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Trenton's Deal With Comcast is Up for Renegotiation. So Far, We Are Doing Nothing

Over the next several months, until September 2019, Trenton has a literal, once-in-a lifetime opportunity to renegotiate the underlying terms of its business relationship with the cable company that has been operating in the City for the last 25 years under a contract that was likely obsolete on the day it was signed.

So far, Trenton has done nothing to prepare for this imminent negotiation and so jeopardizes the available opportunity the City has to require the cable operator to provide – at its cost – public access channel space, equipment, and other consulting services that would allow the city of Trenton to provide its citizens with access to public information, city services, live or on-demand recordings of City public meetings, and other essential services already being provided to communities in Mercer County and elsewhere in the State. The new Gusciora Administration and City Council taking office in July has an early opportunity to make a deal for the City that has the possibility of transforming its information infrastructure.

Looking at the big picture of all of the issues facing Trenton during this transition period, providing it with a city-run cable channel or streaming site is not among the highest in priority.  But, any service that could help more people connect to its local government might in the long term boost civic engagement among its citizens, and perhaps aid in nudging up voter turnout from the pathetic 22% seen this week.

As I hope you will realize as you read on, this is a subject where a lot of resources are already available, with more that could be identified and made available to the city by upcoming negotiations – if the City decides to move quickly, that is.

Also known as Xfinity, or Kabletown, Comcast is along with Verizon FIOS one of two corporations providing Trentonians with an expanding menu of information services including Cable TV, Internet connectivity and Voice (traditional telephone).

These companies are actually more properly called “Franchisees.” Comcast – as all similar companies in the United States – operates under local municipal franchise agreements, renegotiated periodically, under the umbrella of Federal law and regulations. In New Jersey, Verizon FIOS operates under what is called a “system-wide franchise agreement,” which means that the State of New Jersey negotiates and manages the Agreement with Verizon that is in effect in communities statewide. The current system-wide franchise agreement took effect in 2014, and is in force until December 18, 2020.

This state-wide arrangement is due to the pre-existing historical status of Verizon (né NJ Bell) as the predominant (if not only) traditional Telephone company in the State. Verizon has long had a statewide footprint of equipment and services, and is subject to statewide regulation by the NJ Board of Public Utilities. More traditional, cable-only companies had, and continue to have, much smaller footprints in the state. Historically, firms such as Comcast, Cablevision and RCN to name three, expand their businesses and build their systems community by community, which is the rationale that Federal law uses to grant a good deal of regulatory authority to the level of local municipalities such as Trenton.

The franchise agreement with Comcast, however, is handled by the City of Trenton. The current deal was approved by City Council via Ordinance way back on September 16, 1994. It was a 15-year deal that was automatically renewed for another 10 years, in 2009. That means this current arrangement expires on or around September 15, 2019.

It is likely that there is not one single person working in City Hall today with knowledge of, let alone participation in, the 1994 process by which Comcast was granted its 25-year license. By itself, this puts Trenton at a very serious disadvantage when facing the imminent prospect of negotiating a new franchise agreement that may remain in force for perhaps another quarter-century.

We live in a telecommunications environment that has over the last 25 years utterly transformed our global culture and economy. One has only to reach into one’s pocket to find a tool granting instantaneous access to our global culture and economy to realize what’s happened over that 25 years. Companies such as Comcast create, manage, and profit from, these transformations, while communities such as Trenton seldom have ability to track these changes, let alone influence how they affect their citizens, for good or ill.

The City of Trenton has a narrow window of opportunity until September of next year to actually have a measurable influence on this process – at least as it involves Comcast’s franchise agreement. But that window is fast closing.

First, a little bit of background.

Under Federal Law, local communities are entitled to annual license fees payable by the franchisees authorized to do business in them, calculated as a percentage of the franchisees’ customer income on basic subscribed services as defined by federal law. In the City of Trenton’s Adopted FY 2018 Budget, the total amount of those license fees is itemized (on Page 22, Account #08-122) as $678,957.18. That figure is an actualized amount. The cable franchisees make a single annual payment to the City, in January, based on the income received from the previous calendar year from their customers.

The FY 2018 figure does not itemize payments by each company for that period. In FY 2017, the amount paid by Comcast to Trenton was $319,717.29, and from Verizon the amount was $355,559.89.

This is an income stream that is regular, guaranteed, and subject to likely nominal annual increases. Federal law (47 U.S.C. S542(i)) provides that the US government will neither regulate the amount of franchise fees paid by a cable company, nor the use of those funds by the local community, other than to place a ceiling on cable companies of 5% of gross billing to their customers for such purposes.

In New Jersey, the main regulatory structure is provided by N.J.S.A. 48:5A-2 et seq, within the broad umbrella of Public Utilities. In the preamble to this section of State code, Paragraph c, the explicitly-stated objects of such regulation include, in part, “(2) to encourage the optimum development of the educational and community-service potentials of the cable television medium.”

Clearly, although Federal law is deliberately silent on both the collection and use of local franchise fees as seen above, New Jersey statute has long intended the existence of local cable systems to serve the public interest. Therefore, it would fulfill the spirit of state regulation to use the entirety of the annual license fee to further the objectives as stated in Paragraph c.

However, in a financially distressed community such as Trenton, these funds have – not incorrectly – been considered as unrestricted revenue and applied against the city’s annual operating budgets. This has been consistently done with the knowledge and approval of the Local Government Services division of the state Department of Community Affairs, as indicated by the only correspondence on the matter (linked) released by the City in response to an Open Public Records request filed last year.

This background is likely more detailed than it needs to be at this point. However, the main takeaway to keep in mind is that, as far as building a capacity for the City of Trenton to provide an advanced platform for civic information and interaction, there does exist by federal law an annual income stream that has long been intended to be used – at least in part – to support and subsidize the annual operating costs of such a capacity.

To assist local communities in the preparation of a negotiating position for a community such as Trenton as it looks to renegotiate the master agreement with a cable franchisee such as Comcast, there are resources available. The State Board of Public Utilities publishes a “Guide to Franchise Renewal,” revised as of February 2012, to provide “municipalities and cable companies with the information needed to negotiate a successful franchise agreement.

The first half of this guide explains the first part of this process, begun in Trenton in September 2016 and now more than half over. As explained in this guide,

“Ascertainment is the term utilized to explain the fact-finding process described in the Federal Act. The purpose of ascertainment is to examine the past performance of the cable operator and identify the future cable-related needs of the community.

“The OCTV recommends that the municipality engage in the ascertainment phase of franchise renewal for the reasons outlined below. Although ascertainment is optional, it is necessary if the municipality wants to substantially modify the terms of the franchise or to deny the franchise renewal outright. The community’s needs may have changed since the initial franchise or the previous renewal. Moreover, the record that the municipality develops during ascertainment will help the municipality effectively complete negotiations with the cable operator. During negotiations, a municipality may require certain provisions in the municipal consent ordinance (”ordinance”) only if the requirements are based on a record developed during ascertainment. For example, a municipality may require public,educational and/or governmental (”PEG”) access channels and equipment, a system rebuild, expanded channel capacity, etc. (see “Franchise Proposal List”) only if such requests are based on the community’s cable-related needs established during the ascertainment phase and provided that costs are reasonable in light of these needs. There are additional items that the municipality can negotiate for during renewal. (See “Franchise Proposal List” for a full discussion of these items.)”– Emphasis added [ KM]

This is the key language to understanding this process. A municipality may legitimately require a franchisee, as part of its renewal negotiations, to provide at its cost dedicated cable channel space as well as production and distribution equipment to support what’s called the Public, Educational and/or Governmental (PEG) channel. But ONLY if requests are based on needs as determined during the ascertainment phase, going on now and already half-over without any city consideration or preparation for the upcoming negotiations.

The Guide does provide a great deal of information, checklists and bullet points to allow a community to construct and conduct this Ascertainment Phase. With Trenton behind the 8-ball by having allowed so much time to have passed without action, this is an invaluable guide.

Time is short. Data collected in the Ascertainment phase must be collated in an official “Municipal Report.” Per the Guide,

The municipal report must be issued no later than one year before the cable franchise is due to expire. If, for example, the municipality’s franchise expires on August 10, 2009, the report would be due on August 10, 2008. This permits the timely filing of the application for municipal consent.

It should be noted that one or both parties might request an extension of the due date in writing. Because state law mandates these time frames, the OCTV can neither grant nor deny extensions. However, if both parties have agreed to the extension and there is no harm to the public interest, the OCTV will permit the process to continue. The municipality should be aware that there has been no adjudication of the extent to which operating outside the franchise renewal time frames would affect the subsequent rights of the parties in administrative proceedings or in state or federal courts.

Trenton’s Municipal Report is technically due in September of this year, a highly unlikely deadline to meet. Therefore one of the first actions to be taken by a new Administration would be to request an extension to as late in 2019 as possible.

There are some additional resources that the City can draw upon during this process. The “Jersey Access Group” is a membership group of municipalities, school systems and higher education organizations describing itself as follows:

“ The Jersey Access Group (JAG) is a professional advisory organization that informs, educates, and recommends in the areas of technology, legislation, and regulation that shape and direct the use of multi-communication platforms for content creators and distributors on behalf of municipalities, educational institutions, and other public media facilities.”

Specifically, JAG provides assistance and leadership to PEG operators both current and potential in the following areas:

JAG actively analyzes and addresses emerging issues in areas such as:

Cable Franchising

  • Use and management of public rights-of-way
  • Franchise agreements and renewals
  • Regulation of rates and service standards
  • State franchising laws in lieu of local oversight

Operation of Public, Education and Government (PEG) Media Facilities

  • Maintain the integrity and professionalism
  • Program sharing platform
  • Funding and equipment donation sources
  • Station operating procedures, staffing, and volunteers
  • Educate, inform, and promote community involvement
  • Formation of new PEG stations
  • Problem solving strategies

Local Government Communications and Internet Policy

  • Social Media strategies
  • Consumer protection and net neutrality
  • National Broadband Plan, access, and funding
  • Public safety spectrum
  • Public rights-of-way management and policies
  • Service to anchor institutions like city halls, police and fire stations, schools, libraries, universities, hospitals, county services, courts, and community centers.
  • Emergency alert systems
  • Local government networks, wired, wireless, fiber and coaxial

New Technology Initiatives and Advancements

  • Developments in the telecommunication industry
  • Capital equipment purchases
  • Advocacy through local communications initiatives
  • Digital transition of PEG programming
  • Web 2.0 and beyond
  • Integration and best practices of communication platforms
  • Use of wireless networks
  • Converging technologies – impact on your laws

I reached out to JAG several months ago, to find out if Trenton had ever been part of this group or had otherwise been in communication. The answer was no on both counts. They are looking forward to assisting Trenton in any path forward.

One other area of resources. Federal, State, and City law mandate public participation in this process at every step. The City’s Ordinance covering the Cable Television Franchise, A317, provides for a Citizens Advisory Council (Section A317-11), to monitor the operation and service afforded by the company, and may make such recommendations as it deems appropriate to the company and the City Council.”

This Advisory Council has never been constituted by the City of Trenton, as confirmed to me by The City Clerk’s Office.

I hope this brief summary has provided an introduction to the opportunity before the City of Trenton. There is a very real prospect that – for the first time in a quarter-century – terms and conditions of a new contract with the city’s Franchisee Comcast – to establish a real municipal cablecast or streaming capability for the next several decades.

We have an opportunity to negotiate a deal requiring Comcast to provide channel space as well as production and distribution equipment to the City, at their cost, as well as training and installation assistance.

We have opportunity to designate at least some part of the dedicated annual license fees payable by Comcast, totaling almost $700,000 per year, to pay for operational costs.

But we can only do so within a formal license renewal process that began – with no action or even awareness in City Hall – 1½ years ago, and which is half over.

Given the timeframe available to us there are some alternative bargaining positions the City could take. Since traditional cable channel space is still very valuable, a fallback request to asking for the usual PEG channel as operated by many NJ communities might be instead to ask for equipment and services to allow Trenton to set up a digital streaming – live as well as on-demand – capability on the City Website, to allow streaming of public meetings and information in that medium. This could also be a good opportunity to overhaul the City’s website more generally, with the assistance of Comcast.

Three are several resources available to the City to assist it in conducting the franchise renewal process in a way that will help it to achieve at least some of these objectives by the time we are ready to renew a contract with Comcast in September 2019.

I hope the new Council and Administration will recognize the opportunity we have here, and take immediate steps to begin the process that should have begun over a year ago.

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