MARIN TELECOMMUNICATIONS AGENCY Regular Meeting MINUTES OF APRIL 10, 2002 Mill Valley City Hall Council Chamber Mill Valley, CA Directors present: Dan Hillmer, Chairman, City of Larkspur Tony Curtiss, Town of Ross Frank Egger, Town of Fairfax (5:30 PM) Steger Johnson, City of Belvedere Bill Keller, City of Sausalito Peter Kilkus, Town of San Anselmo (5:45 PM) Cyr Miller, City of San Rafael Clifford Waldeck, City of Mill Valley Staff present: Martin J. Nichols, Executive Director Gregory W. Stepanicich, Legal Counsel Suki Sennett, Clerk Agenda Item A: Call to Order/Roll Call Chairman Hillmer called the meeting to order at 5:30 PM. Agenda Item B: Approve minutes of March 13, 2002 meeting. M/S/P Miller/Keller, to approve the minutes of the meeting of March 13, 2002 as read. Agenda Item C: Executive Director s report Chairman Hillmer indicated that it will follow Item G to accommodate Ms. Willard s time constraints. Agenda Item D: Presentation by Sheila R. Willard, Senior Vice President of Government Affairs, Comcast Corporation Leslie Ann Fong of AT&T Broadband introduced Ms. Willard and Greg Cannon, Legal Counsel, AT&T Broadband to the Board. Mr. Cannon described the Comcast-AT&T merger structure and corporate finances on charts. Ms. Willard said they agreed to merge on December 19, 2001. Comcast is a company whose business is cable. The nature of cable is local. Comcast serves 8.4 million subscribers nationally. Comcast is family run by Ralph and his son, Brian Roberts. She circulated a short version of financial information of what has been given to Wall Street. Comcast assumes a $30 billion debt. Comcast provides a unique level of accountability and urged MTA to contact city managers of Comcast franchises to verify this. She said that although Comcast is primarily a cable provider it would continue to provide telephony and modem services now offered by AT&T. Director Keller asked if Comcast plans to have someone available locally to improve customer services. Director Curtiss asked about local presence/office in Marin. Fong
Page 2 responded that the Napa alternative is being re-considered. Willard said Comcast would comply with franchise agreement terms. Vice Chairman Waldeck asked if the AT&T- Comcast relationship is friendly. Director Egger stated that Comcast had paid AT&T $4500 per subscriber and expressed concern about the effect on rates and services. Mr. Curtiss expressed concern with regard to the debt level of $30 billion dollars and how much will have to be paid on the backs of ratepayers. In response to Mr.Egger s question, Ms.Willard said Comcast is not a union shop. Public comments Kingston Cole of San Rafael asked if Comcast would be following in the steps of Adelphia in southern California with regard to an Enron-like accounting debacle. Sandi Franco, Executive Vice President of Communications Workers of America, Local 9404 expressed concern regarding loss of local jobs, including call center closure. She also asked about AT&T s Michael Armstrong s role in the change of control. Tica Lyons of Mill Valley stated that consumers want re-investment into local area and to make it better for subscribers. She questioned the accountability to Comcast stockholders and noted that Comcast is a vocal opponent of open access to the Internet. Chairman Hillmer thanked Ms. Willard and said he appreciated her long trip from the east coast to make the presentation with the Board. Mr. Hillmer further stated that the Board is concerned with the change of control s effect on local subscribers. The interests of our subscribers are the Board s highest priority. He is looking forward to continuing franchise renewal negotiations with the same team. Telephony and cable modem access are also very important to residential customers and local businesses. He looks forward to the continuation of these services. The Chairman declared a short recess. Item G.:Direction to staff on scope of review in Comcast/AT&T change of control application. Authorization to staff to retain necessary consultants. Legal Counsel Stepanicich said the due diligence process requires additional information in three areas: technical performance review, financial analysis and payment of franchise fees. The 120-day review period was triggered March 8. Executive Director Nichols said if the Board wishes to complete these reviews, consultants would be retained to carry out the analyses. Because the time is available to MTA is short, he requests that the Board authorize staff to contract for these services. He will be asking AT&T to reimburse us for these costs as a consideration of our review of their application. Director Egger expressed concern about consultant costs and the Board having the opportunity for contract approval. Mr. Nichols said AT&T would be asked to reimburse
Page 3 costs and that the Board would have an opportunity to approve the contracts at the next meeting. M/S/P Johnson/Waldeck, authorizing staff to engage, subject to Board approval, consultants in three areas: financial analysis of the merger, franchise fee audit and technical review of the system. Item C: Executive Director s report Executive Director Nichols reported that discussions with the College of Marin are proceeding well and that a capital cost analysis of the proposed media center facility is being addressed by the College District s CFO, Michael Beebe. Item E: Receipt of INET Business Plan and appointment of Board subcommittee Consultant Kingston Cole of KC&A briefly reviewed the report regarding a business case for development of a fiber optic network serving Marin s major County, municipal and educational facilities as well as other members of the MIDAS networks, including nonprofits and libraries. The document provides a risk/benefit analysis as well as list of options regarding development of a fiber optic system for Marin. It seeks to answer a number of critical questions if the MTA is to proceed or seek another alternative. The major issue is does it make economic sense to build a network. He summarized the techniques and approaches used to obtain information. He then introduced Shaw Jennings of Endymion Engineering who identified construction issues and costs to build a fiber optic system. Based on their findings, KC&A proffers two primary recommendations to the MTA: issuance of a functional RFP that will allow all interested parties, whether they be Pacific Bell, ISP s, CATV over-builders or engineering-design firms through competitive bidding and the inclusion of private sector applications. Cole recommended the fair and equitable division of PEG monies for public access, educational and governmental programming and for the fiber optic network to be determined by the MTA Board. Keller absent 7:10 PM. Public comment Tica Lyons said she had twenty questions and comments and would submit them in writing, at the request of Chairman Hillmer. Bruce Bagnoli, Media Center Advisory Committee (MAC) member supports the INET. Management and reliability are major issues. He questions the business case on telephony. INET should not in compete with the private sector. MAC was not consulted. PEG resources should not contribute to shortfall. Nancy McCarthy. Marin Taxpayers Association recommended alternate sources of funding than PEG, including a municipal utility model. Gail Connolly, MAC member said using PEG money for the INET would negatively affect quality video production.
Page 4 Board comment Hillmer stated the Board has received the report and would receive written comments from the community. He has asked Directors Miller and Curtiss to join him pursuant to the Executive Directors recommendation that an ad hoc subcommittee be appointed to conduct an in-depth review of the Business Case Report with Mr. Cole and other interested parties before selecting which approach to follow in creating a shared widearea network. M/S/P Kilkus/Johnson, to create an ad hoc subcommittee to review the Business Case Report for the Development of Fiber Optic Network composed of Directors Curtiss and Miller and Chairman Hillmer. M/S/P Waldeck/Johnson to approve Contract Amendment No.1 with Kingston Cole to the review of the recommended business plan in the amount of $2000. M/S/P Waldeck/Johnson to approve Contract Amendment No.2 with Endymion for cost breakdown of INET engineering study in the amount of $1500. Item F: Authorize staff to file comments on the FCC s ruling on cable modem services. Legal Counsel Stepanicich said on March 15, 2002 the FCC released its long awaited ruling on how cable modem services should be classified under the Communications Act of 1934. as amended. Previously, the MTA filed comments in these proceedings urging the FCC to classify cable modem services as a cable service subject to local franchising regulation and the 5% franchise fee. Despite the ninth Circuit Court decision in the AT&T v Portland decision, AT&T has continued to collect and remit to the MTA franchise fees on cable modem services and the working franchise renewal agreement being negotiated with AT&T with provides for this continued payment. Unfortunately, the FCC s declaratory ruling concludes that cable modem services is an interstate information, rather than a cable service subject to local cable franchising requirements under the Communications Act. In a letter from Kent Leacock of AT&T to Martin Nichols dated March 29, 2002, AT&T takes the position that due to the ruling, it will cease collecting franchise fees on cable modem services, effective Match 15, 2002. The letter further states that AT&T will not seek any refunds of franchise fees pair prior to such date. The letter asserts that this action is required by the declaratory ruling. He disagrees with this assertion as this ruling does not a final order to determine but the ruling seeks additional comment on the regulatory impacts. He recommends two Board actions: (1) we request direction that a letter be sent to AT&T noting that the regulatory impacts of the declaratory ruling have no been finally determined by the FCC and that the MTA will not seek payment of any unpaid franchise fees on cable modem services in the event that the FCC in a final order concludes that such fees must be paid or the FCC s final declaratory ruling or final order is reversed by a final court decision. Also, the letter should state our position that cable modem services are subject to a separate, non-cable franchise fee under the MTA s and its member agencies authority to regulate the public right of way. (2) Request the Board authorize the filing of additional comments in
Page 5 the FCC s continued rulemaking proceeding. This on-going dispute is far from finally being resolved. Board discussion ensued. M/S/P Egger/Johnson to file comments on the FCC s ruling on cable modem services and to send letter to AT&T. Item H: Announce vacancies for Media Access Advisory Committee Nichols stated that state law requires appointments to be posted for three weeks before the Board can act. The affected members are Greg Brockbank, Jerry Cadagan, Gail Connolly and Trish Hibben whose terms expire in June 2002. All seek re-appointment. M/S/P Waldeck/Johnson to authorize posting of vacancies for four positions on the Media Access Advisory Committee. Item I: Open time for items not on the agenda Jerry McEowen of San Rafael advocated cable installation and maintenance in every classroom for safety reasons. Gail Connolly said Know Your Community on Channel 26 may be viewed every Wednesday. Tica Lyons urged the Board to seek alternative methods to using PEG funds to finance and construct the INET, such as the creation of a municipal utility. Item J: Adjournment Chairman Hillmer said this was Director Steger Johnson s last meeting. Mr. Johnson is retiring from office after serving two terms on the Belvedere City Counsel. He thanked Mr. Johnson on behalf of the Board. Mr. Johnson praised Mr. Hillmer for his leadership and thanked Mr. Nichols and Ms. Sennett for their excellent staff support. M/S/P Curtiss/Miller, adjourn the meeting The meeting was adjourned at 7:40 PM.