October 2005

October 17, 2005

MEMBERS PRESENT

Peter Blum, Chairman
Kent Burrow, Member
Elizabeth Herriman, Member
Daniel Lynch, Member

MEMBERS ABSENT

Robin Winston, Member

OTHERS PRESENT

Chairman Blum calls the October meeting of the Marion County Franchise Board to order.

The first order of business is the approval of the minutes, which were included in the Board packets. Mr. Lynch moves to approve last months minutes. Mr. Burrow seconds the motion. Ms. Herriman did not vote, as she did not attend last month's meeting. The motion was voted on three-zero.

The next item on the agenda is the Agency Report, submitted by Rick Maultra, the Director of the Cable Communications Agency.

Mr. Maultra thanks the Board for the opportunity to highlight some of the things that the Cable Communications Agency has been involved with during the past month.

The City has received Bright House's yearly rate filing for what Bright House intends to charge customers in 2006 for limited basic service and associated equipment with respect to receiving that service, such as pricing for converters, remote controls and maintenance. This will be brought up under New Business, later in the meeting.

Chairman Blum and Mr. Maultra attended the NATOA Annual Conference in DC the third week of September. National League of Cities representatives and Mr. Maultra visited a number of telecom legislative aides on Capitol Hill during the conference.

Comcast is out of compliance for the third quarter measured in the FCC Customer Service Standards area of answering their customer service lines 90% of the time in thirty seconds or less. The City is giving Comcast the letter that formally cites them for this and awaits their answer to correct problems and cure the situation.

The Agency has been expediting the ETC and IRIS grants contracts in order to get the fund appropriations to the recipients ASAP. With that, the Agency has been in contact with IU to secure their signatures to the contract to get ETC their portion of the grants approved by the Cable Board.

The Cable Communications Agency has been serving as a consumer advocate to Indianapolis and Marion County cable subscribers in assisting them in mediating cable complaints on their behalf.

For the month of September, Bright House had 22 complaints. The high areas of problems were in billing procedures and service interruptions.

Comcast had a 72 complaints reported to the Cable Agency. The high area, overwhelmingly, was in billing procedures, followed by programming, customer service, and telephone service

That concludes Mr. Maultra's Agency Report.

Mr. Lynch states that there was an audit settlement document in the Board Packet this month, which concludes that there has been a settlement. However, with this letter, it is not possible for the Board to understand exactly what has happened. He asked if it is possible to get a summary of the original audit in the settlement and the payment schedule.

Mr. Maultra will put together a draft, share it with a couple individuals, and then run it by Mr. Lynch before distributing it out.

Chairman Blum asked what is the difference between the citation letter to Comcast that was included in the Board Packet and the letter that was handed out at this meeting

Mr. Maultra was mistakenly omitting the non-compliance for the busy rate in the letter that was included in the Board Packet. That is included in the letter that was passed out at this meeting.

Chairman Blum asked Ms. Cade if she received the letter and stated that it shouldn't have been a surprise.

The next item on the agenda is the Government Access TV Programming Report with Mr. Montgomery, Manager of Channel 16.

Channel 16 had another healthy month in September, surprising so due to winding down because budget hearings were concluding. There was 68 hours and 3 minutes of live and tape delayed meeting coverage. Two interesting things to note, they covered another one of the Marion County Consolidation Study Commission hearings that was held over at the State Senate Chamber in late September. That was 5 hours and 40 minutes. Channel 16 does not usually cover township boards, but they covered the Washington Township Board last month by invitation.

The Washington Township Board had a public hearing on a Saturday morning to take public input on the proposed consolidation of the Indianapolis Fire Department and the Washington Township Fire Department. There is a lot of public interest in consolidation issues here in the County so Channel 16 covered and carried that on a tape delayed basis.

Channel 16 covered quite a few special events and productions last month. The most notable one was the 21st Century Workforce Literacy Summit that was 3 hours and 4 minutes. That was sponsored in part by the Indiana Chamber of Commerce. They have such an interest in that program so Channel 16 is duplicating it into a DVC Pro Master format so they can get quantity duplication made to distribute to their membership and to other people who are interested in that particular program.

Channel 16 had a few things for in-kind production including a recognition video for Keep Indianapolis Beautiful called "Dig Deep," which is a program that Angie Gilmer put together.

The total for the month of September in all categories of production was 90 hours and 17 minutes. That is well above the average for Channel 16. The last few years, the average has been about 76 hours.

There were only a few items for in-kind services last month but the value of them, if Channel 16 would have charged for those services would have been $11,190. Those services included the Dig Deep recognition video, another Continuing Legal Education for the Public Defender's Office, and Trial Transcript Training for the courts services. They got special permission from the Indiana State Supreme Court for Channel 16 to video tape some actual trial proceeding that will be used internally for training so that people on the court services staff that do the various documentation processes can make sure they do that accurately and according to all of the rules that they have to follow.

With that, Mr. Montgomery will answer any questions from the Board.

Chairman Blum states that this is the first time he recalls Channel 16 covering a township board event. He adds that he knows Channel 16 has done a good job of reaching out in the City-County Building so that people understand how they can use their services and asks Mr. Montgomery if he has done the same outreach with the township boards.

Mr. Montgomery responds that the folks at the Mayor's Office who were putting together their presentations invited Channel 16 to cover the meeting. Although the township board did not invite them, the board was aware and consented for Channel 16 to be there. Channel 16's programming policy requires consent of the presiding officer of the committee or board. Previously Channel 16 has not done that kind of outreach. With nine township boards, it would be more work, but it is certainly something they could do.

Chairman Blum suggests sending them a letter and extending the offer.

The next item on the agenda is the Cable Operators Management Reports beginning with Bright House.

Al Aldridge, Director of Public Affairs for Bright House Networks will present their operator's management report that was included in the Board Packet. With Mr. Aldridge is Mr. Buz Nesbit, Division President for Bright House.

Bright House gained 17 limited basic customers and 140 full cable service customers, giving a system total of 157 customers gained for the month of September.

On the incoming call report, Bright House handled 57,029 calls out of 57,342 calls received. 52,049 calls were answered in 30 seconds or less, which gave a call answer rate of 91% and a busy rate of 0.21%.

On the Complaint Summaries Report, there were 22 complaints from 18 customers. There were some service interruption calls as well as billing questions.

100% of service interruption calls were addressed within 24 hours. There were no planned outages, but there were 24 unplanned outages that affected 3810 customers. The system reliability for the month was 99.98%.

100% of total service calls were address within the next business day, unless as otherwise directed by the customer. There were no appointments kept outside of the 4-hour service window during normal business hours, unless requested by customer.

100% of standard installations were performed within 7 business days after the order was placed.

There were two new construction projects in September. One was in a multiple dwelling unit and the other was at the Conrad Hilton Hotel.

The Division continued to run in-kind promotional spots for several community non-profits including the Visiting Nurses Service, National Kidney Foundation, and the advertising Council. They also produced and ran spots for the Circle City Classic and the American Cabaret Theater. They continued to run PSA announcements for the Central Indiana Commuter Services. The value of these gratis spots was $41,431.

The Division was a major sponsor of the 2005 "Speaking of Women's Health" event at the Indiana Convention Center. Not only did they provide funding for gift items for the 1,500+ attendees to the event, but also staffed a communications booth at the event in order to acquaint attendees of the many information and entertainment choices available for women through their medium. They also promoted the many educational free services that they provide to their communities: Cable in the Classroom, media literacy and parental control viewing choices. This was their third year in being a major partner of the event.

Bright House continued their relationship with the Circle City Classic and sponsored the Volunteer Brunch for the several thousand volunteers that make the Circle City Classic so successful. The event was celebrated at the Martin University Gathertorium.

The Division participated in a Fall Fundraiser with the 100 Black Men of Indianapolis and helped the organization to raise funds for their programs aimed at mentoring programs for African American Males.

Bright House was a sponsor and participated in the 2nd annual Indiana Cable Telecommunications Association's "Hog Roast." The roast is an annual event to prepare the regional telecommunications members for the coming legislative session. This was their second year of providing sponsorship.

Mr. Aldridge continues to volunteer with the Indianapolis Public Schools Education Foundation, ICTA, the Walker Center, the 100 Black Men Indianapolis Chapter, the Indiana Hemophilia Foundation, and the National Kidney Foundation of Indiana (NKFI).

The continued partnership with WDNI provided 224 hours of local programming.

With that, Mr. Aldridge will answer any questions from the Board.

Chairman Blum states that the Board will take up the rate review for Bright House under New Business.

The Comcast Management Report is next.

Mr. Delph will present on behalf of Comcast their report to the Board for the month of September.

The number of customers requesting total basic service decreased by 303.

79.62% of calls were answered in 30 seconds or less with a busy rate of 3.3%

System Reliability for the month was 99.99%

99.6% of total service calls were addressed by the next business day, or at the direction of the customer. 99.9% of appointments were kept within the 4-hour service window during normal business hours, or at the direction of the customer.

100% of standard installations were performed within seven business days or at the direction of the customer.

Mr. Delph agrees that there were 72 complaints sent to the Cable Agency.

Comcast completed construction in four new subdivisions.

Comcast aired over 225 hours of local community interest programming during the month of September.

Comcast aired public service announcements for the Juvenile Diabetes Research Foundation "Scooby Doo Walk," Ronald McDonald House, American Red Cross "Hurricane Katrina Relief," and others.

Appearing on Newsmakers this month was State Representative David Frizzell, State Representative Bob Behning, Pamela Altmeyer with Gleaners Food Bank, and others.

Comcast was a major media sponsor of the Solheim Cup at Crooked Stick Golf Course, September 6 – 11. Several technical employees worked hard for weeks in advance to set up various multi-media sites around the golf course and an enthusiastic group of volunteers helped out at their Event Vehicle, where they were able to do live product demonstrations. Comcast also sponsored a special appearance by Rich Lerner, host of Golf Central on The Golf Channel.

For the ninth consecutive year, Comcast was the presenting sponsor of the 27th Annual Dick Lugar Community Run, Walk, and Corporate Challenge, held on the campus of Butler University, September 17. Approximately 1500 Hoosiers participated in the event and several Comcast employees walked, ran, or manned water stations on the course. Comcast also promoted the event via a series of cross-channel commercials.

Comcast sponsored the annual charity golf outing of the Geist Sertoma Club, September 22. The event raised more than $2900 to assist the children and families serviced by the Family Support Center of the Indianapolis Children's Bureau.

Comcast was a platinum level sponsor of Gleaners Food Bank's 5th Annual Harvest Moon Gala, September 24. This annual fundraising event helps enable Gleaners to distribute 135,000 pounds of food to hungry Hoosiers.

That concludes Mr. Delph's formal comments. On behalf of the company, he thanks Mr. Maultra for coming out to Comcast Cares Day. They had over 300 employees, relatives of employees, and friends come out to partner with Keep Indianapolis Beautiful.

Chairman Blum acknowledges that Mr. Ward is present and asks Mr. Delph if they plan on going into depth on the call issue.

Mr. Delph asks Chairman Blum if he received the email he sent and stated he had left a message on Mr. Maultra's voice mail regarding what their action items are going to be for meeting service level.

Chairman Blum asks Mr. Delph if he can summarize what that is for the Board.

Mr. Delph stated 18 CAE's were hired, trained, and began taking calls on October 1st. Training schedules were amended to expedite new employees being productive on phones. Recurrent training with new hires is scheduled to ensure quality call handling is not compromised. The number of calls outsource has been increased. Outsourcing is determined by the current service level and the local call center. Thresholds to overflow calls to a third party call center were lowered in order to improve service level. Vacation time for CAE's has been reduced during the month of October. Overtime is open. All CAE's have been encouraged to sign up for additional work hours. To decrease the number of employees utilizing flextime during this extremely critical period, a weekly incentive has been implemented for CAE's that fulfilled their schedules without interruption.

Mr. Delph adds that as of October 16th, their service level for the month is at about 92%.

Chairman Blum asks if these things like more overtime and less vacation are viewed as permanent changes.

Ms. Cade responds that they are not permanent changes; they are just to get them back on track. However, they feel that November and December will be good months without implementing these changes.

The next item on the agenda is the ETC Report. Standing in for Mr. Harris is Mr. Charlie Wiles.

Chairman Blum asks Mr. Wiles to introduce himself to the Board and to the public and to explain his involvement with ETC.

Mr. Wiles has been brought as a volunteer development coordinator for ETC. According to Mr. Wiles, there is a gap from the current status of the organization and some of the bi-laws and different work that was done in the mid/late 90's. ETC is trying to improve local content and to make the station more appealing and community service oriented.

Washington Township has begun producing "WJEL UpFront." It replaces the show "Washington Township Magazine." The scope of the student-produced show will cover topics inside of Washington Township as well as outside of the district. The show can be seen on ETC 1.

"The Derwin Smiley Show" was approved. The locally originated program is a "positive venue for young people, for leadership, and self-actualization; a response to the dominant, negative programming seen on TV." Students from the Indiana Black Expo Youth Video Institute will be used in the production. The show will be seen on ETC 1 starting in November.

The ETC has scheduled a Planning Meeting for Tuesday, October 18th. The meeting will discuss the future of ETC, including the direction of the organization and information that Charlie Wiles has gathered in effort to help ETC. A future update will be provided at the next Franchise Board meeting.

The next item is the New Business portion of the meeting; the Bright House 2006 Rate Review 1240/1205 Forms.

Mr. Maultra asks Chairman Blum for his consideration and that of the Board's to take the Comcast and the Bright House rate orders together because they are essentially the same issues.

Chairman Blum answers that they may be heard together.

The City received Comcast's forms 1240/1205 on August 1st, 2005. This would be for their proposed maximum permitted rate for August 2005 through August 2006. The City just recently received Bright House's 1240/1205 FCC rate filings that cover the period of January 1st, 2006 through December 31st, 2006.

Action Audits has been doing the rate reviews with respect to this matter. They have agreed to do these rate reviews together at $10,000, which is $5000 a piece. That is a discounted rate for doing them both together.

Mr. Maultra advises the Board that he and Mr. Burrow have been speaking frequently concerning a schedule of agreed upon services with regard to the rate audit being performed by Action Audits.

The schedule of agreed upon services will be embedded within the new contract that OCC is going to prepare. It will not be seen as "see attachment A." It will be part of the contract itself so it is clear as to what the scope of agreed upon procedures will be with regard to these rate reviews.

The Agency has the money in the budget for these audits. Mr. Maultra asks the Board for their kind consideration in approving the rate reviews with respect to both operators.

Mr. Burrow asks Mr. Maultra if the auditor agreed with the schedule of agreed upon services or if they had anything to add to it.

Mr. Maultra answered that Action Audits agreed to and had nothing to add to the schedule of agreed upon services.

Mr. Burrow adds that these procedures came from a 2000 contract and he wanted to make sure if there had been any changes in the FCC forms or any regulatory changes, they would be reflected. That has all been taken care of. Mr. Burrow states that he is comfortable with what is required.

Chairman Blum adds that he thinks it is important that the language is in the contract itself, and not in an attachment or a referral.

Chairman Blum has questions with regard to the Bright House rate request; the selected rate exceeds the maximum permitted rate.

Mr. Maultra responds that is something either Bright House can speak to, or Mr. Sepe can speak to when he has performed his audit.

Chairman Blum asks Mr. Nesbit if he can comment on that.

Ms. Nesbit responds that he thinks it may be better if Mr. Sepe raises it and then they explain it. He adds that Bright House has done the same in many years gone by and it has do with the upgrade of cost that allows that difference.

Chairman Blum states that he thought the Board has been through this before but they will let this be answered through the audit process.

Ms. Herriman moves to approve the contract with Action Audits to review the 1240/1205 forms for both operators. Mr. Burrow seconds the motion. The motion is voted on 4-0.

The next item on the agenda is the Modification of Chapter 851 pertaining to the filing fees for new operators.

The background on this is that First Mile is operating in Brookfield Place subdivision and providing broadband services, including that of video, without a cable franchise agreement. The City is trying to find an amicable way of getting them franchised.

The City is taking in consideration for First Mile's available resources at 43 subscribers and is trying to find a way of promoting competition without putting up economic barriers to entry to that particular company.

Council has provided the Board with a draft for their consideration with regard to the schedule of application fees that might be considered across the board for First Mile, SBC, Comcast, Bright House, or whoever might enter the market place. It is based on a $5,000 initial application fee instead of the $50,000. If looking at a per sub basis, First Mile would actually be paying more per subscriber than the $50,000 paid by Comcast and Bright House for initial application to franchise.

From there the discussion was if the City went beyond the $5,000 incremental application fee and the City's cost incurred in this process went above $5,000, then the City would show the applicant that they have reached $10,000 and show an accounting of that. Mr. Maultra believes that is where things were left at the last meeting. There has been much discussion since and he assumes there is probably going to be differing opinions as to the way to go. Mr. Maultra's personal feeling is that this might be more equitably done looking at purely out of pocket expenses. It can be quantified so that if there is an entity like First Mile that has 43 subs and a third party putting together the negotiations of franchise or doing a technical audit, that amount of money would directly resemble the resources and the size of the company. A franchise fee audit on First Mile might take half of an afternoon, as to Comcast might take several months to do. The cost for doing that would be reflective as such.

Mr. Maultra had some concern at the last meeting in terms of the City internally trying to come up with the cost. Mr. Maultra figuring what his time spent might be, the secretary's time spent might be, counsel's time, rent cost based upon the Building Authority, the use of the computers that the offices get charged back from ISA, and a lot of things that become unwieldy. It almost gets to the point of the time being spent internally with the various City departments becoming a best guestimate, versus a third party able to do these things where it is, Mr. Maultra believes the code already speaks to, an out of pocket expense.

Mr. Maultra states that First Mile could be handled by third party entities that could come, not guestimate, and give the Board a hard and fast figure as to what it would take to work out a franchise agreement with this company. They may say, First Mile has 43 subs and they believe that it is going to cost $5,000 for them, versus a much larger company that has tens of thousands subscribers more, and a lot more to look at in terms of books, and the cost estimate would be appropriate for that.

The fees would not be capped with this application process, it would be the actual out of pocket expense by the third party. Mr. Maultra thinks that would be the most equitable to all. That way everybody is treated the same and it is based equitably on what the vendor thinks it is going to take to franchise that entity.

Chairman Blum asks Mr. Maultra if what he is saying is that the $50,000 that is in the current code would not cover the actual cost of assessing a large operator.

Mr. Maultra responds that it may, or it may not. He is looking at initial estimates, doing legal and technical, and combined. Those two alone would probably exceed $50,000. He would be very hesitant to put a cap on that.

Mr. Maultra asks who is going to make up for the excess if there is a cap at $50,000. If the entity is almost paying directly the third party vendors to engage in the process and to expedite it, then that's between that entity and the third party vendor. The City does not have to subsidize this with any taxpayer dollars.

Chairman Blum asks if he is understanding that if the code isn't amended, and a large potential operator were to come in, and the assessment of that operator costs more than $50,000, then the taxpayers would have to eat what was over the $50,000.

Mr. Maultra responds that is correct.

Chairman Blum states that the City does not really have, in fact, a cost based system right now.

Mr. Maultra responds that it works both ways. First Mile would be paying $50,000 if this was not changed, and for an entity that would exceed $50,000 if it weren't capped, to pay actual out of pocket expenses, then it would possibly be a burden to the taxpayers.

Chairman Blum asks if it will also be written to return any unspent fees since it will be based on actuals.

Mr. Maultra responds that is correct, although he does not even think that refunds would enter into it. If the entity is paying out of pocket expenses by the vendor, it will be dollar for dollar.

Chairman Blum asks if that is without an initial upfront. He recalls having talked about having some initial upfront, with the understanding that it could wind up being more or less than that. If it's more, then they would pay the more, if it were less then they would receive a refund.

Mr. Maultra responds that he would leave that up to the pleasure of the Board. He thinks that if they are looking for dollar for dollar accounting out of pocket expenses, it would remove the filing fee doing it that way.

Mr. Lynch sets aside from the financial estimates of the City's cost to administer this micro franchise, his perception is that here is a company that built over the county line without checking before they did it so now there is an anomalous situation that is a problem for all. It doesn't fit any model. The two franchisees that are granted in the City now are $100 million contracts. They're big operators. This is a little neighborhood that has come over the edge. They are truly not a competitor in the marketplace and they don't intend to be a competitor. Mr. Lynch would like to ask Comcast if anyone is going to overbuild their 43 subs.

Mr. Maultra responds that it is his understanding that Brookfield Place can take an offering from Comcast or First Mile. Comcast would have to answer the question as to whether or not there is actual in-fighting competition within that neighborhood between the two entities. There is a number of homes passed with this fiber throughout the county so there is certainly the possibility that this company could hook people up quickly over the years and ramp up the subscribership that they have right now. They could go beyond just a micro anomaly to one that might grow to be real significant competition in time.

Mr. Lynch asks if the Board should really modify the code and create an exception for this situation if they don't believe First Mile to be truly a competitor that is going to come in and compete. He thinks they need to really understand what that intention is.

Mr. Maultra responds that he thinks this goes across the board with any corporation that may wish to compete, including SBC as well.

Mr. Lynch states that what happened here was there was an inbuilt out corner of the county with no existing incumbent. There was a cable system built. It was built before any agreements were struck and now the City is trying to retrospectively deal with the fact that it has been built into an existing franchise area. It is Mr. Lynch's understanding that First Mile is not a competitive entry.

Mr. Maultra states that First Mile is in Comcast's territory. Comcast brought it to his attention. Comcast was putting down plant. Comcast was inspecting the Public Rights of Way and they told Mr. Maultra that he had somebody in the City that is operating without a franchise agreement.

Chairman Blum stated that he understood what Mr. Lynch was saying, but he thinks there is a broader way of looking at this. Even with taking First Mile out of the picture, the City does not currently have a system that is equitable if a large applicant were to come forward. What the code says right now is if an applicant comes in, they pay a $50,000 application fee, and that's all they pay. Then the city undergoes, in the case of a large applicant, what is bound to be a fairly detailed assessment process. If that assessment process winds up costing more than $50,000, whatever it is over $50,000, the taxpayers wind up paying. Mr. Blum thinks this makes it more equitable. There has to be some way to take a small anomaly and put it on the same page as a large provider, somebody who can potentially serve the whole county.

Mr. Lynch states that he follows that logic entirely, but states that the Board was completely satisfied with the code as written when TotaLink was intending to build over the entire county. It was an unfortunate loss when they withdrew 8 or 9 months ago. Mr. Lynch does not perceive this small overbuild over the county edge as being a competitive entry in any way, shape, or fashion. He questions as to why the City would want to modify the existing codes, given that they were completely suitable for TotaLink, which was a bonafide competitive entry that fully intended to come in and compete direct heads up.

Mr. Lynch states that the City seems to be in a mode, and he understands that it is a difficult mode, but he wonders if modifying the code is the appropriate path forward. He wonders if it would be more appropriate if the City approached this small entry, pointed out their error, and told them not to build any more out or pay the $50,000. Leaving the code alone for now would be a proposal that Mr. Lynch would offer in this particular situation because he does not believe that First Mile is a competitive entry. Although he does not know for sure what they intend to do, it does not sound to him like they plan on building out over the community after they receive a franchise agreement.

Mr. Maultra responds that he thinks that the foundation has to be put in place for what First Mile may or may not do. If they are in Comcast territory and they are serving homes that Comcast is passing with their plant, then that is a form of competition.

Mr. Maultra notes the importance of looking at out of pocket expenses and paying that directly, sets up an equitable way of heading off these problems when they come. There may be another First Mile, and another, and so on. Mr. Maultra does not want to get into a situation where the FCC tells the City that it's setting up impediments to entry with regard to these various entities. If the City can do it on such a way that is price neutral and it's what the costs are for that particular third party entity to help franchise them, then whether it's an SBC or it's a First Mile, the foundation is in place to handle that. Mr. Maultra pointed out that SBC is right around the corner.

Where Mr. Lynch would concur with that direction is if the City believes a future competitive franchise is going to be greater than $50,000 regardless, and that ceiling of $50,000 is removed to absorb the true cost of a competitive entry, then he is completely in alignment with the proposal. However, that is not his sense of what is driving this. His sense of what is driving this is these 43 houses. Mr. Lynch asks Comcast if they will actually have a choice between Comcast and the existing cable system.

Mr. Delph stated that the concern that he has is anybody that is going to provide cable service needs to comply with the law as Comcast and Bright House does. Mr. Delph's understanding with respect to First Mile is that Comcast cannot go into their neighborhoods and provide cable service to those customers. He thinks that is because the lane that they utilize for the pipe that they put down, or private easements versus the public rights of way. Mr. Delph stated that it takes two to compete, and right now Comcast is not allowed to go into that community and compete for the customers.

Mr. Lynch stated that First Mile, in essence, would be granted a lower cost franchise than Comcast has already been granted and at this point there is no head to head competition.

Chairman Blum adds that it is his understanding that Comcast did not pay a fee to get the current franchise. This really only pertains to new applicants. The franchise that Comcast has now is a renewal. There was a fee paid some time ago when Comcast first came to the community, as well as for Time Warner. The franchises that are both held now are feeless franchises. Mr. Blum asks Mr. Nesbit if that is also his understanding.

Mr. Nesbit responds that he is not sure that feeless is the appropriate word. He stated that what was really being talked about was the franchise fee to maintain the rights of way.

Chairman Blum adds that there are two steps to get to collecting the franchise fee, which he thinks is very important and knows it also important to the cable operators. The issue is what steps the applicant, First Mile in this instance, or anybody else down the line is going to have to go through and pay through to get to a franchise where the City will then be collecting franchise fees. Therefore, both operators hold franchises now that they did not pay a fee to get because they were renewals.

Mr. Nesbit adds that they did pay a fee at their first entry in to town, which was back in 1981.

Chairman Blum states that is his point and what is being talked about is changing the code so there is a level playing field for any new applicant. The playing field is going to be leveled, but the idea is to level the playing field according to actual out of pocket cost.

Mr. Blum's opinion is that the $50,000 that is in the current ordinance is a number pulled out of the air. He does not think it really pertains to the actual cost. He feels certain that if a large operator were to come in, it would cost more than $50,000 to go through the assessment process and all of the constituents would end up paying the excess.

Mr. Nesbit agrees with Chairman Blum about the $50,000. He stated that to look at a pure level playing field and how much Bright House paid in 1981, which the value at that time was probably less, but probably worth more today. He would guess that with a small operator, it probably would not take as long to determine the financial viability of the company and the customer service standards that they would provide and the three prongs that whether they are able to provide a service that met the needs and interest of the community.

At the same time, Mr. Nesbit thinks that it's probably those that due diligence needs to be done on small guys as well as big guys. You can't not do it. Mr. Nesbit also mentions that First Mile does serve some areas outside of Marion County, where Bright House is in competition with them. It's not so much the private easements as it is getting from one development to the other where they go out into and use the public rights of way to serve different subdivisions. Just to tell First Mile to not build out anymore, it would not be so much that they are building out in the public rights of way to serve their developments, but getting from one development to another is where they are using the public rights of way. Mr. Nesbit states that if First Mile is going to go out and use those public rights of way, they ought to have a franchise like everybody else.

Chairman Blum agrees with Mr. Nesbit and states that there has to be something that is defensible. Picking a number out of the air, whatever the number is, is not. To say it will be based on the cost that is incurred is fairly defensible. That makes a lot of sense.

Mr. Delph adds that there is a process in place for anybody that wants to come to provide cable service. They have the ability to do so under the cable ordinance. They can sit down and negotiate a franchise agreement. Mr. Delph is not sure he agrees with the premise that is the role of the City to pick an economic winner of one size over another based upon the economic power of an enter net into the market place. Mr. Delph hopes that the Board, going forward, would not try to bend the ordinance or the intent of the ordinance for the idea of propping up competition that is really not competition.

Chairman Blum's concern is that the ordinance is not bent each time.

Mr. Delph asks Chairman Blum if he agrees that is going on right now.

Chairman Blum responds that he does not agree. There is a present situation and there is a looming situation, which everybody believes is coming. They could not be more divergent. First Mile is possibly the smallest potential operator, a small company serving a small neighborhood, stacked against a large corporation that stands to serve the whole county. There has to be some way to treat them equitably and the current set up does not. It's not a matter of propping up competition. It's a matter of treating everyone the same. To say that it is cost based treats everyone the same. It will take more if a large operator comes in to do that assessment than it will for a small operator. 43 subs and 750,000 subs is a large difference. Mr. Blum adds that he does not know where to draw the line and asks, for example, if the line is drawn at 350,000 and one. He agrees with Mr. Delph that the City should not have to make that determination.

Chairman Blum thinks that having a cost based system makes it so they do not have to draw that line.

Mr. Delph states that Comcast is happy to engage in this process going forward in these discussions. He adds that the company has not been contacted in recent discussions on what is going on. They are happy to see what the Board's mindset is.

Mr. Lynch states that assuming that the Board follows and does due diligence on a new entrant to the same degree that would be appropriate and protect customers on a large entry, his guess is to do that appropriately, they would have outside financial review and professional consultants look at it as much as they have with the auditors. It would be rigorous and costly to do appropriately. In Mr. Lynch's business, in the pharmaceutical industry, it doesn't matter if you sell one tablet or a million tablets, you have the same due diligence for every customer. There is a certain cost to doing that. It seems to him that they have that same threshold that they need to meet with these 43 customers and he doesn't understand how they can do that with $5000. He doesn't know how they can generate that kind of a review because we can't even review the existing audit for basic cable rate for $5000.

At the last meeting, Mr. Lynch was interested in Mr. Maultra soliciting what a franchise fee audit or a rate audit would be for such a company and versus $5000, which is typical for the rate review. Mr. Maultra thinks it is usually around $12,000 for a franchise fee audit review. Those entities came back to Mr. Maultra and one said instead of it normally costing 10 or 11 thousand, they would charge $750. They certainly saw the size of the company having less paperwork. Mr. Maultra thinks due diligence can be done along the lines that Mr. Lynch is talking about but he feels that the paperwork is much less voluminous, therefore it will take less time.

Mr. Lynch asks if the Cable Agency will do that work.

Mr. Maultra responds that he will be looking for the third party entities that will be doing that work. That is where the out of pocket cost comes to actually do what is being talked about here as far as the application fee money. It takes less of the arbitrariness out of what Mr. Maultra would do. He can ask five or 7 different entities to take First Mile, 43 subs, do the financial, do the technical, and everything due diligence and give him their best price. He imagines that it would be considerably less than it would be for an SBC, Bright House, or a Comcast. He thinks this is the fairest approach. As Chairman Blum alluded to, there is an anomaly at one end of the spectrum, versus what is looming at the other end. They are so far apart that this needs to be in place as a foundation to deal with both entities separate from the whole principle of them needing a franchise agreement under the City code, which is the law of the land as it is.

Mr. Lynch adds that this has been talked about hypothetically for about 2 years now. There is a couple thousand dollars in franchise fees that have been lost in that time period. He wonders if it makes sense to get a firm quote from an appropriate firm to actually do the due diligence as if this were a new franchise that a major city was issuing to a competitor and get all that together and find out what it costs.

Chairman Blum asked if there would be even be dollar figures in the ordinance if it is said that it is cost based.

Ms. Herriman responded that from reading the document that was included in the Board packet, the company would pay $5,000 and then the City goes forward and starts doing it's due diligence. Once the money gets down to $500 or below, the City will then ask for more money depending on how much is needed.

Mr. Maultra responds that he is thinking about changing the original draft of the recodification. Instead of the incremental $5,000, getting down to $500, and then going back and asking for more, they are thinking about removing what they think their costs might be and having a third party vendor do these things. That vendor will do these things as far as the due diligence having to do with the application for franchise and looking at the technical and financial merits of that particular company. Mr. Maultra is trying to run this by the Board to see if this might be a better solution than what was initially written by counsel.

Ms. Herriman is somewhat concerned with putting in writing the fact that it would always be a third party vendor dealing with these costs. It seems like there are certain circumstances where the Agency will be doing work, counsel will be doing work, and it seems like there should be a way for the City to recoup those costs. By always saying there's going to be third party vendor, it seems the City is going to be expending resources and not being able to recoup that.

Mr. Maultra responds that one way to do that is to say out of pocket costs and the City's costs for recovery.

Chairman Blum suggests that something be put in the ordinance stating it is a minimum of $5,000 and the cost of recovery above that. He adds that was not a bad point.

One of Mr. Maultra's concerns is what it might cost counsel or the Agency and some of these other things might be somewhat subjective in terms of what the costs could be. It might be some of their best guestimates but then when you have to give an accounting via a third party vendor, it's simple and it's easily quantifiable. If the entity that is paying into the application fee asks how their money was spent, it can be shown because there would be an accounting via a third party vendor or consultant. Mr. Maultra is not trying to shirk his responsibility by not coming up with hitting the meter and calculating his time spent on First Mile or SBC, but he wonders how obtainable that is.

Mr. Nesbit states that the size of the entry may not be too material. First Mile has 43 customers but that is 43 more than TotaLink has and that was a pretty large review of their process. He assumes that those types of reviews need to be done on all levels.

Chairman Blum responds that Mr. Nesbit is right, but the question is do you just arbitrarily assign the value to that or do you say what the actual value is. To say maybe it will cost 5,000 and 1 dollars to do an assessment of First Mile. Maybe it will cost 5,000 and 1 dollars to do an assessment of SBC. All we have right now is an arbitrary number.

Mr. Nesbit states that it has always been somewhat arbitrary just like it was back in 81. He has no idea what was paid back in 1981. He just left the City of Memphis. He thinks it was $7,000 in 1977. That was mostly for copying costs that they expected to incur. He is not sure how those numbers were ever arrived at and certainly if it were a cost of permitting that was a direct cost. Whatever it costs the City makes a lot more sense than an arbitrary number or if it is a fee based to recover that money.

Mr. Nesbit also suggests having a minimum amount makes some sense. He adds that unless someone tells him for franchise renewals, he will have to file another application fee, he is ok with it.

Mr. Smashey is a cable customer of a multi-family dwelling unit. He states that First Mile is essentially a multi-family dwelling unit provider who has actually made a substantial mistake by entering into the rights of way. The ordinance was indeed $50,000 in 1980 for each cable operator. The Chief Legal Counselor for the President of the City-County Counsel was always the one here dealing with new franchise operators. It was his fee and he is no longer here.

Mr. Smashey asks Chairman Blum to declare, deem, and determine that this is an exceptional limited special case. First Mile is too small of an operator to bother with. He asks that they be declared as a special case because he does not believe that there will be any other new entries. Comcast has told the Board that they were not allowed on their property. He asks Chairman Blum to declare this as a limited exceptional case and it serves the public interest to grant them relief from the full fee.

Mr. Maultra agrees with most of what Mr. Smashey said. When he spoke to First Mile, they said they had no exclusivity. This is not an exclusive arrangement with Estridge for them to provide service without competition. This is not an MDU. It is a small sub division. Mr. Maultra understands that these are also dedicated streets so there won't be private streets, private property arguments. He does not know if Ms. Becker, the attorney for First Mile, can confirm that or not but with talking with First Mile executives about a year and a half ago when there was some discussion about Comcast being kept off the property.

Chairman Blum adds that he believes that very issue was brought up at the hearing.

Ms. Becker confirms that there is a non-exclusive license agreement with the developer. The developer does not have a business relationship or an affiliate relationship with First Mile. The facilities of First Mile within this particular neighborhood is within private easement.

Ms. Herriman asks if the streets are public, does that mean that the neighborhood cannot keep Comcast out.

Chairman Blum responds that is his recollection, but he will need to go back and review the record from the hearing.

Mr. Delph states that it would be helpful to Comcast if the Board would take the initiative to find the answer to that question definitively whether or not Comcast has access to that private easement to provide cable service.

Mr. Lynch states that he thinks it is necessary for the Board to ensure that Comcast has access to that private easement, otherwise they will be granting a non-competitive exclusive franchise.

Mr. Maultra suggests getting that in writing from First Mile and Mr. Delph agrees.

Chairman Blum states that the Board is obviously not ready to vote on anything right now because there is nothing put together yet.

What Chairman Blum would like to do is to get a sense of the Board to direct counsel to proceed down one path or the other. He has become persuaded on the cost based idea but he very much likes the idea of establishing a non refundable minimum at the front to cover some of the costs without having to get into an account for minute by minute. He supposes $5,000 is ok. That is what is written in the language now.

Chairman Blum will entertain a motion on the idea. His thought is that the motion is really to just direct counsel to prepare an amendment that encapsulates all of that. The Board will also address the exclusivity issue.

Mr. Maultra states that will take that up with First Mile.

Mr. Lynch adds that he thinks the Board should take that up and they should be crystal clear and have it in writing before they entertain any code modifications based on this business.

Mr. Maultra responds that he will find out this week if he can and he will distribute to the Board his findings. He stated that Mr. Lynch is absolutely right. These cannot be exclusive. The City does not engage in exclusive franchise agreement arrangements.

Mr. Lynch states there is confusion on his part on exactly what the private easement means. He asks if that means Comcast, or Bright House for that matter, can lay cable in that easement or not.

Mr. Maultra responds that there is a long history going back to this easement deal and he would have to go back and look into it. Mr. Maultra and Bob Borgmann sat down with DPW on this issue. The person he would like to get involved that was in on those discussions is Matt Sessany if he is still involved with DPW. It was interesting with how the easements were obtained and how they were interpreted. DPW doesn't necessarily agree with the premises of First Mile.

Chairman Blum recalls at the hearing that First Mile agreed with Mr. Roberts characterization and analysis.

Ms. Herriman asks Mr. Maultra and counsel to consider a way for the City to recoup any costs that it incurs in going through an application and not necessarily saying that all costs are going to be by third party vendors. She thinks there will be some time put in by City Officials.

Mr. Maultra notes out of pocket plus the City covering it's own cost internally.

Ms. Herriman states that she does not mean to change Mr. Maultra's role into a bookkeeper, but phone calls and certain number of hours shouldn't be too hard to track if he notices that they are getting to be extensive.

Chairman Blum asks the Board if there is any comfort in directing counsel down this path without the exclusivity question resolved.

Mr. Lynch responds that he is fully supportive of a cost based approach as long as we don't view the city's resources and employees' cost in the deal. He is very hesitant to support a $5,000 number.

Mr. Lynch uses for example absorbing the time the Board's time and the City's time at $10 an hour over the last 2 years, they would already be approaching $5,000.

Mr. Nesbit asks if there are franchise fees being escrowed now or if fees are being collected on First Mile.

Chairman Blum believes that they are not collecting franchise fees but they have expressed a willingness to pay the back fees once an agreement has been reached.

Chairman Blum states that counsel can do their work. If the exclusivity happens to not work out, the Board will just stop this process.

Mr. Bryant states there is no motion needed at this time.

The next item on the agenda is Public Comment.

Mr. Smashey comments on the advertising and solicitation of the cable and satellite companies. He added that the City can collect the franchise fees from the cable companies, but the cable companies should not collect those fees from their customers. He makes no claim about First Mile being exclusive. He states they are so small, they are insignificant. He adds that a Comcast household cannot look to Bright House, and a Bright House household cannot look to get Comcast. He stated that the Board has nothing to claim about exclusive franchises. These operators have been exclusive franchises and the Board has not taken action about it.

Andrea Price, President of Public Access of Indianapolis, commends the Board for trying to put some things in place that look at the interest to a market that might be forthcoming. Ms. Price is concerned that the Board still has not rectified the situation that the City code does not require a public access channel. She would like to see the Board restore the requirement to the City code that was eliminated with the franchise agreements that were signed with Comcast and Bright House. She asked if there has been any consideration to doing that.

Chairman Blum responds that the Board is looking to doing that with the franchise renewals.

Chairman Blum announces next months meeting on November 21st, 2005 and adjourns this meeting.

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Mr. Peter Blum, Chairman

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Mr. Kent Burrow, Member

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Ms. Elizabeth Herriman, Member

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Mr. Daniel Lynch, Member

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Mr. Robin Winston, Member

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Ms. Cristy Tirotta, Recording Secretary

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