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May 27, 2014 Page 2 of 11 Special Order of Business 1. Comcast Presentation to the City Council Regarding the Cable Franchise Renewal. Report No. 14 -116. City Manager Lotter reported Cor Wilson, with CTV would be coming before the Council on June I O' with information regarding the cable franchise. He indicated Carley Warner with Comcast had a presentation for the Council this evening. Carley Warner, Comcast, introduced herself and thanked the Council for their time. She clarified Comcast's position and provided context on the proposed franchise renewal. She provided the Council with a handout and was proud of the $1 billion investment Comcast has made in the metro area. She discussed what this investment meant to residents of New Brighton and how each customer now had access to cutting edge services, including high -speed broadband. She explained the City's 1998 franchise was about to expire and noted the City would have to take formal action on the franchise before June 20"'. She reported the formal negotiation process had commenced. She indicated Comcast was not trying to kill local programming. It was her opinion, that the North Suburban Cable Commission was conditioning the cable franchise on unlawful monetary demands. She requested the Council understand that Comcast was already paying New Brighton 5% from cable fees or $500,000 per year. This fee was not in dispute. However, on top of these fees, the NSCC was requesting PEG fees in excess of $7.50 per month per customer, which were significantly higher than the PEG fees charged to other metro area customers. She then reviewed the PEG fees charged to other metro area residents. Ms. Warner reviewed the demands that local franchises could make based on FCC limitations stating that local franchises could not request PEG fees over and above the 5% franchise fee. However, local franchises could request reasonable and adequate PEG capital fees could be made. She reported that the formal negotiation process was established to encourage investment in cable systems and to protect the investment Comcast has made in the system. Refusing to provide support for the franchise because of the PEG fees was not a lawful reason for denial. She believed that the local network has not planned for the transition off of PEG fees. She explained that the $7.50 PEG fee would make Comcast uncompetitive in this market. She encouraged the local cable commission to consider the value added to its customers through the high PEG fees if they were to continue. She reported that the PEG fees in New Brighton were higher than anywhere else in the nation. She urged the Council to view the April meeting that was held in Shoreview, along with the formal document provided by Comcast counsel dated Friday, May 23, 2014. She explained there would be a long, expensive formal process if the City were to deny Comcast's franchise. Councilmember Burg thanked Ms. Warner for her presentation. She indicated she served on the Cable Commission previously. She asked if the PEG fee was simply a pass through fee, why the rate mattered. She questioned the market share that Comcast had in the metro area She inquired what percentage of customers had basic cable. Ms. Warner did not have the statistics on Comcast's market share in front of her this evening. She indicated high PEG fees were impacting competition, which led the FCC to set limits. Councilmember Burg asked what PEG fee amount Comcast was proposing. Ms. Warner stated the formal proposal was $0.44 for PEG fees. Councilmember Burg questioned how local franchises would continue to operate such a drastic reduction in PEG fees. Ms. Warner understood that a major change was being proposed. She reviewed how other municipalities were making this work. She indicated franchise fees were now to be used for PEG access operations. She indicated the shift will not kill PEG programming as other municipalities were making this change work. Councilmember Jacobsen inquired if franchise fees were for right -of - -way access. Ms. Warner stated this was correct that Comcast paid franchise fees for rent on City right -of -ways. She commented that the federal government has limited PEG access fees, while still requiring Comcast to provide channels. It was now up to local franchises to use franchise fees to cover their programming. PEG fees were not set at an amount that would reasonably cover capital costs. Councilmember Burg asked if Comcast would continue to provide scholarships to local students. Ms. Warner reported the local cable commission would now have to draw from franchise fees to cover any future Special Order of Business 1. ComcastPresentation to the City Council Regardingthe Cable Franchise Renewal. Repod No. 14 -116.