEMENTS BETWEEN

VERIZON NEW YORK INC. AND THE VILLAGEOF ARDSLEY

THE TOWN OF GREENBURGH, THE VILLAGEOF HASTINGS-ON-HUDSON,

THE VILLAGEOF IRVINGTON, THE VILLAGEOF TARRYTOWN

Background

 

A Consortium of the Town of Greenburghand the villages of Ardsley, Hastings-on-Hudson, Irvingtonand Tarrytown(Consortium) has conducted a process originally seeking to simultaneously conclude both a new cable television franchise with

Verizon New York Inc. and a renewal cable television franchise with Cablevision of Westchester.  However, this original objective

has proven elusive for a number of reasons. Consequently, the Consortium - in consultation with elected and appointed officials of

its constituent municipalities more recently has focused on negotiations with Verizon New York Inc. in response to the latter's

demonstrated greater interest in concluding an agreement. The document that you have either received or soon will be

receiving represents the results of these negotiations.

The renewal process with Cablevision remains open and the Consortium looks forward to resuming

that process at the earliest opportunity.

Process

It should be stressed that this franchising process is not a competitive bidsituation.   Verizon and Cablevision are each

entitled to a franchise (or renewal) to provide cable television service if they (a) comply with federal and state laws and

regulations and (b) agree to meet the reasonable cable-related community needs specified by the local franchising authority (i.e.,

the Town and each of the villages).

The Consortium prepared for negotiations by carefully reviewing the cable-related needs of its constituent communities

taking into account the costs associated with meeting those needs. The bulk of those cable-related needs were concerned with public, educational and government access and this fact is reflected in each proposed agreement commensurate with the

demonstrated need in each community. However, in the conduct of the process other such needs were identified and these also are reflected in the proposed agreement.

State regulations specify certain minimum franchise standards. In particular, Section 895.3 of Public Service Commission

cable television, rules states that "No municipality may award or renew an agreement which contains economic or regulatory burdens that when taken as a whole are greater or lesser than those burdens placed upon another cable television franchise operating in the same franchise area." While much of the evaluation regarding level playing field awaits completion of the Cablevision renewals (whose underlying current franchises have nominally expired but are continued provisionally under temporary operating

authorities granted by the PSC), the Consortium has negotiated the proposed agreement with Verizon giving particular attention to

this important responsibility.

The Greenburgh area communities are on the cusp of a new competitive marketplace for cable television service. Obviously,

the public hearing is a key stage in that process. Within 60 days of the municipality's approval of the franchise, Verizon is required

to file an application for a certificate of confirmation with the PSC. Upon release of an order granting the certificate, Verizon may then begin to provide cable service to the community.

Highlights

 

The proposed franchise agreement with Verizon affords each municipality in the Consortium and its residents the maximum benefits reasonably achievable under the current cable television regulatory and business environment. In most cases, these benefits

are quite liberal when compared with some contracts recently concluded in other jurisdictions.

Term

 

This agreement provides for a non-exclusive grant of ten (10) years.

Service Obligations

 

Verizon is required to provide cable television service to all residents within five years. The sole exception to this commitment is a finding of economic infeasibility by the PSC, each and any incident of which must be filed for and demonstrated to the PSC's satisfaction by Verizon. In most if not all cases, Verizon has or will indicate in its application that it has completed the construction

of its Fiber to the Premises (FTTP) network to in excess of 90% of the households in each of the municipalities. Economic

redlining is expressly prohibited. The vast majority of the residents in each community will have service available to them almost immediately following PSC certification.

Verizon is required to comply with all Federal and state laws and regulations pertaining to cable television service including the handling of requests for service, complaints and trouble calls, subscriber billing, termination of service for non-payment, system installation and repairs, subscriber credits and fee waivers, protection of subscriber privacy, technical performance and safety of the technical plant. While adequate safeguards exist within federal and state rules and the proposed agreement, it is expected that the imperatives of a competitive marketplace also will ensure the provision of superior customer service. Nonetheless, there is a

procedure specified in the proposed agreement to effectively address deficiencies in this regard short of revocation of the franchise.

Verizon must maintain its system using materials of good and durable quality and all work performed with respect to the system must be done in a safe, thorough and reliable manner. Verizon must comply with all local laws governing the right-of-way and the municipalities retain all rights regarding police powers. Verizon must comply with federal and state Emergency Alert System requirements. While Verizon is required to maintain a system with the minimum capacity of 860 MHz and 77 analog

channels, it is expected that, in addition to the safeguards described in the proposed agreement, the imperatives imposed by a competitive marketplace will compel Verizon to regularly maintain and improve its system to meet the needs of its customers and in other communities currently being served has exceeded the minimum standards.

Franchise Fees

 

Verizon is required to annually pay, on a quarterly basis, a franchise fee of five percent (5%) based on "all revenue, as determined in accordance with generally accepted accounting principles, which is derived by Franchisee from the operation of the Cable System to provide Cable Service in the Service Area." Because the amount of the franchise fee collected

from subscribers is included within :he definition of gross revenue in the proposed agreement, the effective rate of the franchise fee obligation is 5.25%. Each payment must be accompanied by a report showing in detail the basis for the computation. The proposed agreement anticipates a marketing device known as "bundling" under which voice, internet and video programming (cable) services are offered at a discounted rate if the subscriber agrees to subscribe to all three in a package from the same company. If such

bundling occurs, Verizon has agreed not to allocate such discounts "for the purposes of evading the franchise fee", and to "allocate

the bundled discount such that the discount allocated to Cable Service revenues will not exceed the amount which would be allocated to Cable Service revenue on a pro rata basis".

The municipality may audit any such payment for a period of up to three years after such payment is first made.

Public, Educational and Government Access Support

 

Under the proposed agreement, Verizon agrees to make available three full time, dedicated Public, Educational and Government Access (PEG) channels on its cable system to be transmitted as part of its basic broadcast offering. In addition to agreeing to provide, install and maintain, without cost to the municipality, the equipment for receiving a video signal feed from each municipality's

"master control" facility for distribution to the community at large, Verizon has agreed to provide live interconnection to

the "master control" facility from up to three sites in each community. If the underlying technology changes in such a manner as to render the existing connections inoperable or insufficient, Verizon has agreed to provide suitable upgrades and replacements, also at

no charge to the municipality.  Verizon also is required under the proposed agreement to make both an "Initial PEG Grant" and "Annual PEG Grants" to be used by the municipalities for capital costs associated with PEG access. Within sixty

(60) days of effective date of the proposed agreement, Verizon will pay to each municipality for the following "Initial PEG Grant":

Ardsley                          $24,793

Greenburgh                    $88,843

Hastings-on-Hudson      $61,983

Irvington                       $33,058

Tarrytown                    $41,322

The "Annual PEG Grant" is payable annually on the anniversary of the effective date of the proposed agreement. In order to ensure competitive neutrality, the amount due to each municipality is expressed as a monthly per-subscriber assessment as follows:

Ardsley                          $0.57

Greenburgh                    $0.60

Hastings-on-Hudson      $0.75

Irvington                       $0.55

Tarrytown                    $0.69

Provisions are made within the proposed agreement for computational methodology.  Each annual payment is to be accompanied by a report explaining in sufficient detail how the payment was calculated and on what basis. Verizon also is given the option to defer the first payment of the "Annual PEG Grant" for a period not to exceed three years from the effective date of the proposed agreement or until such time as it has recovered from subscribers an amount equal to the Initial PEG Grant,

whichever is earlier.

The amounts associated with the "Annual PEG Grant" are contingent on each municipality requiring Cablevision, in any renewal agreement, to make "substantially equivalent PEG financial contributions".  In the case of the "Initial PEG Grant," if a municipality does not require Cablevision to provide substantially equivalent PEG contributions, then Verizon may offset

against its franchise fee obligations to the municipality by the amount by which the Initial PEG Grant that it is required to pay

exceeds the amount that Cablevision is required to pay. Consistent with federal law, Verizon is permitted but not required to pass

these costs on to subscribers and to identify them as a separate line-item on its billing.

Other Provisions

 

The proposed agreement requires Verizon to repair or replace and to restore to serviceable condition any municipal property damaged or destroyed in connection with its provision of cable service and to restore to its pre-existing condition any subscriber property damaged in connection with the installation, repair or disconnection of cable service.

Consistent with recent PSC orders, the proposed agreement provides that upon delivery of cable service, Verizon's FTTP network becomes a "mixed use" facility subject to the PSC’s minimum cable television franchise standards and the police power

of the municipality but that the municipality is not granted any broader authority over the construction, placement and operation

of the mixed use facilities as a consequence of Verizon's providing the municipality with cable service.

Free basic cable service will be provided to each public library and educational institution chartered or licensed by the state education department or Board of Regents, as well as other buildings used for municipal purposes.

Under the proposed agreement, the municipality has the right to inspect Verizon's pertinent books and records and Verizon

will be required to maintain certain records for a period of three years.

There are insurance and indemnification requirements running to the benefit of the municipality.

The municipality retains the right to approve or deny transfers, consistent with the limitations imposed by federal law.

Verizon is prohibited from abandoning service, in whole or in part, without the written consent of the municipality.

Equal employment opportunity practices also are ensured under the proposed agreement.

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