HomeMy WebLinkAboutOrdinance - 8554-1984 - An Ord. Of City Of LBK, To Est. A Proced. For Granting Of Franchises For Cable - 02/06/1984/ ✓ /
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ORDINANCE NO. 8554
AN ORDINANCE or THE CITY or LUBBOCK RELATING, TO THE ESTABLISHMENT or
A PROCEDURE FOR GRANTING OF FRANCHISES FOR CABLE COMMUNICATION SYSTEMS AND
THE REGULATION or SUCH SYSTEMS AND AMENDING THE LUBBOCK CODE or ORDINANCES;
PROVIDING A SAVINGS CLAUSE; PROVIDING A PENALTY; AND PROVIDING FOR PUBLICA-
TION.
BE IT ORDAINED BY THE CITY COUNCIL or THE CITY or LUBBOCK:
SECTION 1 -PURPOSE
The City Council has determined it is in the best interest of and
consistent with the convenience and necessity of the City of Lubbock to
grant franchises to companies desiring to provide cable communications
services within the confines of the City of Lubbock and on the terms and
conditions hereinafter set forth, and as may be further described in each
franchise agreement.
The City Council has identified the purpose of this Ordinance to be as
follows:
A. Ta provide a procedure for the granting of nonexclusive fran-
chises for providing cable communications in the City of Lubbock.
B. To regulate the erection, construction, reconstruction, installa-
tion, operation, maintenance, dismantling, testing, repair and use of cable
communications systems in, upon, along, across, above, over or under or in
any manner connected with the streets, public ways or public places within
the jurisdiction of the City of Lubbock as now or in the future may exist.
C. To provide for the payment of certain franchise fees and other
valuable considerations to the City which, among other purposes, may be
used to regulate the construction and operation, use and development of
such a system within the City.
D. To provide conditions under which such franchised system or
systems will serve present and future needs of government, public insti-
tutions, commercial enterprises, public and private organizations, and the
citizens and general public of the City; and
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E. To provide remedies and prescribe penalties and liquidated
damages for any violation of this Ordinance and the terms and conditions of
franchises granted pursuant thereto.
SECTION 2 -DEFINITIONS
For the purpose of this Ordinance the following terms, phrases, words
and their derivations shall have the meaning given herein. When not
inconsistent with the context, words used in the present tense include the
future, words in the plural number include the singular number, and words
in the singular number include the plural number, and the use of any gender
shall be applicable to all genders whenever the sense requires. The words
"shall" and "will" are mandatory and the word "may" is permissive. Words
not defined shall be given their common and ordinary meaning.
A. "Access channel" shall mean a single channel dedicated in whole
or in part for local programming which is not originated by a Company.
B. "Basic Service" shall mean any or all of the different combina-
tions of basic program services as described in a Company's proposal
including the delivery of broadcast signals, satellite signals, local
origination and access signals, covered by the regular monthly charges paid
by subscribers, excluding the optional premium services for which separate
charges are made.
C. "Cablecasting" is programming carried on a cable system, exclu-
sive of broadcast signals, whether originated by the cable operator or any
other party.
D. "Cable Communications System," "Cable Television System" or"CATV
System," shall mean a system of antennas, cables, wires, lines, towers,
waveguides, or other conductors, converters, equipment or facilities,
designed and constructed for the purpose of producing, receiving, trans-
mitting, amplifying and distributing, audio, video and other forms of
electronic or electrical signals, located in the City. Said definition
shall not include any such facility that serves or will serve only sub-
scribers in one or more multiple unit dwellings under common ownership,
control or management, and does not use City rights-of-way.
E. "City" is the City of Lubbock, Texas in its present incorporated
form or as it may be changed by annexation.
F. "Construction." The terms "completion of construction," "com-
plete system construction," "satisfactorily complete and fully activate"
shall mean that strand has been put up and all necessary cable (including
trunk and feeder cable) has been lashed--or, for underground construction,
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that all cable has been laid and trenches refilled all road services
restored and, except as prevented by weather conditions or delayed because
of seasons, landscaping restored; that all amplifier housings and modules
have been installed (including modules for return path signals); that power
supplies have been installed and all bonding and grounding has been
completed; that all necessary connectors, splitters and taps have been
installed; that construction of the headends or hubs have been completed
and all necessary processing equipment has been installed; and that any and
all other construction necessary for the system to be ready to deliver
cable service to subscribers has been completed. Proof of performance
tests shall have been conducted on each otherwise completed segment of the
cable system before direct marketing of that segment begins. It is
expected that segments of less than the entire system will be activated and
proofed when completed. Construction of any segment or of the entire
system will not be considered complete until proof of performance tests
have been conducted on such segment (or in the case of the entire system,
on all segments of the cable system) and any problems found during testing
have been corrected. The term "completion of construction does not include
1 marketing and installation of subscriber service.
G. "Council" shall mean the governing body of the City of Lubbock.
H. "Dedicate" shall mean to make available channel space or equip-
ment for exclusive use of the designated user, subject to the authority of
the City Council to authorize reassignments of channels.
I. "Grantee" or "company" is the party or parties to which a
franchise under this Ordinance is granted by the Council, and its or their
lawful successors and assigns.
J. "Gross Revenues" shall mean all cash, credits, property of any
kind or nature, or other consideration received directly or indirectly by a
Grantee, its affiliates, subsidiaries, parent and any person in which
Grantee has a financial interest, or from any source whatsoever, arising
from or attributable to the sale or exchange of cable communications
services by Grantee within the City or in any way derived from the opera-
tion of its system, including, but not limited to, basic service, monthly
fees, optional service or pay cable fees, installation and reconnection
fees, leased channel fees, converter rentals or sales, studio rental, and
advertising revenues. These gross revenues shall not be reduced for any
purposes other than provided herein, and shall be the basis for computing
the fee imposed pursuant to Section 14. These gross revenues shall not
include any taxes on services furnished by Grantee imposed upon any
subscriber or user by the State, City or other governmental unit and
collected by Grantee on behalf of said governmental unit, converter
deposits, or refunds to subscribers by the Grantee.
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K. "Initial activation of service," or "initially providing cable
communication service" shall mean with respect to a particular segment,
group of segments or the entire cable system, as the case may be, that, all
proposed services and system capabilities as stated in the Proposal are
available and/or in place, construction has been completed (see definition
of construction) and the completed segment or segments in question or the
entire cable system, as the case may be, has been activated.
L. "local Origination Programming" shall mean programming locally
produced by the Company.
M. "Proposal" or "Application" refers to a formal proposal by a
qualified cable company to provide cable communications services to
residents, businesses, industries, and institutions in the City of Lubbock.
N. "Subscriber" is a recipient of cable communications services.
O. "Two-way communications" means the transmission of telecommunica-
tions signals from subscriber locations or other points throughout the
system back to the system's control center es well as transmission of
signals from the control center to subscriber locations.
P. "User" means a party utilizing a cable communications system
channel for purposes of production or transmission of materiel to sub-
scribers, as contrasted with receipt in a subscriber capacity.
Q. The terms "will be available," "will be equipped," "will use,"
"will be designed," "will perform," "will be utilized," "will permit,"
"will allow," "will be act,iveted," "will be initially connected," "will be
capable," "will provide," "will include," "will employ," "will be estab-
lished," "will be able," "will be implemented," "will be delivered," "will
utilize," and other similar uses of terms in a company's Proposal denoting
the activation of cable service or the delivery of equipment, facilities,
or services, shall be interpreted to mean delivery or accomplishment at a
date no later than the initial activation of service (see definition)
unless otherwise expressly and clearly stated or qualified in the company's
Proposal to mean a more specific or different time.
SECTION 3 -APPLICATIONS FOR FRANCHISE
A. Content. Each application for a franchise to construct, operate
or maintain any cable communications system in this City shall be filed
with the City Secretary end shell be on forms prescribed by the City. Said
forms will require, but not be limited to, the following information:
(1) the name, address, end telephone number of the applicant;
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(2) a detailed statement of the corporate or business entity
organization of the applicant, including but no limited to,
the following end to whatever extent required by the City:
(a) the names, residence and business addresses of all
officers, directors, and associates of the applicant,
(b) the names, residence and business addresses of all
officers, persons and entities having any share of the
ownership of the applicant and the respective ownership
share of each such person or entity,
(c) the names and addresses of any parent or subsidiary of
the applicant, namely, any other business entity owning
or controlling applicant in whole or in part or owned
or controlled in whole or in part by the applicant, and
a statement describing the nature of any such parent or
subsidiary business entity, including but not limited
to cable communications systems owned or controlled by
the applicant, its parent and subsidiary and the areas
served thereby,
(d) a detailed description of all previous experience of
the applicant in providing cable television system
service and in related or similar fields,
(e) a detailed and complete financial statement of the
applicant, certified by an independent certified public
accountant, for the fiscal year next preceding the date
of the application hereunder, or a letter or other
acceptable evidence in writing from a recognized
lending institution or funding source, addressed to
both the applicant end the Council, setting forth the
basis for a study performed by such lending institution
or funding source, and a clear statement of its intent
as a lending institution or funding source to provide
whatever capital shall be required by the applicant to
construct and operate the proposed system in the City,
or a statement from an independent certified public
accountant, certifying that the applicant has available
sufficient free, net and uncommitted cash resources to
construct and operate the proposed system in this City,
and
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(f) a detailed financial plan (pro forms) describing for
each year of the franchise, projected number of
subscribers, rates, all revenues, operating expenses,
capital expenditures, depreciation schedules, income
statements and a sources and uses of funds statement.
All information is to be presented in the format
required by the City,
(g) a statement identifying, by place and date, any other
cable communications system franchises awarded to the
applicant, its parent or subsidiary; the status of said
franchises with respect to completion thereof; the
total cost of completion of such franchised systems;
and the amount of applicant's and its parent's or
subsidiary's resources committed to the completion
thereof;
(3) a detailed description of the proposed plan of operation of
the applicant which shall include, but not be limited to,
the following:
(a) a detailed map indicating all areas proposed to be
served, and a proposed time schedule for the installa-
tion of all equipment necessary to become operational
throughout the entire area to be served,
(b) a statement or schedule setting forth all proposed
classifications of rates and charges to be made against
subscribers and all rates and charges as to each of
said classifications, including installation charges
and service charges,
(c) a detailed, informative, and referenced statement
describing the actual equipment and operational
standards proposed by the applicant and that such
standards of operations are in compliance with or
exceed those contained in Title 47, Subpart K (Section
76.601 et seq.), of the Rules and Regulations of the
federal Communications Commission,
(d) a copy of the form of any agreement, undertaking, or
other instrument proposed to be entered into between
the applicant and any subscriber, and
(e) a detailed statement setting forth in its entirety any
and all agreements and undertakings, whether formal or
informal, written, oral, or implied, existing or
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proposed to exist between the applicant and any person,
firm, or corporation which materially relate or pertain
to or depend upon the application and the granting of
the franchise.
(4) A copy of any agreement covering the franchise area, if
existing between the applicant and any municipal utility or
public utility subject to regulation by the Texas Public
Utilities Commission providing for the use of any facilities
of the public utility including but not limited to poles,
lines, or conduits.
(5) Any other details, statements, information or references
pertinent to the subject matter of such application which
shall be required or requested by the Council, or by any
other provision of law.
SECTION 4 -APPLICATION FEES
A. Amount. Notwithstanding any other requirement of this Ordinance,
each applicant must furnish with its proposal a non-refundable filing fee
in the amount of Six Thousand Dollars by certified or cashier's check made
payable to City of Lubbock. No proposal for a franchise shall be consi-
dered without receipt of said check.
B. Deposit and Use. All checks received will be deposited to an
account of the City and will serve to recover all expenses incurred by the
City in the preparation and granting of a franchise, the execution of a
franchise and regulation of franchise pursuant to this Ordinance. Said
expenses shall include, but not be limited to, any and all administrative,
engineering, publication, or legal costs, and consultant's expenses,
incurred in connection with the processing, evaluation and preparation of
documents relating to the franchise.
C. Additional fee. In the event that actual expenses exceed the
total amount of filing fees collected from the applicants, an applicant
awarded a franchise shall pay to the City all actual expenses and costs
within sixty days after the City has provided written itemization of said
expenses.
SECTION 5 -SELECTION OF GRANTEE
A. Solicitation of Proposals. The Council may, by advertisement or
any other means, solicit and call for applications for cable communication
system franchises, and may determine and fix any date upon or after which
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the same shall be received by the City, or the date before which the same
must be received, or the date after which the same shall not be received,
and may make any other determinations and specify any other times, terms,
conditions, or limitations respecting the soliciting, calling for, making
and receiving of such applications. The terms and conditions for applica-
tion shall be described in a document called "Request for Proposals."
B. Referral to City Manager. Upon receipt of any application for
franchise, the Council shall refer the same to the City Manager who shall
prepare or cause to be prepared a report, including recommendations
respecting such application, and cause the same to be completed and filed
with the Council.
C. Public Comment. If the Council shall determine to further
consider the application, it shall pass a resolution setting a public
hearing for the consideration of competing applications; fixing and setting
forth a day, hour, and place certain when and where any persons having any
interest therein or objections may file written comments and appear before
the Council and be heard, and directing the City Secretary to publish said
resolution at least once within ten days of the passage thereof in a
newspaper of general circulation within the City.
D. Consideration. In making any determination hereunder as to any
application for a new franchise, or renewal thereof, the Council shall give
due consideration to the quality of the service proposed, rates to sub-
scriber, income to the City, experience, character, background, and
financial responsibility of any applicant, and its management and owners,
(including reasonable proof that the applicant has the resources committed
to the full construction and delivery of all proposal commitments) techni-
cal and performance quality of equipment, willingness and ability to meet
construction and physical requirements, to meet all requirements set forth
in this Ordinance, and to abide by all conditions, franchise limitations
and requirements, and any other considerations deemed pertinent by the
Council for safeguarding the interests of the City and the public.
E. Determination. At the time set for the hearing, or at any
adjournment thereof, the Council shall proceed to hear all protests.
Thereafter, the Council shall make one of the following determinations:
(1) that such application be denied, which determination shall
be final and conclusive; or
(2) that such franchise be granted and the terms and conditions
thereof.
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f. Rejection. The Council may reject any and all applications from
whatever source and whenever received and may, if it so desires, request
new or additional proposals.
G. Additional Information. The Council may at any time demand and
applicants shall provide such supplementary, additional or other informa-
tion as the Council may deem reasonably necessary to determine whether the
requested franchise should be granted.
H. Infraction. Any person submitting a proposal for a cable
communications system in response to the City's Request for Proposals shall
provide all information required by this Ordinance and all other informa-
tion requested by City's Request for Proposals or otherwise required by the
City. Each proposal shall be responsive to the questions soliciting the.
information, and shall completely, accurately and materially supply all of
the information so solicited. Any misrepresentation, failure, neglect or
refusal to provide any of such information may, at the option of the City,
render a proposal invalid. The requested information must be complete and
verified as true by the applicant.
I. Property of City. All proposals received by the City from an
applicant shall become the sole property of the City.
J. Rejection and Waiver. The City reserves the right to waive any
and all formalities and accept proposals containing minor variances where
the best interest of the City may be served.
K. Applicant Responsibility. Before submitting a proposal, each
applicant shall be solely responsible for and must: (1) examine this
Ordinance and the Request for Proposal documents thoroughly; (2) be
familiar with local conditions that may in any manner affect performance
under the franchise, including, but in no event limited to, community and
institutional telecommunication needs, relevant demographics, topographies,
pole attachment policies of appropriate utility authorities, under-
grounding,and subscriber desires; (3) be familiar with federal, state and
local laws, ordinances, rules and regulations affecting performance under
the franchise; and (4) carefully correlate all observations with the
requirements of this Ordinance and the Request for Proposals documents.
L. Investigations. The City may make such investigations as it
deems necessary to determine the ability of the applicant to perform under
the franchise, and the applicant shall furnish to the City all such
information and data for this purpose as the City may request. The City
reserves the right to reject any proposal if the evidence submitted by, or
investigation of such applicant fails to satisfy the City that such
applicant is properly qualified to carry out the obligations of the
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franchise agreement, comply with the provisions of this Ordinance, or to
satisfactorily construct and operate the system. Conditional proposals
shall not be accepted.
M. Awards Based on Merit. It is the intention of the City to award
any cable communications franchise on the basis of merit of proposals. To
this end any communications with the City Council by those wishing to
submit proposals for a cable communications franchise should be limited to
public sessions. Requests for information should be directed to the Office
of the City Manager. Proposals will not be evaluated on the basis of
ownership by individuals, institutions and community agencies in corpora-
tions submitting cable communications franchise proposals.
N. Council Decisions Final. Any decision of the City Council
concerning selection of a franchisee pursuant to this Ordinance shall be
final.
SECTION 6 -GRANT OF AUTHORITY
A. Successful applicants chosen by the City Council will be granted
the right and privilege to construct, erect, operate and maintain, in,
upon, along, across, above, over and under the streets, highways, alleys,
public ways and public places now laid out or dedicated and all extensions
thereof, and additions thereto, in the City, poles, wires, cables, under-
ground conduits, manholes, and other cable conductors end fixtures neces-
sary for the maintenance and operation in the City of Lubbock of a cable
communications system, to be used for the sale and distribution of cable
services to the residents of the City. Provided, however, Grantee shall
utilize to the extent practical the communication zones of the existing
utility pole installations through agreement with the City of Lubbock and
other utility companies, provided a reasonable and practical agreement can
be reached. In no event shall a Grantee have the right or privilege to
erect poles in the corporate limits of the City of Lubbock without prior
express consent of the City Council. Any poles erected by a Grantee shall
be of sound material, reasonably straight, and shall be so set that they
will not interfere with the flow of water in any gutter or drain and so
that they will not interfere with ordinary travel upon any street, alley,
highway, bridge, public way or other public place. The location and route
of all poles, studs, guys, anchors, conduits, cables or other electronic
signal equipment to be placed or constructed by the Grantee in the City of
Lubbock shall be approved in writing, in advance, by the City Engineer of
the City and shall conform to the National Electrical Safety Code. The
City hereby retains all of its power and control for regulation of its
streets, highways, alleys, bridges, public ways and other public places
granted or which may hereafter be granted to it under the Constitution of
the State of Texas, the Home Rules Statutes, and its Charter.
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City assumes no responsibility for securing any franchises, rights of
way, permits or easements which the City does not already own, making and
maintaining of such attachments, or permission to make such attachments to
the poles of others, but Grantee assumes the duty and responsibility of
securing the same. The permission granted herein is likewise subject to
laws, ordinances and regulations now in force or which may hereafter be
enacted or promulgated by any governmental body or agency having juris-
diction. City shall in no way be responsible for the construction,
operation, maintenance, performance, or any other activity of a Grantee or
its system or any pert thereof.
A Grantee must agree to take any necessary precautions, by the
installation of protective equipment or otherwise, to protect all persons
and property against injury or damage that may result from Grantee's
installations or operations. If, in the City's opinion, a Grantee has not
taken such necessary precautions, within a reasonable time after City has
so notified Grantee, City shall have the right by written notice to Grantee
to terminate the franchise as hereafter provided in Section 26. However,
City shell not be considered in any way responsible for the adequacy or
inadequacy of such precautions of a Grantee.
SECTION 7 -DURATION Of FRANCHISE; RENEWAL
A. The duration of the rights, privileges and authorizations granted
in a franchise agreement shall be fifteen (15) years from the date a
franchise is awarded. A franchise may be renewed by the City upon appli-
cation of the Company pursuant to the procedure established in Subsection B
of this section and in accordance with the then applicable law.
B. Renewal
(1) Upon receipt of Grantee's notice of intent to renew the
franchise, the City shell give public notice end proceed to
determine whether the Grantee has complied with the condi-
tions of, end performed its obligations under the franchise
agreement to the satisfaction of the City and its subscri-
bers. In making this determination, the City shall consider
technical developments and performance of the system,
programming, other services offered, cost of service, and
any other particular requirements set forth in the ordi-
nance; also, the City shall consider the Grantee's proposal
and its annual reports made to the City end the FCC;
industry performance end current state-of-the-art of
broadband communications on a national basis shell also be
considered. Provision shall be made for public comment.
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Grantee shall pay any reasonable costs incurred by the City
in analyzing and evaluating Grantee's performance and its
proposal for renewal of the franchise.
(2) If, based upon Grantee's performance during its franchise
term, the Grantee's new proposal, and report thereon, and
the public hearings, Council finds a renewal of the fran-
chise with Grantee within the public interest, Council may
enter into a renewal of the franchise with Grantee for an
additional franchise period under such terms and conditions
as the City may determine.
(3) In the event the Grantee is determined by the City to have
performed unsatisfactorily, or Grantee's proposal for
renewal is not satisfactory or in keeping with the state-
of-the-art, new applicants may be sought and evaluated and
new franchise awards may be made by the City.
SECTION 8 -FRANCHISE TERRITORY
A franchise is for the present territorial limits of the City of
Lubbock and for any area henceforth annexed thereto during the franchise
term.
SECTION 9 -SERVICE AVAILABILITY AND RECORD REQUEST
The Grantee shall provide cable communication services throughout the
entire franchise area pursuant to the provisions of this ordinance and
franchise agreement and shall keep a current file of all complaints
received by the Grantee for at least the three (3) most recent years. This
record shall be maintained during the entire life of the franchise and be
available for public inspection at the local office of the Grantee during
regular office hours.
SECTION 10 -CATV SYSTEM CONSTRUCTION
A. Construction Map and Schedule
(1) Map and Plan
Grantee shall submit a construction plan or reconstruction plan which
shall be incorporated by reference and made a part of the franchise
agreement.
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The plan shall consist of a map of the entire franchise area and shall
clearly delineate the following:
(a) The areas within the franchise area where the cable tele-
vision system will be initially available to subscribers
including a schedule of construction for each year of
construction, or reconstruction.
(b) Areas within the franchise area where extension of the cable
communication system cannot reasonably be done due to lack
of present or planned development or other similar reasons,
with the areas and the reasons for not serving them clearly
identified on the map.
(1) Early Construction and Extension
Nothing in this section shall prevent the Grantee from constructing or
reconstructing the system earlier than planned. However, any delay in the
system construction or reconstruction beyond the times specified in the
plan report timetable shall require application to and consent by the
Council.
(2) Delay in Construction Timetable
Any delay beyond the terms of the construction or reconstruction
timetable, unless approved by the Council, will be considered a violation
of this ordinance for which the provisions of either Sections 26 or 27
shall apply, as determined by the Council.
(3) Commencement of Construction
Construction in accordance with the plan submitted by Grantee shall
commence as soon after the grant and acceptance of a franchise as is
reasonably possible. failure to proceed expeditiously, shall be grounds
for revocation of a franchise. failure to proceed expeditiously shall be
presumed in the event construction is not commenced within twelve (12)
months of the grant and acceptance of a franchise.
(4) Underground and Overhead Construction
In all sections of the City where all the cables, wires, or other like
facilities of public utilities are placed underground, the Grantee shall
place its cables, wires or other like facilities underground to the maximum
extent that the existing technology reasonably permits the Grantee to do
so. If at any time the City determines that existing wires, cable or other
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like facilities of public utilities anywhere in the City shall be changed
from an overhead to an underground installation, the Grantee shall also, at
Grantee's sole expense, convert its system to en underground installation.
In areas of the City where electrical telephone systems are installed
on poles above ground, the Grantee shell have the option of installing the
system in like manner above or underground.
(5) Line Extension Policy
The Cable System shall be one that, upon request for service, is
capable of serving every residence now or in the future located within the
serviceable areas defined on the map referenced in Section 10A(1)(a)(b),
within the reasonable time after said requests are received by the Grantee.
Service shall be made available, without an additional charge for plan
extensions (other than the customer drop charges hereinafter described) to
all residences now or hereafter located within the above described areas.
The Cable System shall be one that, upon request for service by
residents within such an area, is capable of serving the residence in all
areas hereafter desiring service or annexed to the City where the nunber of
residences passed by the cable plant necessary to serve such residences
(i.e. the density) is at least forty (40) occupied residences per mile of
cable plant. In addition, if residents of an area hereafter desiring
service request the services of the Cable System and the cable plant
necessary to serve such area will pass fewer than forty (40) occupied
residences per mile of the cable plant, the Grantee shall construct and
install such cable plant, within a reasonable time after the requests for
services are received by the Grantee, but may, as a condition of doing so,
require that the residents requesting such services pay a proportionate
share of the construction cost. Calculation of e proportionate share is
illustrated by the following example: If the requested extension will pass
thirty (JO) occupied residences per mile of cable plant, the Grantee's
share will equal thirty-fortieths or three-fourths of the construction
costs and the residents requesting service shell share equally ten-for-
tieths or one-fourth of the construction cost. The Grantee may require the
deposit of the subscriber's share before commencement of construction or
offer to subscriber e time payment contract through which payments can be
made on regular bill for cable service. Fore period of two (2) years
after the completion of construction of any such extension, each new cable
subscriber along such extension shall pay en adjusted proportionate share
of the construction cost, end all cable subscribers who have previously
paid a share and the Grantee shell receive prorated refunds from the amount
received from a new cable subscriber. Calculation of an adjusted propor-
tionate share end prorated refund is illustrated by the following example:
If, for example, ten (10) residents along the extension initially obtained
service and shared equally a one-fourth portion of the construction costs,
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and at a later date, an additional resident along such extension requested
service, he would be required to pay one-eleventh of the construction cost
in order to receive service and his payment would be divided three-fourths
to the Grantee and one-fortieth to each of the original subscribers. The
Grantee, at its sole option, may waive collection of adjusted proportionate
shares from new subscribers but, if it does so, it shall, nevertheless,
reimburse subscribers who have previously paid a proportionate share of
adjusted proportionate share of construction costs an amount equal to the
prorated refund they otherwise would have received. The Grantee shall be
responsible for maintaining appropriate records and administering all
refunds authorized in this section.
(6) New Development Undergrounding
In cases of new construction or property development where utilities
are to be placed underground, the developer/property owner shall give
Grantee at least ten (10) days notice of such construction or development,
and of the particular date on which open trenching will be available for
Grantee's installation of conduit, and/or cable. Grantee shall also
provide specifications as needed for trenching.
Costs of trenching and easements required to bring service to the
development shall be born by the developer/property owner; except that if
Grantee fails to install its conduit, and/or cable within five (5) working
days of the date the trenches are available, as designated in the notice
given by the developer or property owner, then should the trenches be
closed after the five (5) day period, the cost of new trenching is to be
borne by Grantee. Except for the notice of the particular date on which
trenching will be available to Grantee, any notice provided to Grantee by
City of a preliminary plat request shall satisfy the requirement of
reasonable notice if sent to the local general manager or system engineer
of Grantee prior to approval of the preliminary plat request.
(7) Aerial Drops Exceeding 150 Feet
All areas required to be aerial construction shall require all aerial
drop installation of not more than 150 feet at the cost of Grantee.
Connections in excess of 150 feet shall be at the expense of a subscriber
at Grantee's actual cost.
(8) Underground Drops Exceeding 150 Feet
All areas required to be underground construction shall require all
underground drop installation of not more than 150 feet at the cost of
Grantee. Connections in excess of 150 feet shall be the expense of a
subscriber at Grantee's actual cost.
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SECTION 11 -CONSTRUCTION AND TECHNICAL STANDARDS
A. Compliance with Construction and Technical Standards
Grantee shall construct, install, operate and maintain its system in a
manner consistent with all laws, ordinances, construction standards,
governmental requirements, FCC technical standards, and detailed standards
submitted by Grantee as part of its application, which standards are
incorporated by reference in the franchise agreement. In addition, Grantee
shall provide the City, upon request, with a written report of the results
of Grantee's annual proof of performance tests conducted pursuant to FCC
standards and requirements. If City, in its opinion has determined company
has not met the technical standards, it may schedule a public hearing to
review the results of Grantee's performance tests; and public hearing to be
conducted after the City has provided 14 days written notice of the same to
Grantee and published notice of said public hearing in a local newspaper at
least once. Grantee shall pay the costs incurred by the City for any
technical assistance deemed necessary by the City for obtaining independent
verification of technical compliance with all standards.
B. Additional Specifications
Construction, installation and maintenance of the cable communications
system shall be performed in an orderly and workmanlike manner. All cables
and wires shall be installed, where possible, parallel with and in the same
manner as electric and telephone lines. Multiple cable configurations
shall be arranged in parallel and bundled with due respect for engineering
considerations. Undergound installations shall be in conformance with
applicable codes.
Grantee shall at all times comply with:
(1) National Electrical Safety Code (National Bureau of Stan-
dards);
(2) National Electrical Code (National Bureau of fire Under-
writers)
(3) Bell System Code of Pole Line Construction; and
(4) Applicable FCC or other federal, state and local ordinances
and regulations.
In any event, the system shall not endanger or interfere with the
safety of persons or property in the franchise area or other areas where
the Grantee may have equipment located.
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SECTION 12 -TRANSFERS AND ASSIGNMENTS
A. A franchise shall not be assigned or transferred, either in whole
or in part, or leased, sublet, or mortgaged in any manner, nor shall title
thereto, either legal or equitable or any right, interest or property
therein, pass to or vest in any person without the prior written consent of
the City. The proposed assignee must show technical ability, financial
capability, legal qualifications and general character qualifications as
determined by the City and must agree to comply with all provisions of the
franchise. City shall be deemed to have consented to a proposed transfer
or assignment in the event its refusal to consent is not communicated in
writing to Grantee within one hundred twenty (120) days following receipt
of written notice of the proposed transfer or assignment.
B. The Grantee shall promptly notify the City of any actual or
proposed change in, or transfer of, or acquisition by any other party of,
control of the Grantee. The word "control" as used herein is not limited
to major stockholders but includes actual working control in whatever
manner exercised. Every change, transfer, or acquisition of control of the
Grantee shall make the .franchise subject to cancellation unless and until
the City shall have consented thereto, which consent will not be unreason-
ably withheld. for the purpose of determining whether it shall consent to
such change, transfer or acquisition of control, the City may inquire into
the qualifications of the prospective controlling party and the Grantee
shall assist the City in any such inquiry.
C. A rebuttable presumption that a transfer of control has occurred
shall arise upon the acquisition or accumulation by any person or group of
persons of 10 percent of the voting interest of the Grantee.
D. The consent or approval of the City Council to any transfer of
the franchise shall not constitute a waiver or release of the rights of the
City in and to the streets, and public rights-of-way and any transfer shall
by its terms, be expressly subordinate to the terms and conditions of a
franchise.
E. In any absence of extraordinary circumstances, the City will not
approve any transfer or assignment of a franchise prior to substantial
completion of construction of proposed system.
r. The City Council reserves the right of "first refusal" to
purchase a cable communications system at the fair market value price if
and when it is placed on the market for sale.
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G. The City Council reserves the right to review the purchase price
of any transfer or assignment of a cable system. Any assignee to a
franchise shall expressly agree that any negotiable sale value which the
Council (acting upon professional advice) deems unreasonable will not be
considered in the rate base for any subsequent request for rate increases.
H. In no event shall a transfer of ownership or control be approved
without successor in interest becoming a signatory to the franchise
agreement.
SECTION 13 -SUBSCRIBER SERVICES RATES
A. Initial rates
(1) The Grantee shall establish initial rates for its services
in accordance with the rates contained in Grantee's appli-
cation for a franchise.
(2) Initial basic rates shall be effective until one year
following completion of construction.
B. Minimum Timing of Requests. The Grantee may initiate a rate
change at any time after above-stated period, provided not more than one
(1) request may be made by the Grantee in any twelve (12) month period.
C. Rates Subject to Review. The Council reserves the right to
exercise review and approve the following rates, fees and charges:
(1) Rates for the provision of basic service to subscribers,
whether residential or commercial.
(2) Rates for the connection, installation and reinstatement
(including converters) of basic service, whether residential
or commercial.
(3) Rates for installation, connection and reinstatement of
basic service where unusual circumstances exist such as
remote or inaccessible subscriber locations or subscriber
requested underground service drops.
(4) Any other rates for services that may become subject to
local regulation.
D. The Grantee may petition the Council for a change in rates by
filing a proposed rate schedule with the City Secretary which petition
shall include the justification(s) for the proposed schedule. Said
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petition shall be filed at least sixty (60) days prior to the requested
implementation date of the rate change. One (1) copy of the petition shall
remain on file with the City Secretary end be open for public inspection.
E. Within sixty (60) days of the filing of the petition for rate
change, the Council may either choose not to review, and thereby deregulate
rate regulation for a period not to exceed three (3) year increments, or
hold a public hearing to consider the proposed rate change, at which
hearing all persons desiring to be heard, including the Grantee, shall be
heard on any matter, including but not limited to, the performance of the
Grantee, the Grantee's services and the proposed new rates.
If the Council chooses to deregulate rates, the duration of the
deregulation shall not last more than three (3) years. At the end of each
three (3) year period, Council may elect to continue deregulation for
another three (3) years or initiate the formal rate regulation proceedings
of this ordinance.
F. Upon notice of any public hearing as provided in Subsection (E),
the Grantee shall notify its subscribers of the time, place and subject
matter of the public hearing by announcement on at least two (2) channels
of its system between the hours of 7:00 pm and 9:00 pm, for at least five
(5) consecutive days prior to the hearing. In addition, notice of any
public hearing shall be published in a newspaper of local general circu-
lation at least once but not less than seven (7) days before the public
hearing and direct mail notice to all subscribers by the Grantee as a
special mailing or attached to monthly bill.
G. Within sixty (60) days after said hearing, the Council shall
render a written decision on the Grantee's petition, either accepting,
rejecting, modifying or deferring the same and reciting the basis of its
decision. The Council shall consider, inter alia, the following factors in
approving or disapproving the petition:
(1) the ability of the Grantee to render system services and to
derive a reasonable profit therefrom under the existing rate
schedule and under the proposed rate schedule;
(2) the revenues and profits derived from system services;
(3) the efficiency of the Grantee;
(4) the quality of the service offered by the Grantee;
(5) the original cost of the system less depreciation;
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(6) a fair rate of return with respect to the cost of borrowing
and the rates of return on investments having familiar risks
to that of cable TV;
(7) the extent to which the Grantee has adhered to the terms of
this ordinance and the franchise agreement;
(8) fairness to City residents, subscribers and users.
All costs incurred by the City in analyzing and evaluating the
Grantee's rate request examining the above information shall be paid by the
Grantee.
The Council shall not consider any valuation based upon a franchise or
the Grantor's goodwill and these items of value shall neither be amortized
as an expense nor shall a return be paid on them.
H. If the Council fails to render a written decision either accept-
ing, rejecting, modifying or deferring Grantee's petition within sixty (60)
days after said hearings, the Grantee shall thereafter be entitled to put
its proposed new rates into effect on a provisional basis, provided that it
shall keep a full and accurate accounting of all income resulting from said
provisional rates and shall be obliged for a period of sixty (60) days
thereafter to refund the amount of which said provisional rates exceed the
rates ultimately established by the Council. Upon request by the Council,
the Grantee shall provide a bond or other reasonable surety to insure that
possible refunds due under this subsection shall be promptly made. The
bond or surety shall be in an amount not to exceed the difference between
the amount of revenues generated in sixty (60) days at the previously
existing rates and the amount of revenues expected to be generated in sixty
(60) days at the provisional rates.
I. If no final decision on the Grantee's petition has been rendered
by the Council within one hundred twenty (120) days of the hearing, the
Grantee's petition will be deemed approved.
J. The Grantee's petition for a rate increase shall include, but not
be limited to, the following financial reports, which shall reflect the
operations in the City of Lubbock.
(1) Balance Sheet
(2) Income Statement
(3) Cash Flow Statement
(4) Statement of Sources and Applications of Funds
(5) Detailed Supporting Schedules of Expenses, Assets and other
items as may be required.
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(6) Statement of Current and Projected Subscribers and Pene-
tration.
The Grantee's account records applicable to this system shall be available
for inspection by the City at all reasonable times. The City shall have
access to records of financial transactions for the purpose of verifying
burden rates or other indirect costs prorated to this particular operation.
The docunents listed above shall include sufficient detail and/or footnotes
as may be necessary to provide the City with the information needed to make
accurate determinations as to the financial condition of the system. All
financial statements shall be certified as accurate by an officer of
Grantee.
SECTION 14 -PAYMENT OF FRANCHISE FEE
A. For the reason that the streets to be used by the Grantee in the
operation of its system within the boundaries of the City are valuable
public properties acquired and maintained by the City at great expense to
its taxpayers, and that the grant to the Grantee to the said streets is a
valuable property right without which the Grantee would be required to
invest substantial capital in the right-of-way costs and acquisitions, and
because the City will incur costs in regulating and administering the
franchise, and at the option of the Council, the City may make available a
portion of the franchise fee to further the development of public and
community uses of cable TV, the Grantee shall pay to the City an amount up
to five percent (51) of Grantee's gross annual revenue from all sources
attributable to the operations of the Grantee within the confines of the
City of Lubbock. If such fee requires a waiver or other approval by the
FCC, the applicant agrees to support the waiver and acknowledges this
support by its voluntary act of applying for a franchise.
B. The franchise fee and any other cost or penalties assessed shall
be payble quarterly to the Office of the City Treasurer. The Grantee shall
file a complete and accurate verified statement of all collected gross
revenues within the City during the period for which said quarterly payment
is made, and said payment shall be made to the City not later than thirty
(30) days after the expiration of the quarter for which payment is due.
C. The City shall have the right to inspect the Grantee's income
records and the right to audit and to recompute any amounts determined to
be payable under this ordinance; provided, however, that such audit shall
take place within thirty-six (36) months following the close of each of the
Grantee's fiscal years. Any additional amount due to the City as a result
of the audit shall be paid within thirty (30) days following written notice
to the Grantee by the City which notice shall include a copy of the audit
report.
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D. In the event that any franchise payment or recomputed amount,
cost or penalty, is not made on or before the applicable dates heretofore
specified, interest shell be charged daily from such date et the annual
rate equivalent to an average of the existing prime rate of local banking
institutions in Lubbock, Texas.
SECTION 15 -REQUIRED SERVICES AND FACILITIES
A franchise agreement or contract shall include a description of the
Grantee's system design and a description of programming and services being
offered, including optional premium services plus a description of facili-
ties being proposed for local origination programming, and facilities being
offered to various community institutions. In the event a program origina-
tor ceases providing a service, or in the even the Grantee determines that
other programming or cable services may be more attractive to subscribers,
or other users, the Grantee may, in accordance with the following proce-
dures, substitute services. The system, after the incorporation of such
substitute services, shall maintain a diversity of public service end
entertainment programs end other cable services, and an overall quality
level of programming that is equal or higher then the programming level
before the substitution. The City Council shell have the right to review
any substitution of service that the Grantee hes made and may require a
change therein if it so determines, after due hearing on notice, that the
above standards have not been met. Nothing in a franchise or contract
shell be construed es obligating the Grantee itself to produce substitute
programming to replace programming deleted because the originator or
supplier has ceased producing the service where en alternative comparable
service is not available on a comparable basis from a different third
party.
SECTION 16 -USE OF STREETS
A. All transmission and distribution structures, lines, and equip-
ment erected by the Grantee within the City shell be so located es to cause
minimum interference with the rights and reasonable convenience of property
owners who adjoin any of the said streets.
B. In case of disturbance of any street easement or paved area or
other property the Grantee shall, at its own cost and expense and in a
manner approved by the City, replace end restore such street easement or
paved area or other property in as good a condition as before the work
involving such disturbance was done.
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C. If at any time during the period of a franchise the City shall
lawfully elect to alter or change the grade of any street, the Grantee,
upon reasonable notice by the City, shall remove, relay, and relocate its
poles, wires, cables, underground conduits, manholes, and other fixtures at
its own expense.
Any poles or other fixtures placed in or adjacent to any street by the
Grantee shall be placed in such manner as to comply with all requirements
of the City.
The Grantee shall, at the request of any person holding a moving
permit issued by the City, temporarily raise or lower its wires to permit
the moving of building. The expense of such temporary removal or raising
or lowering of wires shall be paid by the person requesting the same, and
the Grantee shall have the authority to require such payment in advance.
The Grantee shall be given not less than forty-eight (48) hours notice to
arrange for such temporary wire changes.
The Grantee shall have the authority to trim trees upon and over-
hanging streets of the City so as to prevent the branches of such trees
from coming in contact with the wires and cables of the Grantee, except
that at the option of the City, such trimming may be done by it or under
the supervision and direction at the expense of the Grantee.
At the expiration of the term for which a franchise is granted, or
upon its termination and cancellation, as provided for herein, City shall
have the right to require Grantee to remove at its own expense aerial plant
and all visable facilities attached to underground plant from all portions
of the cable television system located in all streets, alleys and easements
within the City.
SECTION 17 -INDEMNIFICATION AND INSURANCE
A. It shall be expressly understood and agreed by and between the
City and any Grantee that the Grantee shall save the City and its agents
and employees harmless from and against all claims, damages, losses, and
expenses, including attorney's fees sustained by the City on account of any
lawsuit, judgment, execution of judgment, claim or demand by another
individual, corporation or entity whatsoever arising out of but not limited
to copyright infringements and all other damages arising out of the
implementation or terms of this ordinance, the award of any franchise or
the installation, operation or maintenance of a cable system whether or not
any act or omission complained of is authorized, allowed or prohibited by
this ordinance and/or any franchise agreement granted.
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B. The Grantee shall maintain and by its acceptance of a franchise
specifically agrees that it will maintain throughtout the term of a
franchise the following types of liability insurance insuring the City and
the Grantee, with at least the minimum amounts set forth in the Request for
Proposals and/or franchise Agreement of:
(1) Worker's Compensation: State, Maritime or other laws.
(2) Grantee's Liability.
(3) Comprehensive General Liability: including bodily injury,
property, damage and aggregate.
(4) Comprehensive Automobile Liability: including nonownership
and hired car coverage as well as owned vehicles.
(5} Umbrella Liability Policy.
Each insurance policy shall name the City as an additional insured, and
shall ensure performance of the indemnity provisions set forth in this
ordinance.
C. The insurance policy obtained by the Grantee in compliance with
this section must be approved by the City and such insurance policy, along
with written evidence of payment of required premiums, shall be filed and
maintained with the Office of the City Secretary during the term of a
franchise and may be changed from time to time to reflect changing liabi-
lity limits. A Grantee shall immediately advise the City Attorney of any
litigation that may develop that would affect the insurance.
D. Neither the provisions of this section nor any damages recovered
by the City thereunder, shall be construed to or limit the liability of a
Grantee under any franchise issued hereunder or for damages.
E. All insurance policies maintained pursuant to a franchise shall
contain the following endorsement:
It is hereby understood and agreed that this insurance policy may
not be cancelled by the surety nor the intention not to renew be
stated by the surety until thirty (30} days after receipt by the
City, by registered mail, of written notice of such intention to
cancel or not to renew.
SECTION 18 -SECURITY FUND
A. Within thirty (30) days after the award of a franchise, a Grantee
shall file with the City a security fund in the form of a performance bond
or letter of credit from a financial institution in the amount of $100,000.
The form and content of such security fund shall be approved by the City
Attorney. The security fund shall be used to insure the faithful perfor-
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mance by a Grantee of all provisions of this ordinance and resulting
franchise agreement; and compliance with all orders, permits end directions
of any agency, commission, board, department, division or office of the
City having jurisdiction over its acts or defaults under a franchise and
the payment by the Grantee of any penalties, liquidated damages, claims,
liens and taxes due the City which arise by reason of the construction,
operations or maintenance of the system.
B. The security fund shall be maintained at $100,000 during the
entire term of a franchise, even if amounts have to be withdrawn pursuant
to subdivision A. or C. of this section.
C. If a Grantee fails to pay to the City any compensation within the
time fixed herein; or, fails, after ten (10) days notice to pay to the City
any taxes due end unpaid; or fails to repay the City within ten (10) days,
any damages, costs or expenses which the City is compelled to pay by reason
of any act or default of the Grantee in connection with a franchise; or,
fails, after three (3) days notice by the City of such failure to comply
with any provision of a franchise which the City reasonably determines can
be remedied by demand on the security fund, the City may immediately
request payment of the amount thereof, with interest and any penalties,
from the security fund. Upon such request for payment, the City shall
notify the Grantee of amount and date thereof.
O. The rights reserved to the City with respect to the security fund
are in addition to all other rights of the City, whether reserved by a
franchise or authorized by law, and no action, proceeding or exercise of a
right with respect to such security fund shall affect any other right the
City may have.
SECTION 19 -CONSTRUCTION BOND
A. Within thirty (30) days after the award or renewal of a fran-
chise, a Grantee shall obtain end maintain at its cost and expense, and
file with the City Secretary, a corporate surety bond in a company autho-
rized to do business in the State of Texas, end found acceptable by the
City Attorney, in the amount of Five Hundred Thousand Dollars ($500,000) to
guarantee the timely construction and/or reconstruction and full activation
of the CATV system and the safeguarding of damage to private property and
restoration of damages incurred with utilities.
The bond shall provide, but not limited to, the following condition:
There shall be recoverable by the City, jointly and severally from the
principal and surety, any end all damages, losses or costs suffered by the
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City resulting from the failure of a Grantee to satisfactorily complete and
fully activate the CATV system throughout the franchise area pursuant to
the terms and conditions of this ordinance and the franchise agreement.
B. Any extension to the prescribed construction time limit must be
authorized by the Council. Such extension shall be authorized only when
the Council finds that such extension is necessary and appropriate due to
causes beyond the control of a Grantee.
C. The construction bond shall be maintained in the amount of
$500,000 but may be reduced as as a ratio of unconstructed (or recon-
structed) miles to total miles to be built (or rebuilt) within City and
shall be terminated only after the Council finds that a Grantee has
satisfactorily completed construction and activation of the CATV system
pursuant to the terms and conditions of this ordinance and the franchise
agreement.
D. The rights reserved to the City with respect to the construction
bond are in addition to all other rights of the City, whether reserved by
this ordinance or authorized by law, and no action, proceeding or exercise
of a right with respect to such construction bond shall affect any other
rights the City may have.
E. The construction bond shall contain the following endorsement:
It is hereby understood and agreed that this bond may not be
cancelled by the surety nor the intention not to renew be stated
by the surety until sixty (60) days after receipt by the City, by
registered mail, of written notice of such intent to cancel or
not to renew.
SECTION 20 -SERVICE STANDARDS
A. A Grantee shall put, keep, and maintain all parts of the system
in good condition throughout the entire franchise period.
B. Upon termination of service to any subscriber, a Grantee shall
promptly remove all its facilities and equipment from the premises of such
subscriber upon subscriber's request.
C. Grantee shall render efficient service, make repairs promptly,
and interrupt service only for good cause and for the shortest time
possible. Such interruptions, insofar as possible, shall be preceded by
notice and shall occur during periods of minimum system use.
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D. Grantee shall not allow its cable or other operations to inter-
fere with television reception of persons not served by Grantee, nor shall
the system interfere with, obstruct or hinder in any manner, the operation
of the various utilities serving the residents of the City.
E. A Grantee shall continue, through the term of the franchise, to
maintain the technical, operational, and maintenance standards and quality
of service set forth in this ordinance and franchise agreement. Should the
City find, by public hearing process, that a Grantee has failed to maintain
these standards and quality of service, and should it, specifically
enumerate improvements to be made, a Grantee shall make such improvements
as identified by the City Council. failure to make such improvements
within three (J) months will constitute a breach of condition for which the
remedy of Section 27 is applicable.
SECTION 21 -CONTINUITY Of SERVICE MANDATORY
A. It shall be the right of all subscribers to continue receiving
service insofar as their financial and other obligations to a Grantee are
honored. In the event that a Grantee elects to overbuild, rebuild, modify,
or sell the system, or the City gives notice of intent to terminate or
fails to renew a franchise, the Grantee shall act so as to ensure that all
subscribers receive continuous, uninterrupted service regardless of the
circumstances.
In the event of a change of Grantee, or in the event a new operator
acquires the system, a Grantee shall cooperate with the City, new Grantee
or operator in maintaining continuity of service to all subscribers. During
such period, Grantee shall be entitled to the revenues for any period
during which it operates the system, and shall be entitled to reasonable
costs for its services when it no longer operates the system.
B. In the event a Grantee fails to operate the system for four (4)
consecutive days without prior approval of the City or without just cause,
the City may, at its option, operate the system or designate an operator
until such time as Grantee restores service under conditions acceptable to
the City or a permanent operator is selected. If the City is required-to
fulfill this obligation for a Grantee, the Grantee shall reimburse the City
for all reasonable costs or damages in excess of revenues from the system
received by the City that are the result of the Grantee's failure to
perform.
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SECTION 22 -COMPLAINT PROCEDURE
A. The City Manager or the City Manager's designee is specified by
the City as having primary responsibility for the continuing administration
of a franchise and implementation of complaint procedures.
B. A Grantee shall maintain a central office within the City, which
shall be open during all usual business hours, and have a publicly-listed
telephone and be so operated with adequate line capability that complaints
and request for repairs or service adjustments may be received on a
twenty-four (24) hour basis seven (7) days a week. Sufficient responsi-
bility must be delegated locally to permit the local system manager to make
timely decisions.
c. Subject to constraints imposed by acts of God, or events over
which Grantee has no control, a Grantee shall maintain a repair and
maintenance crew capable of responding to subscriber complaints or requests
for service within twenty-four (24) hours after receipt of the complaint or
request. No charge shall be made to the subscriber for this service unless
such maintenance or repair is required as a result of damage caused by
subscriber. A Grantee may charge for service calls to the subscribers'
home that are not the result of cable failure upon approval of a rate and
equitable procedure by the City.
D. A Grantee shall establish procedures for receiving, acting upon,
and resolving subscriber complaints to the satisfaction of the City
Manager's Office. A Grantee shall furnish a notice of such procedures to
each subscriber at the time of initial subscription to the system. Upon
request by a subscriber, the Grantee shall credit a subscriber's account on
a pro rate basis for loss of service commencing forty-eight (48) hours
after notification.
E. A Grantee shall keep a maintenance service log which will
indicate the nature of each service complaint, the date and time it was
received, the disposition of said complaint and the time and date thereof.
This log shall be made available for periodic inspection by representatives
of the City Manager's Office. All service complaint entries shall be
retained on file for a period consisting of the most recent three (J)
years.
F. When there have been similar complaints made or when there exists
other evidence, which, in the judgment of the City Manager casts doubt on
the reliability or quality of cable service, the City Manager shall have
the right and authority to compel a Grantee, at its expense, to test,
analyze, and report on the performance of the system. Such report shall be
delivered to the City Manager no later than fourteen (14) days after the
City Manager formally notifies the Grantee end shall include the following
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information: the nature of the complaints which precipitated the special
tests; what system component was tested, the equipment used, and procedures
employed in said testing; the results of such tests; and the method in
which said complaints were resolved.
G. The City Manager may require that tests and analyses shall be
supervised by a professional engineer not on the permanent staff of a
Grantee but paid for by the Grantee. The aforesaid engineer should sign
all records of the special tests and forward to the City Manager such
records with a report interpreting the results of the tests and recommend-
ing actions to be taken by a Grantee and the City.
H. The City Manager's right under this section, shall be limited to
requiring tests, analyses, and reports covering specific subjects and
characteristics based on said complaints or other evidence when and under
such circumstances as the City has reasonable grounds to believe that the
complaints or other evidence requires that tests be performed to protect
the public against substandard cable service.
SECTION 23 -AVAILABILITY OF BOOKS AND RECORDS
A Grantee shall fully cooperate in making available at reasonable
times, and the City Manager or his designee shall have the right to inspect
the books, records, maps, plans and other like materials of the Grantee
applicable to the CATV system, at any time during normal business hours;
provided where volume and convenience necessitate, Grantee may require
inspection to take place on Grantee's premises. If records are maintained
outside the City of Lubbock, the Grantee is obligated to reimburse the City
government any expenses incurred in making inspection of the books and
records.
SECTION 24 -OTHER PETITIONS AND APPLICATIONS
Copies of all petitions, applications, communications and reports
submitted by a Grantee to the Federal Communications Commission, Securities
and Exchange Commission, or any other federal or state regulatory com-
mission or agency having jurisdiction in respect to any matters affecting
cable television operations authorized pursuant to the franchise, shall be
provided simultaneously to the City Manager.
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SECTION 25 -FISCAL REPORTS
The Grantee shall file annually with the Office of the City Secretary,
no later than one hundred twenty (120) days after the end of the Grantee's
fiscal year, a copy of a financial report applicable to the CATV system
serving the City of Lubbock, including an income statement applicable to
its operations during the preceding twelve (12) month period, a balance
sheet and a statement of its properties devoted to CATV system operations,
by categories, giving its investment in such properties on the basis of
original cost, less applicable depreciation. These reports shall be
certified as correct by an authorized officer of Grantee and there shall be
submitted along with them such other reasonable information as the Council
shall request.
SECTION 26 -FORFEITURE AND TERMINATION
A. In addition to all other rights and powers retained by the City
under this ordinance or otherwise, the City reserves the right to forfeit
and terminate a franchise and all rights and privileges of a Grantee in the
event of a material breach of its terms and conditions. A material breach
by Grantee shall include, but shall not be limited to the following:
(1) Violation of any material provision of the franchise or any
material rule, order, regulation or determination of the
City made pursuant to the franchise;
(2) Attempt to evade any material provision of the franchise or
practices any fraud or deceit upon the City or its sub-
scribers or customers;
(J) Failure to begin or complete system construction or recon-
struction or system extension as provided under the fran-
chise;
(4) Failure to provide the types of services promised;
(5) Failure to restore service after ninety-six (96) consecutive
hours of interrupted service, except when approval of such
interruption is obtained from the City; or
(6) Materiel misrepresentation of fact in the application for or
renegotiation of the franchise.
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B. The foregoing shall not constitute a material breach if the
violation occurs but it is without fault of a Grantee or occurs as a result
of circunstances beyond its control. Grantee shall not be excused by mere
economic hardship nor by misfeasance or malfeasance of its shareholders,
directors, officers, or employees.
C. The City may make a written demand that a Grantee comply with any
such provision, rule, order, or determination under or pursuant to this
ordinance and franchise agreement. If the violation by the Grantee
continues for a period of thirty (30) days following such written demand
without written proof that the corrective action has been taken or is being
actively and expeditiously pursued, the City may place the issue of
termination of a franchise before the City Council. The City shall cause
to be served upon Grantee, at least twenty (20) days prior to the date of
such a Council meeting, a written notice of intent to request such termina-
tion and the time and place of the meeting. Public notice shall be given
of the meeting and issue which the Council is to consider.
D. The City Council shall hear and consider the issue and shall
hear any person interested therein, and shall determine in its discretion,
whether or not any violation by the Grantee has occurred.
E. If the City Council shall determine the violation by a Grantee
was the fault of Grantee and within its control, the Council may, by
resolution, declare that the franchise of the Grantee shall be forfeited
and terminated unless there is compliance within such period as the City
Council may fix, such period not to be less than sixty (60) days, provided
no opportunity for compliance need be granted for fraud or misrepresen-
tation.
r. The issue of forfeiture and termination shall automatically be
placed upon the Council agenda at the expiration of the time set by it for
compliance. The Council then may·terminate a franchise forthwith upon
finding that Grantee has failed to achieve compliance or may further extend
the period, in its discretion.
SECTION 27 -LIQUIDATED DAMAGES
By acceptance of the franchise granted by the City, a Grantee under-
stands and agrees that failure to comply with any time end performance
requirements es stipulated in this ordinance and franchise agreement will
result in damage to the City government, and that it is end will be
impracticable to determine the actual amount of such damage in the event of
delay or non-performance; end a Grantee therefore agrees that, it will pay
to the City government the following amounts which will be chargeable to
the security fund:
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A. For failure to complete system construction or reconstruction in
accordance with Section 10, unless the Council specifically approves the
delay by motion or resolution, due to the occurrence of conditions beyond
Grantee's control, a Grantee shall pay Five Hundred Dollars ($500.00) per
day for each day, or part thereof, the deficiency continues.
B. For failure to provide upon written request, data, documents,
reports, information or to cooperate with City during an application
process or CATV system review, a Grantee shall pay Fifty Dollars ($50.00)
per day, or part thereof, that each violation occurs or continues.
C. For failure to test, analyze and report on the performance of the
system following a written request pursuant to this ordinance, a Grantee
shell pay to City Two Hundred Dollars ($200.00) per day for each day, or
part thereof, that such non-compliance continues.
D. For failure to provide in a continuing manner the types of
services proposed in the accepted application, unless the City Council
specifically approves Grantee a delay or change, Grantee shell pay to the
City Government Five Hundred Dollars ($500.00) per day for each day, or
part thereof, that such non-compliance continues.
E. In accordance with Section 20 in which it has been determined
that there has been a failure of Grantee to comply with operational,
maintenance or technical standards, grantee shall pay to the City Govern-
ment Five Hundred Dollars ($500.00) for each day, or part thereof, that
such non-compliance continues beyond the three months period provided in
Section 20.
SECTION 28 -RIGHTS OF INDIVIDUALS
A. A Grantee shall not deny service, deny access, or otherwise
discriminate against subscribers, channel users, or general citizens on the
basis of race, color, religion, national origin, or sex. A Grantee shell
canply at ell times with all other applicable federal, state and local laws
and regulations, and all executive and administrative orders relating to
nondiscrimination which are hereby incorporated and made part of this
ordinance by reference.
B. A Grantee shall strictly adhere to the equal employment oppor-
tunity requirements of federal, state end local regulations, and as amended
from time to time.
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C. No signals shall be transmitted from a subscriber terminal for
purposes of monitoring individual viewing patterns or practices without the
express written permission of the subscriber. The request for such
permission shall be contained in a separate document with a prominent
statement that the subscriber is authorizing the permission in full
knowledge of its provision. The authorization shall be revocable at any
time by the subscriber without penalty of any kind whatsoever. Such
authorization is required for each type or classification of two-way cable
communications activity planned, provided, however, that a Grantee shall be
entitled to conduct systemwide or individually addressed "sweeps" for the
purpose of verifying system integrity, controlling return-path trans-
mission, or billing for pay services.
O. A Grantee, or any of its agents or employees, shall not, without
the specific written authorization of the subscriber involved, sell, or
otherwise make available to any party:
(1) lists of the names and addresses of such subscribers, or
(2) any list which identifies the individual viewing habits of
subscribers.
SECTION 29 -FORECLOSURE, JUDICIAL SALE OR RECEIVERSHIP
A. Upon the foreclosure or other judicial sale of all or a sub-
stantial part of the system, or upon the termination of any lease covering
all or a substantial part of the system.
(1) A Grantee shall notify the City of such fact, and such
notification shall be treated as a notification that a
change in control of the Grantee has taken place, and the
provisions of this Ordinance governing the consent of the
City to such change in control of a Grantee shall apply; or
(2) In such an instance, the City may serve notice of termina-
tion upon a Grantee and if applicable, the successful bidder
at such sale. In such event, the franchise shall cease and
terminate 30 days after service of such notice unless:
(a) The City shall have approved the transfer of a fran-
chise and a prospective Grantee, as and in the manner
of this Ordinance provided; and
(b) The successful bidder shall have convenanted and agreed
with the City to assume and be bound by all the terms
and conditions of the franchise.
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8. The City shall have the right to revoke a franchise 120 days
after the appointment of a receiver, or trustee, to take over and conduct
the business of a Grantee, whether in receivership, reorganization,
bankruptcy, or other action or proceeding, unless such receivership or
trusteeship shall have been vacated prior to the expiration of said 120
days, or unless:
(1) Within 120 days after the election or appointment, such
receiver or trustee shall have fully complied with all the
provisions of this Ordinance and remedied all defaults
thereunder; and
(2) Such receiver or trustee, within said 120 days, shall have
executed an agreement, duly approved by the court having
jurisdiction in the premises, whereby such receiver or
trustee assumes and agrees to be bound by each and every
provision of the ordinance and franchise agreement and of
the franchise granted to a Grantee.
SECTION 30 -PERFORMANCE EVALUATION SESSIONS
A. The City and a Grantee shall hold scheduled performance evalua-
tion sessions within thirty (30) days of the first, second, third, sixth,
ninth, and twelfth anniversary dates of a Grantee's award of the franchise
and as may be required by federal and state law.
B. Special evaluation sessions may be held at any time during the
term of a franchise at the request of the City or the Grantee.
C. All evaluation sessions shall be open to the public and announced
in a newspaper of general circulation in accordance with legal notice.
Grantee shall notify its subscribers of all evaluation sessions by an-
nouncement on et least two (2) channels of its system between the hours of
7:00 p.m. and 9:00 p.m., for five (5) consecutive days preceding each
session.
D. Topics which may be discussed at any scheduled or special
evaluation session may include, but not be limited to, service rate
structures; franchise fee; liquidated damages; free or discounted services;
application of new technologies; system performance; services provided;
programming offered; customer complaints; privacy; amendments to this
ordinance; judicial and FCC rulings; line extension policies; and Grantee
or City rules.
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SECTION 31 -NEW DEVELOPMENTS
A. The City Council shall have the authority to order a public
hearing from time to time on the provision of additional channel capacity
by Grantee or on the inclusion in the Grantee's CATV system of "State-
of-the-Art" technology or upgraded facilities.
B. If after such a hearing, the City Council determines (1) that
there exists a reasonable need and demand for additional channel capacity
and/or State-of-the-Art technology or upgraded facilities, and (2) that
provision has been made or will be made for adequate rates which will allow
Grantee a fair rate of return on its investment (including the investment
required to provide the additional channels and/or the State-of-the-Art
technology or upgraded facilities), and will not result in economic waste
for the Grantee, the City Council may order Grantee to provide a specified
number of additional channels and/or specified State-of-the-Art technology
or upgraded facilities. Without implying any limitations as to other
provisions of this ordinance, this Section is deemed a material provision
within the meaning of Section 26 of this ordinance.
C. If any access channel(s), in the opinion of the City Council,
have become fully utilized, Grantee shall within six (6) months from
receipt of written notice make a new channel available for the same
purpose(s); provided however, that nothing in this paragraph shall require
Grantee to add additional channel capacity to the CATV System. Such
requirement may be met by making available, on a part-time basis, one or
more other underutilized access channels, or on a full or part-time basis
one or more other unused channels until such time as such underutilized or
unused channels are needed for the uses to which they have been dedicated.
O. Whenever, in the opinion of the City Council, any access channel
is underutilized, the City may order or permit different or additional uses
for said channel.
SECTION 32 -AREAWIDE INTERCONNECTION Or CATV SYSTEMS
A. Interconnection Required
A Grantee shall interconnect access channels of the cable system with
any or all other CATV systems in adjacent areas, upon the directive of the
City. Interconnection of systems may be done by direct cable connection,
microwave link, satellite, or other appropriate method.
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B. Interconnection Procedure
Upon receiving the directive of the City to interconnect, a Grantee
shall immediately initiate negotiations with the other affected system or
systems in order that all costs may be shared equally among cable companies
for both construction and operation of the interconnection link.
C. Relief
A Grantee may be granted reasonable extensions of time to interconnect
or the City may rescind its order to interconnect upon petition by the
Grantee to the City. The City shall grant said request if it finds that a
Grantee has negotiated in good faith and has failed to obtain an approval
from the system or systems of the proposed interconnection, or that the
cost of the interconnection would cause an unreasonable or unacceptable
increase in subscriber rates.
O. Cooperation Required
A Grantee shall cooperate with any interconnection corporation,
regional interconnection authority or city, county, state and federal
regulatory agency which may be hereafter established for the purpose of
regulating, financing, or otherwise providing for the interconnection of
cable systems beyond the boundaries of the City.
SECTION 33 -ACCEPTANCE AND EffECTIVE DATE Of FRANCHISE
A. No franchise agreement granted pursuant to the provisions of this
ordinance shall become effective unless and until all things required in
this section are done and completed, all of such things being hereby
declared to be conditions precedent to the effectiveness of any such
franchise granted hereunder. In the event any of such things are not done
and completed in the time and manner required, the Council may declare a
franchise null and void.
B. Within thirty (30) days after the effective date of an ordinance
awarding a franchise or within such extended period of time as the City
Council in its discretion may authorize, a Grantee shall file with the City
Secretary its written acceptance, in a form satisfactory to the City
Attorney, of the franchise agreement, together with the insurance policies,
security fund and construction bond required by Sections 17, 18 and 19
respectively, and its agreement to be bound by and to comply with and to do
all things required of Grantee by the provisions of this ordinance and the
franchise agreement. Such acceptance and agreement shall be acknowledged
by the Grantee before a notary public and shall in form and content be
satisfactory to and approved by the City Attorney.
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SECTION 34 -VIOLATIONS
A. From and after the effective date of this ordinance, it shall be
unlawful for any person to construct, install or maintain within any public
street in the City, or within any other public property of the City, or
within any privately-owned area within the City which has not yet become a
public street but is designated or delineated as a proposed public street
on any tentative subdivision map approved by the City Government, any
equipment or facilities for the purpose of operating a cable television
system unless a franchise authorizing such use of such street or property
or area has first been obtained pursuant to the provisions of this ordi-
nance, and unless such franchise is in full force and effect.
B. No Grantee nor any representative of a Grantee shall engage in
the business of selling, repairing or installing television receivers,
radio receivers, or accessories for such receivers within the City of
Lubbock during the term of a franchise, and the Grantee shall not allow any
of its shareholders to so engage in any such business.
SECTION 35 -INCORPORATION OF PROPOSAL BY REFERENCE
Upon award of a franchise pursuant to this ordinance, a Grantee shall
agree to be bound by all the terms and conditions contained herein.
A Grantee also agrees to provide all services specifically set forth
in its proposal, to provide cable television service within the confines of
the City of Lubbock and by its acceptance of a franchise, the Grantee
specifically grants and agrees that its proposal is thereby incorporated by
reference and made a part of the franchise agreement. In the event of a
conflict between such proposal and the provisions of this Ordinance, and
the franchise agreement, that provision which provides the greatest benefit
to the City, in the opinion of the Council, shall prevail; provided that,
the City, having chosen or accepted one of the conflicting provisions, may
not thereafter elect to require compliance with a different alternative of
the conflicting provisions. Failure to provide services as promised in
Grantee's application shall be deemed a breach of this ordinance to which
the provisions of Section 26 of this ordinance shall apply.
SECTION 36 -TIME IS or THE ESSENCE
Whenever a franchise or contract shall set forth any time for an act
to be performed by or on behalf of the Grantee, such time shall be deemed
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of the essence and any failure of the Grantee to perform within time
allotted shall always be sufficient ground for the City to invoke liqui-
dated damages or revocation of a franchise.
SECTION 37 -FAILURE Of CITY TO ENFORCE A FRANCHISE, NO WAIVER Of THE
TERMS THEREOF
A Grantee shall not be excused from complying with any of the terms
and conditions of a franchise agreement or this ordinance by any failure of
the City upon any one or more occasions to insist upon or to seek com-
pliance with any such terms or conditions.
SECTION 38 -SAVINGS CLAUSE
If any section, sentence, clause or phrase of this ordinance is held
unconstitutional or otherwise invalid, such infirmity shall not affect the
validity of the ordinance, and any portions in conflict are hereby re-
pealed. Provided, however, that in the event that the state or federal
government laws or regulations renders any section invalid, then such
section or sections may be renegotiated by the City and a Grantee.
SECTION 39 -PENALTY
THAT violation of Section 34 of this ordinance shall be deemed a
misdemeanor punishable by a fine not to exceed Two Hundred Dollars as
provided in Section 1-5 of the Code of Ordinances of the City of Lubbock.
SECTION 40 -PUBLICATION
THAT the City Secretary is hereby authorized to cause publication of
the descriptive caption of this ordinance as an alternative method provided
by law.
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AND IT IS SO ORDERED.
Passed by the City Council on first reading this 9th day of February ,
1984.
Passed by the City Council on second reading this
1984. ---
February ----'
AL
APPROVED AS TO CONTENT:
~0e~ Bob Cass, Assistant City Manager
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Ordinance 8554 -2/23/84 (2d Rdg)
CTIC Associates
1500 NOR1H BE.AUREGAOO STREET. SUlE 205. .AJ.EXANmlA. VA 22311 (703) 8-45-1700 ITEM 1 " -13
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Report of System Evaulation
A Review of Cox Cable Communications, Inc.
Serving the City of Lubbock, Texas
February 16, 1984
Prepared by
CTIC Associates
1500 North Beauregard Street
Suite 205
Alexandria, Virginia 22311
(703) 845-1700
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INTRODUCTION
EXECUTIVE SUMMARY
A. Technical Evaluation
B. Services Evaluation
C. Financial Evalution
TECHNICAL EVALUATION
A. Present System
B. Proposed System
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TABLE OF CONTENTS
C. Other Considerations -Two-way Activation
and Addressable/Interactive Converters
SERVICES EVALUATION
A. Introduction
B. Programming and Channel Allocations c. C'.Dmmunity Programming
D. Enhanced Services
E. Summary
FINANCIAL EVALUATION
A. Revenues
B. Operating Expenses
C. Capital Expenditures
D. System Profitability
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INTRODUCTION
REPORT OF SYSTEM EVALUATION
The City of Lubbock, on July 21, 1983, authorized CTIC Associates, under
contract dated May 12, 1983, to evaluate the existing operations of the local
cable franchisee, Cox Cable Communications, Inc.
The City requested CTIC to review the existing cable television system,
to render analytical and technical advice to the City as to the type of
service the City of Lubbock could expect to receive given recent advances
in the industry, to assist the City in preparing an up-to-date franchise
ordinance and related documents, to assist the City in development of such
franchise and to render such other technical and professional services as may
be appropriate.
In accordance with the contract, CTIC has previously presented a draft
ordinance for City Council's consideration and for changes they deem neces-
sary.
Following receipt from Cox of responses to an extensive questionnaire
prepared by CTIC, an on-site technical review of the cable system was per-
formed on January 24-27, 1984. In addition to the technical review, CTIC has
also reviewed the financial status of the existing operations and the existing
services being provided by the company.
As the present franchise with Cox will expire on March 13, 1985, an over-
all objectiv~ of the City in undertaking this evaluation was to examine the
iii
technical and financial viability of the present operation and the proposal
presented by Cox for system and service improvements. The proposal has been
presented to the City for their consideration in determining the feasibility
and appropriateness of renewing the franchise with Cox for an additional term.
The following report evaluates both the present and proposed operations
of Cox from a technical and financial viewpoint and comments on the overall
proposal from the perspective of what is taking place generally today in the
cable television industry.
The report is divided into four sections:
I -Executive Summary
II -Technical Evaluation
III -Services Evaluation
IV -Financial Evaluation
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I. EXECUTIVE SUMMARY
A. TECHNICAL EVALUATION
Our examination has shown that Cox's present system has generally been
well maintained and is capable of delivering acceptable signals to all sub-
scribers, however, this abililty may be compromised by "structural" weaknesses
in the system itself. These weaknesses include the age of the system and its
components, overly long amplifier cascades required to reach distant resi-
dents, and the condition of subscriber drops and connectors, which could sig-
nificantly degrade the quality of service delivered.
Cox's proposal calls for a rebuild of the Lubbock system which will ad-
dress and correct the weaknesses in the present system. lhe rebuild will
also contain features which will strengthen the perceived quality of the cable
system to subscribers, including expanded channel capacity and service offer-
ings; an emergency alert system, new and more flexible converters, standby
powering and a separate institutional network.
We find Cox's proposal to be technically acceptable but do note that two
active areas in cable technology were not specifically addressed or proposed;
two-way activation of the cable system, and the use of advanced addressable/
interactive converters. While these points may or may not intially be judged
to be necessary in the cable system, we feel that they should be examined for
future utilization.
I-2
B. SERVICES EVALUATION
Cox proposes to increase services from a 16 channel Basic service package
with three optional pay channels to a 27 channel Basic service package with 5
premium options. over all, a good variety of services are included in Cox's
proposal with no significant increase in costs for subscribers. Cox also
proposes to add community programming channels and some production equipment.
This will add to the diversity of programming available to Lubbock subscribers
and will provide a new communications outlet for community utilization.
The entertainment options proposed to be available to Lubbock subscribers
include most of the programming nationally available and the proposed system
channel capacity does provide some additional room to accomodate new program-
ming as it is made available.
C. FINANCIAL EVALUATION
Our. review of Cox's financial position reveals that Cox has been operat-
ing profitably over the past 5 years. Subscriber revenues have increased
substantially over this period due to additional subscribers as well as rate
increases.
Cox has invested a substantial amount of capital in the system (close to
$8 million) over the past 5 years. Most of this expenditure has been for addi-
tional plant mileage as well as drops and converters to accomodate the system
growth. Despite this expenditure and other escalations in operating costs,
Cox has been able to obtain a very reasonable return on its investment; an ave-
rage of 24 percent per year over the past 5 years.
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Cox's plans to re~uild the system are expected to cost $14.3 million over
the next 3 years. This expenditure will require $10.3 million in additional
borrowings from the parent coQpany. Cox continues to anticipate rapid growth
in the subscriber base as well as increased per subscriber revenues due to the
availability of more subscriber services. The result is expected to be a
doubling in system revenues by 1988.
Cox does forecast substantial inflation in operating costs over the next
few years. Hopefully, if operating costs do not accelerate at the rate ex-
pected, the series of rate increases forecasted by Cox over the next 10 years
may not be necessary. Cox assumes the average cost of basic service will
increase by more than 50 percent over the next 10 years.
Cox's forecast for the next 10 years results in a profitable operation.
The average annual rate of return on net investment is expected to be 15
percent. The operation is not expected to experience any period of negative
cash flow as a result of the rebuild.
Generally, we believe Cox has developed a reasonable and conservative
estimate of the financial impact of the proposed rebuild. It has developed a
financial plan that will yield the parent company a favorable return and
improve the level of service, yet will not force subscribers to pay more for
cable service if they do not choose to do so.
II. TECHNICAL EVALUATION
A. PRESENT SYSTEM
On January 24-27, 1984, as a part of CTIC Associates' contract with
Lubbock, an on-site technical review of Cox's existing cable system was per-
formed. The purpose of this review was to evaluate Cox's operations, deter-
mine the technical quality of the existing system and to identify areas that
should be addressed in the event that a franchise extension is considered.
1. SYSTEM DESIGN
The actual system design has not changed greatly since the system was
first franchised, however, it has evolved slightly which is often the case.
Originally designed and constructed to carry frequencies to 216 MHz (the
equivalent of a 21 channel capacity); over the years as, available equipment
has changed, Cox has used newer equipment in certain extension and new build
areas. The result has been tl1at a wide variety of distribution equipment is
being used in the Lubbock system with different channel capacities varying
from 216 MHz to 300, 400 and even 450 MHz in limited instances. The point
that cannot be over stressed is tllat this equipment has only been used in a
relatively small percentage of the existing system, and when channel capaci-
ties are discussed, it is important to remember that the entire system must
be considered, not individual sections or pieces. As this newer equipment
has been generally used in extension or newly built areas, the nwnber of
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channels that these sections can carry is limited by the number of channels
that can be delivered to it. As these areas are fed from older, existing
cable plant, they are constrained by the channel capacity of these older sec-
tions, limiting the channel capacity of the entire system to effectively the
216 MHz, currently being delivered.
lbe system is served from a single headend, however, the headend has
been relocated to its present location and effectively replaced with new
electronics in 1981. lhe headend is operating acceptably, however, the use
of a single headend, and the type of distribution electronics utilized, have
combined with the geographic size of Lubbock to create one of the present
system's most obvious weaknesses-overly long amplifier cascades (i.e., the
number of amplifiers and amount of cable required to reach from the headend
to distant residents). Generally, as the amount of cable and number of
amplifiers, signals must pass through increases so does the amount of loss
and degradation the signal will experience. 'lhe basic reason for this is that
as each amplifier "boosts" the signals passing through it, it also adds a
certain amount of noise and distortion to the signals (which varies based on
the type of equipment used, the power required, the bandwidth or number of
channels carried ••• ). The "trick" to a successful cable system design is to
choose the appropriate equipment and uses that will insure that although
signals being carried will inevitably suffer some degradation, the overall
quality of the signals will not be lowered to a point that the subscribers
would find objectionable. If high quality signals are received at the head-
end, an effective system design will deliver these signals to subscribers with
the information portion of the signal sufficiently higher than all noise and
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II-4
instances, when a technician made the call, the problem that caused the
subscriber to call the company could no longer be found or diagnosed. Such
intermittent behavior is often found in older systems or in those with long
cascades or similar features. A sporadic problem may be caused by one com-
ponent in an amplifier beginning to fail or by a physical defect in the cable
system (e.g., a connector or splitter) that will only cause a problem, in its
present condition, when a number of different conditions are met. It is quite
likely that one month's "no problem" calls can turn up the next or following
month when the failure becomes more permanent. Some of these calls are no
doubt caused by the aging of the system and its equipment.
Skipping ahead for the moment in this discussion, we should note that
our second examination into signal quality was performed on a first hand
basis. CTIC examined, subjectively the received/processed signal quality at
the headend and throughout the distribution system. Examinations at the
headend showed acceptable quality signals.
The next step was to determine the quality of signals that are being
delivered to subscribers' homes. As it is often difficult to arrange access
to subscribers' homes for these observations, we usually examine delivered
signal quality by proxy with examinations conducted at the end of the longest
amplifier cascades. Test points were chosen throughout the City to represent
the type of performance that should be the worst delivered. In all cases,
test points were chosen at or near the end of major trunk cascades or splits
and are readily accessible if reexamination would be required. Signal quality
at 12 separate test points were observed. The location, approximate cascade
and type of test point are summarized below.
II-3
distortion so that all noise and distortion will be below the subscribers
visibility threshold.
2. SIGNAL QUALITY
As the major function of the traditional cable television system has
been to deliver acceptable television signals to subscribers, a key aspect of
CTIC's on-site evaluation was an examination of signal quality. Preliminary
investigations in this area were accomplished by reviewing pertinent Cox rec-
ords, including annual FCC Proof of Performance tests, service call summaries
and correspondence/complaint files in order to identify any unusual number or
concentration of complaints which would indicate potential problem areas.
Most of the complaint letters received by Cox or forwarded to Cox by the City
had little to do with strictly the technical operations of the system. lhe
majority of these complaints centered around procedural areas such as billing,
changes in service, or disconnects. This is not surprising given the transi-
tory nature of a significant portion of Cox's subscribers, i.e., students at
Texas Tech.
The service call summaries, on the other hand, showed on the average in
1983, 53 percent of all service calls could be traced to a part of the distri-
bution system itself. Twenty three (23) percent of all service calls could be
lumped into a "system" designation which would include problems with or caused
by trunk amplifiers, distribution amplifiers, cable (feeder or trunk) taps or
connectors. Thirty (30) percent of the service calls were related to subscri-
ber drops with the major problems being with the drop cable itself or with
connectors. It is also useful to note that the next largest concentrations of
service calls ( 17 percent average) were classified as "no problem." In these
..
Test Point
Number
1
2
3.
4.
5.
6
7
8
9
10
11
12
II-5
Location
Chicago & 83rd
Indiana & 101st
Ivory & 74th
Beach & 4th
Quirt & Auburn
Globe & Municipal
Ash & Stanford
Mesa & Vega
University near
Utica & Fordham
Elkhart & 3rd
Iola & 16th
Marlboro
Cascade
16 Amplifiers
13 Amplifiers
12 Amplifiers
28 Amplifiers
27 Amplifiers
32 Amplifiers
38 Amplifiers
36 Amplifiers
40 Amplifiers
31 Amplifiers
33 Amplifiers
38 Amplifiers
Type
Undergound/Tap
Underground/ Tap
Underground/Tap
Aerial/Tap
Aerial/Tap
Aerial/Tap
Aerial/Tap
Aerial/Tap
Aerial/Estab-
lished Test
Point
Aerial/Tap
Underground/Tap
Aerial to Under-
ground Transi-
tion
Th.e signal quality observed at these test points was within our expecta-
tions. Signal quality was generally good, however, a number of problems were
noted:
Case 1:
Case 2:
Slight degradation of channel 8 was noted half-way through ob-
servation at test point number 2. 'Ibis degradation continued
when observations were made at test point number 3, however,
cleared up prior to our completion at this point and were not
noted elsewhere.
Slight degradation on cable channel 5 due to ingress of off-
air channel 5 was noted at test point number 6. Th.is problem
was not seen at later test points until test point number 9
(longest amplifier cascade and on different trunk than test
Case 3:
II-6
point nu;mber 6) where ingress was severe and objectionable.
The low VHF channels also showed a drop off in power at this
test point.
Intermittent beats were observed on channel 18 at test point
number 12. This showed up sporadically while we were at this
site, and was not observed at other test points.
These cases reflect the types of problems that are common with cable
systems similar to the Lubbock system. One possible cause for the problems
noted in cases numbers land 3, could be an isolated fault in one component
such as one section in a particular trunk amplifier. The intermittent or
sporadic nature of this fault could cause it to be quite difficult to accu-
rately diagnose and repair. The ingress noted in case number 2 is caused by
an actual "defect" in the physical integri,ty of the cable system. The most
probable cause for this is the loosening of a connector some place
along the cascade. To correct a problem of this sort, the cable technician
must first isolate the section of the cable plant where the ingress or leakage
is taking place which can be done by making observations at different loca-
tions along the amplifier cascade to determine where the problem is seen and
where it is not. While this is a relatively straight forward approach, it can
be time consumming.
Overall, our evaluation of the present system leads us to believe that
within its limits, the Lubbock system can be expected to be able to deliver
generally acceptable signals, however, service will likely continue to be
affected by the types of problems noted above. In other words, while the
present system can deliver acceptable service, it is probable that it will not
always deliver perfect service to all subscribers at all times. We should
,•
note that Cox has engaged in maintenance procedures which have included the
,. '
..
II-7
replacement of equipment such as line extenders, taps, connectors and drop
cable which have helped to lessen the occurrances of the problems noted,
however, this replacement has only been done on an as needed basis (i.e., as
problems have been found). Thus, there is still a significant amount of older
equipment still in use in the system.
B. PROPOSED SYSTEM
Under Cox's proposal many of the causes of the existing system's problem
will be corrected.
1. SYSTEM REBUILD
Cox intends to essentially build a new cable system to serve Lubbock.
With the exception of 22 miles of plant built to its new standards in 1983, it
will replace!.!!. amplifiers, passives, trunk cable and feeder cable in the
existing system. It also anticipates replacing 60 percent of all apartment
and residential drops during this process. It estimates that construction
would take 18 months to be completed and could be started in the fourth
quarter of 1984 upon the completion of all preparatory work. During this
rebuild, the existing system will be physically raised on the utility poles
where it would be temporarily attached so that service to subscribers could be
continued without interruption during the rebuild operation. As sections of
the new system are completed subscriber drops will be replaced if necessary
and transferred to the new system. The rebuild operation will help to minimize
the types of problems currently experienced due to the change to better equip-
II-8
ment as well as the attention that will necessarily be paid to each section of
the system and drops during construction.
2. NEW SYSTEM COVERAGE
Cox has identified three sections of the City which will correspond to
construction phases 1-3, which are estimated to be 6 months long. Phase
1 would reach 43 percent of all homes in an area bounded by the Texas Tech
campus on the North, Brownfield Highway on the West, Avenue Q on the East and
loop 289 on the South. This phase would be completed in the first 6 months of
the total rebuild period. Phase 2 would be completed in the next 6 months and
would reach an additional 30 percent of homes in the remaining area inside
loop 289 and those homes beyond 289 to the North. Phase 3 would be finished
in the final 6 months of the construction period and would serve the remaining
27 percent of homes which are located south and west of loop 289.
At this point, we should make one note regarding system coverage. The
construction maps originally submitted by Cox showing the different construc-
tion phase appear to show that certain areas presently being served would not
be served under its new proposal. When questioned on this point, Cox has
stated that any such omissions on the submitted map were errors and that it
commits to providing service to all homes currently served. Cox also plans on
increasing its system mileage by 21 aerial miles and 8 underground miles in
1984 and by 12 underground and 4 aerial miles annually in 1985-1989 to serve
new developments in the South and West.
. -
II-9
3. SYSTEM CHANNEL CAPACITY
Cox has proposed to build a cable system with a higher channel capacity
than the existing system. Based upon its clarifications, it has proposed to
construct a system designed and spaced at 400 MHz. 1be system would initially
be activated to 330 Mhz to provide the services it has proposed. At 330 MHz,
the system will be capable of carrying approximately 40 channels, at 400 MHz,
approximately 52 channels. 1be system can be relatively easily expanded to
permit 400 MHz operation. Cox discusses the need to replace 40 trunk ampli-
fiers with feedforward trunk amplifiers (which are more expensive but have
better operating characteristics) in order to expand. lbis point leads us to
believe that it intends on using active equipment in its rebuild that will
initially be able to carry 400 MHz but that has been adjusted to operate at
330 MHz, thereby explaining the relatively small cost that it has estimated
would be required for an eventual expansion to 400 MHz.
Cox has stated that the expansion to 400 MHz would depend on the avail-
ability of programming, the extent of subscriber demand and the cost that
would have to be borne by Cox and the subscriber. It has also reserved the
right to effect an expansion of channel capacity using whatever the appropri-
ate technology is at the time the expansion is deemed necessary. Th.is posi-
tion would allow it to make use of newer technology that may be available,
such as bandwidth compression techniques that would allow two channels to be
squeezed into the capacity previously needed for one channel. lbese techni-
ques have been discussed in the cable industry, however, a product has not yet
appeared on the market.
II-IO
4. CONVERTERS
As a major part of its rebuild, Cox would methodically changeout all of
the different models of converters presently being used and would give all
subscribers a Sylvania model 4040 converter. 'lhe use of the single model of
converter will reduce Cox's inventory and repair needs. 'lbe Sylvania conver-
ter will also be an improvement to subscribers in terms of the features that
they will see. 'lhe Sylvania converter is programmable to be able to deliver
whatever channels are authorized. It contains a memory chip that will in-
struct the descrambler to decode only authorized channels. It will alow the
subscriber to scan through all channels or enter certain channels into a
"favorite channel" memory for faster access. 'lhe converter also has options
that would allow for a wireless remote control, and parental control features
which would allow selected channels only to be viewed if the correct code
is entered on the converter's key pad,
The Sylvania converter is also operational to 400 MHz. This means it
would not be necessary to replace all converters as channel capacity and of-
ferings increase.
5. SYSTEM PERFORMANCE -CASCADE LENGTH
One of our primary concerns is to insure that any system is designed in
such a way that subscribers can expect to receive high quality service. As
was noted in an earlier section, the rebuild process should serve to clean up
some of the problems that have been caused by mechanical failures or aging
equipment. However, the question about cascade length and expected perfor-
mance are also important issues.
II-11
Although Cox does not propose to relocate its headend, it does expect to
reduce its longest amplifier cascade from the present 40 amplifiers to around
29. This reduction will come from the use of new equipment with improved
operating characteristics as well as from a system design utilizing a more ef-
ficient trunk routing. In order to reduce the cascade further, it could be-
come necessary to consider some change in the system architecture from the
present single headend design to one that would employ one or more headends
with remote hubs. This could serve to reduce cascades but would require more
capital for such things as duplicated reception facilities or headend to hub
interconnection.
In any event, the system Cox is proposing to build will be capable of
delivering the following performance:
I I !FCC Requirement
INCTA Recommendation
!Cox Proposal
C/N
36.00 db
40.00 db
44.01 db
CTB I
I
Not required!
-53.00 db I
-50.69 db I
Cox's specifications are well above the minimal stand~rds set by the FCC,
are also much better than the NCTA's recommendations and describe a system
that will be able to provide good service to all subscribers.
While we would like to see the longest cascade reduced even further, if
possible, such an action may require a material change in the system design.
As the proposed system will be capable of delivering high quality service, a
system design change in order to solely.reduce amplifier cascades does not
appear warranted.
II-12
One additional point regarding amplifier cascades should be noted. in
its redesign of the system, Cox plans on using at least 4 separate trunks to
provide service throughout the City; each trunk would serve a separate
geographical area. Compared to the 2 main trunks presently used, this action
would further segment the City with the results being a smaller number of
subscribers being served on each trunk. '.Ibis increases the reliability of the
system due to the fact that a problem or accident that may disable one trunk
will not affect the same number of City residents as with the existing system.
The separate trunks could also become important if two-way utilization of the
cable system is envisioned (discussed in a later section).
6. EMERGENCY ALERT SYSTEM
A new feature that Cox is proposing to include in its rebuilt system is
an emergency alert system. Equipment at the headend would be capable of
overriding the audio and video of all TV channels, the audio of simulcast FM
channels and the audio of the local FM channels (that Cox intends on offering
as an expansion to present FM services). lbe purpose of such a system is to
allow an emergency message to be transmitted, after all channels have been
overridden, to inform subscribers of emergency situations (e.g., weather alerts)
no matter what channel they are tuned to. Such systems have been included in
most recent new franchises and renewal situations as a public service. lbe
activation of such a system can be accomplished in a number of ways including
directly at the cable system's headend or remotely from a designated city
official's office. As the actual desires of City in this area have not been
explored, Cox has not proposed a definite operational plan for this system
. .
11-13
but would rather negotiate all pertinent details with the City prior to the
systems implementation.
7. STANDBY POWERING
Cox has also proposed to enhance the reliability of· its cable system by
making provisions for complete standby powering. It would install a 45 Kw
generator at its headend that would supply power to all electronics and key
lighting and air conditioning systems. It will also provide a UPS (uninter-
ruptible power supply) for all equipment that may be sensitive to the finite
lag or transfer time between power supplies. It has also proposed to provide
standby powering for its distribution plant throughout Lubbock. It has
proposed to install supplies with a 2 hour capacity versus the 4 hour capacity
we have seen proposed in other markets. Based upon its explanation (mainly
the quality of Lubbock Power and Lights system-average outage of 30 minutes)
we agree that a 4 hour supply does not appear to be needed and would indeed
constitute an unecessary expense. The 2 hour supplies should prove to be
sufficient for use in Lubbock.
8. INSTITUTIONAL NETWORK
The newest and most non-traditional feature of Cox's proposal is the
inclusion of an institutional network. Institutional networks, or, I-Nets,
are one of the most talked about recent developments in the cable industry and
have the potential to greatly expand the role of the cable company in its
franchise area.
The I-Nets are basically a separate and distinct communications system
that can be set up to provide service to strictly institutional entities
II-14
(e.g., schools, libraries, governmental departments, etc.) or can include
commercial users. The services that can be provided could be one-way or
two-way video, audio or any data transmission. Generally, the cable company
provides the mechanism to allow communications (i.e., the cable network
itself) and may also supply or assist in the selection of suitable terminal
and switching equipment.
Cox has proposed to construct an independent I-Net that would be built
with 400 MHz mid-split equipment. The "mid-split" here signifies that the
separation between upstream and downstream signals is generally in the middle
of the useable bandwidth, giving a more nearly equal number of upstream and
downstream channels. Th.is network will be capable of carrying 29 standard
video channels upstream and 27 standard video channels downstream. Since
the bandwidth required for data is usually much less than that required for
a video signal, if data uses are envisioned, many more "channels" can be
squeezed into the available bandwidth.
Cox has planned on constructing the I-Net similtaneously with the sub-
scriber cable and estimates that 16 plant miles will be required to connect
the following sites:
NORTHSIDE SITE:
EASTSIDE SITE:
CENTRAL SITE:
WESTSIDE SITE:
(and Possible
Hub Location)
Estacado High School
1504 E. Itasca
Dunbar-Struggs High School
210 E. 26
Lubbock High School
2004 19th
Texas Tech University
19th and Indiana
\
SOUTHSIDE SITE:
OTHER SITE:
II-15
Monterey High School
3211 47th
Mahon Library
1306 9th
Municipal Civic Center
1501 6th
City Hall
916 Texas
Cox Cable Lubbock
6710 Hartford
Cox has stated that these locations are its first estimates of those
sites that should be initially passed by the I-Net, however, it also states
that this is subject to change depending on actual circumstances, such as
where can the availability of the I-Net be best utilized. Cox is willing to
discuss the design and utilization of this network with all potential parti-
cipants and will alter its preliminary layout if other locations, such as the
LISD offices are determined to be desireable locations for connection.
The I-Net will allow those locations connected the ability (if they de-
sire) to send information, video, audio or data, to the system headend. When
this information is at the headend, it can be routed back along the I-Net to
another institutional location. When the information is at the headend, it
can also be routed back on the subscriber cable. Such an ability will allow
programming to be originated in the field and relayed to the headend where it
can be relayed live, or tape delayed, for delivery to subscribers. Such pro-
gramming could include programs from the Civic Center, educational, sports or
general interest programming from Lubbock's schools, or possibly functions at
City Hall. The I-Net and subscriber cable could also become a significant
II-16
force in the local educational environment. Since all schools will have ac-
cess to programming on the subscriber cable, it would be possible for Lubbock's
schools to assist in the teaching of students (shared lectures or specialized
programming) or in their own administrative requirements (expanded instruction
and education for teachers and staff). The I-Net and subscriber cable will
allow institutions to share resources without always requiring the expense and
time involved in coordinating in-person meetings or conferences.
We find Cox's inclusion of an I-Net for Lubbock to be an important por-
tion of its proposal which has the potential of being very beneficial to Lub-
bock. However, we would note that up until this time all discussions along
these lines have been preliminary and tentative with the result being a rather
sketchy description of the network to be installed. While the electronic par-
ticulars (bandwidth/number of available channels) is clear, we would suggest
that the actual design or routing of the network itself be closely studied
while an ascertainment of Lubbock's institutions is conducted in order to
clearly identify the most advantageous locations to have connected and the
probable uses of the I-Net. The general terms outlined in Cox's proposal
could be included in the agreement with the stipulation that parameters are
subject to change following the ascertainment study. It is likely that the
ascertainment study could be conducted in the pre-construction time period
noted by Cox (for the securing of permits, etc.) with the results being in-
corporated in its design without affecting Cox's ability to activate the sys-
tem when proposed.
I
II-17
9. SUMMARY
overall, we find that we generally approve of the technical portions of
Cox's proposal. The proposal would serve to expand the number of channels
available to City residents. The rebuild will clear up many of the problems
that have been plaguing the present system, specifically the age of the
system, the overly long cascades and the condition of service drops, with the
result being improved service for subscribers. The inclusion of standby
powering will serve to increase the reliability of the system as a whole and
could play an important part with the emergency alert system proposed to
safeguard Lubbock residents. The addition of an Institutional Network for
Lubbock can also prove to be of great benefit to the City and its residents,
but as we pointed out in the previous discusssion, more work is required to
define the actual scope and design of the I-Net.
While we find ourselves in general approval of Cox's technical plans as
submitted, we would be remiss in our duties if we did not point out and
discuss two of the most active technical areas in the cable industry -the
two-way activation of the subscriber cable and the use of advanced address-
able or interactive converters, which Cox has not directly addressed or
included in its proposal. These discussions are contained in the following
section.
ll-18
C. OTHER CONSIDERATIONS -TWO-WAY ACTIVATION AND
. ADDRESSABLE/INTERACTIVE CONVERTERS
1. TWO-WAY ACTIVATION OF THE SUBSCRIBER CABLE
In the past few years much attention has been focused on the idea of
using the cable television distribution system as a conduit for information,
not only .E2,_ the subscriber ( termed "downstream" transmission) but also .f.!2.!!
the subscriber (termed "upstream" transmission). This idea is made possible
by the fact that cable systems can be designed to carry information in both
directions simultaneously using separate amplifier modules for upstream
traffic and downstream traffic. This capability was not available when the
Lubbock system was first constructed. However, all equipment installed after
1976, and all equipment to be installed in the rebuild is capable of carrying
or being upgraded to carry frequencies in the upstream direction.
In the typical sub low split system, the standard type of subscriber
system, the frequencies from 5-30 MHz are available for upstream traffic.
This capacity is sufficient for 4 standard video channels, however, for
technical reasons, one or two of these channels often cannot be used for video
but can be used for data transmission.
There are two basic scenarios advanced during discussions of two-way
activation which differ mainly by the extent of upstream activation; limited
activation; and system wide activation.
In the limited activation scenario, only those sections of the cable
plant required to reach certain identif~ed locations are initially activated
to allow upstream transmissions. This idea is best suited where there are
only a limited number of identified locations, such as schools, hospitals,
II-19
city offices, libraries, fire and police stations, etc., where the need for
upstream traffic is established. Under this scenario, the effect would be
similar to the 16 mile I-Net that Cox has proposed to install, however, there
are two major differences: 1) The I-Net would have a greater channel capacity
and 2) It is possible that the active upstream on the subscriber cable could
be available to a wider geographic area and, thus, more locations.
The system wide upstream activation scenario is the one that has been
receiving a lot of attention recently, and as the name implies, entails
upstream activation from any point in the system. Under this idea, every
location passed by cable, and hence every subscriber home, is a potential
origination site. Of course a system could not possibly handle a separate
video channel from every subscriber (due to the fact that all upstream chan-
nels must funnel through one of the four trunk cables in the Lubbock rebuild
as it returns to the headend. Each of these cables has a capacity of only
around 2 upstream video channels) but can conceivably carry data of some sort
from all or a portion of total subscriber homes, depending on the system
used.
The ability to generate a signal in subscribers' homes and to receive it
at the headend, or other location, has created interest in the cable industry
to develop and offer new and possibly non-entertainment services. The most
wide-spread of these services is home security. This service is
identical to the more traditional phone based security services differing
only in the use of the cable as the conduit for information from subscribers'
homes rather than telephone lines. Many of the systems now available go one
step beyond the telephone based companies and capitalize on the fact that the
cable is an alternative communications path. These systems incorporate as a
II-20
built in feature, or as an option, the ability in the subscribers' terminal
to use the coaxial cable for upstream communications .2!. standard telephone
lines if the cable system is not operating, thus increasing its reliability by
offering redundant communications paths.
While cable television based security systems can be said to be estab-
lished in the industry, this is a relative statement. As of December of 1982,
there were cable security systems operating in 38 cities across the county,
with additional systems included in most major franchise proposals. The other
data related uses of the cable television system are less well developed and
are only offered in limited cases or as pilot projects. These uses would in-
clude energy management (both residential and institution) traffic management,
remote meter reading, videotext, transactional services, telemetry and gateway
services to remote data banks.
'While these services have not yet become generally available in the
cable industry, many industry analysts expect them to become increasingly
important in the future as the direction of the cable industry turns from that
of a strictly entertainment medium to a more total communications orientation.
Although the need for initial or immediate upsteam activation may not be evi-
dent, provisions should at least be made to insure that the cable system
can and will be able to take advantage of new developments. Cox's proposed
system can be upgraded to allow two-way operations. The City may want to have
Cox outline a time table or the circumstances that would serve to trigger an
upgrade.
n-21
2. ADDRESSABLE/INTERACTIVE CONVERTERS
Addressable and interactive converters are the most recent step in the
evolution of the subscriber "terminal" from a simple frequency translator,
into an actual control mechanism and the avenue to new services and operating
efficiencies.
These converters are the result of the merging of the converter and com-
puter technology. The first step in this merger is the programmable converter
that Cox has proposed to use after the rebuild. 'Ibis type of converter basic-
ally has a built-in computer chip that is programmed at the cable company's
offices based on the actual services that an individual subscriber has elected
to receive. When placed in the subscribers' homes the converter will only
allow authorized channels to be viewed. The use of the computer chip also
allows the additional features that were noted earlier that are not available
on older types of converters, i.e., favorite channel recall, and parental
control capabilities.
The addressable converter operates in the same way with one significant
difference. While the programmable converter must be programmed at the cable
office for any service change, the addressable converters list of authorized
channels can be updated or changed while it remains in the subscribers' homes
delivering service. :Each of the addressable converters in a system is given a
unique identification number. A computer at the headend can send a stream of
data down the cable with a converter only reacting if the data stream contains
its identification number or address. Since the converter only receives and
does not transmit data, it is sometimes called "one-way addressable." This
ability can be of great use to the cable operator as it can allow the operator
to change a subscriber's service level without requiring a service call. It
u~22
can also be used to remotely disconnect (by making the converter inoperable)
a subscriber who is seriously delinquent with his bill. The addressable
converter can also allow the cable opertor to sell pay-per-view (PPV) pro-
gramming. The cable operator would have a single event (usually a major
fight, sporting event or concert, although early release movies are also
offered) that he wishes to sell as is, i.e., not as part of another channel
like HBO or Showtime. The operator puts this program on a separate channel
and instructs his computer to only authorize the converters of those subscri-
bers who have previously paid or ordered the event (typically, ordering is
done over the telephone or through the mail).
The interactive or two~way addressable converters generally offer the
same features as the addressable converters plus the ability to talk back or
interact directly with the controlling computer at the headend. Incorporated
in the converter is a data modem that takes the subscriber's information,
inputted in a special manner on the converter's controls, and sends it back
upstream to the headend. The use of these converters, of course, requires
that the cable distribution plant is fully activated in the upstream direc-
tion. The ability to send data to the headend allows the concept of PPV to be
expanded to IPPV ( Impulse pay-per-view) in which the subscriber can order and
receive pay-per-view programming by ordering at the time the program is
offered. There is no need to go through the time lag required for Telephone
or mail preordering. The interactive converter can also allow the company
to offer polling type programs where the subscribers can cast his vote con-
cerning a topic of interest.
The company's choice of converters is largely developed on the types of
services that they plan to offer and their experience with the equipment
II-23
manufacturers. Cox has told us that they plan to use the Sylvania program-
mable converter because it has used them successfully in the other markets and
currently has a stock pile of units that are available for use in the Lubbock
system. Cost can also be an important factor and it may be that Cox is
willing to sacrifice the service related benefits to be found with addres-
sable converters (authorization of PPV, service level changes, remote discon-
nects) for a less costly converter to place in all homes. 'Ibis could be the
case if Cox experienced significant theft of converters in the past. Over-
all, we find that the converters proposed by Cox will be acceptable for the
services being proposed. however, the City may wish to have Cox discuss these
newer technologies in reference to the system or its future.
•
III. SERVICES EVALUATION
A. INTRODUCTION
Cox Cable Lubbock has proposed an upgrade of subscriber services as a
part of the renegotiation of its franchise with the City of Lubbock. In this
chapter, a description of proposed services is presented and compared with
services currently available in Lubbock and with types of services available
to cable operators today. Items of consideration include basic service
packages offering programming from broadcast signals, automated services,
satellite delivered programming and local channels. Premium services, such as
movie channels which are provided at additional fees on a per channel basis,
are also covered.
B. PROGRAMMING AND CHANNEL ALLOCATIONS
Cox has proposed for Lubbock subscribers a variety of changes in service
packages and rates. Currently a package of 16 basic channels are offered for
an $11.00 monthly fee. Three pay channels, FM/Audio services and a printed
program guide are also available as options. Two discount packages, comprised
of basic and pay services and FM service and/or a program guide are also avail-
able.
Proposed cable services include a 12 channel basic tier of service for
$8.00 monthly which would be the prerequisite level for two optional tiers
IIl-2
and five optional pay services. The two additional tiers may be purchased
separately and are not prerequisite for each other or for any pay channels.
' A variety of discount pack.ages are also proposed, to include various combina-
tions of basic, the two tiers, pay services, a remote converter and a printed
program guide.
Table III-1 presents a comparison of existing and proposed services
including rates, options and discount pack.ages. This table will be referred
to throughout the report and the reader is advised to utilize this table for
reference.
1. BROADCAST SIGNAL CARRIAGE
Broadcast signals are available i~ two categories, those local stations
which cable operators are required by the FCC to carry, including Lubbock's
three network stations, a PBS affiliate and an independent station. The other
type of broadcast signals are the so called "super-stations," WTBS-Atlanta,
WOR-New York and WGN-Chicago, which are independent stations whose signals are
distributed nationally utilizing satellites. Cox is currently offering the
five local stations and the three super stations, and these eight channels are
also included in its proposed service pack.ages. In the existing system, only
one pack.age of basic services for $11.00 is offered which includes all ser-
vices, including local and imported broadcast signals. In the proposed sys-
tem, the Basic pack.age for $8.00 monthly plus optional Tier 1 for $3.00 would
have to be purchased for reception of these eight broadcast channels. The
"a la carte" price (the sum of the prices of each item purchased individually)
of these two pack.ages would also be $11.00. For the subscriber interested
III-3
LUBB A!USON OF EXISTING A.ND PROPOSED SERVIC&S
I EXI ICES PROPOSED SERVICES I
I ,--, 5-Star I 1---liiiii'c"°"I Bade ,--,--,--,-"r-1-1
I I IDiacountfDiacountj I I Plu• I Plua I I I Diacount Pacll&gea I I I l~IPackage !Package I I Baaic !Tier l ITier 2 I l_l_l _l_!L_I 13 I 14 I 15 I
I I I I I ,--,--,--, I I ,--,--,--, IBASIC SERVICES: I I I I I I I I I I I I I I I Local lroadcHt t I I I I I I I I I I I I I I II.BX I X I X I X I I X I X I X I I X I .I I X I .I I X t I UHC I X t X I X I I X t X I X I I X I X I X I X I X I I KCBD I X I X I X I I X I X I X I I X I X I X I X I X I I rrxr I X I X I X I I X I X I X I I X I X I X I X I X I I IUAA I X I X I X I I X I X I X I I X I X I X I X I X I I llll!!?rted Broadcast I I I I I I I I I I I I I I I WOR I X I X I X I I I X I I I X I X I X I X I X I I WTBS I X I X I X I I I X I I I X I X I X I X 1 X I I WCN I X I X I X I I I X I I I X I I I X I X I X I I Automated I I I I I I I I I I I I I I I Program Guide I X I X I X I I X I X I X I I I I X I X I X I X I I Satellite I I I I I I I I I I I I I I I SIN I X I X I X I I I X I I I X I X I I I X I I I
I Nickelodeon/Arts I X I X I X I t t X I I I X I X I I I X I X I I MTV I X I X I X I I I X I I I X I X I X I X I X I I CBN I X I X I X I I I X I I I X I X I X I X I X I I CNN I X I X I X I I I I X I I X I I I X I X I X I I ESPN I X I X I X I I t I X I t X I X I I t X t X I I IJSA Netvorlt I X ! X I X I I I I X I I X I X I X I X I I I I Trinity I N/A I N/A I N/A I I X I X I X I I X I X I I I X I X I t 0--SPAN I N/A I NIA l NIA I l X I X I X I I X I X I X I X I X I I llaahville Network I NIA I N/A I N/A I I I X I I I I I X I X t I I I I I Weather Channel I NIA I N/A I N/A I I I I X I I X I X I X I X t X I I Financial News Netvorlt I N/A I NIA I N/A I I I I X I I X I X I X I X t X I I Lifetime I NIA I N/A I N/A I I I I X I I X I X I X I X I X I I CNN U I N/A I N/A I N/A I I I I X I I X I X I I I I. I I I I Local Channel• I I I I I t I I I I I I I I I Local Origination I NIA I N/A I N/A I I X t X I X I I X I X I I I X I X I I Religious Acceaa I N/A I NIA I N/A I I X I X I X I I l[ I X l X I X I X I I Goverment Acee•• I N/A I N/A I N/A I I X I X I X I I X I X I X I X I l[ I ' Educational Acee•• I N/A I N/A I N/A I I X I X I X I I X I X I X I I I X I
I I I I I I I I I I I I I I I !OPTIONAL SERVICES I.ATES: I I I I I I I I I I I I I I I Pay Channell I I I I I I I I I I I I I I I IIBO (Pay l) 1s10.oo I s10.oo I incl I 1,10.00 1s10.oo 1s10.oo I 1s10.001 incl I incl I tncl I incl I ' Showtime (Pay 2) IS 9,00 I incl I incl I 1s10.oo 1s10.oo 1s10.oo I l$10,00l$10,00I incl I incl I tncl I
' Galaviaion (Pay 3) 1s10.oo Is a.oo I $ a.oo I 1s10.oo 1s10.oo 1s10.oo I I $10,001 $10,001 $10,00I incl Incl I
I Disney Channel (Pay 4) I N/A I N/A I N/A I 1s10.oo 1s10.oo l$lo.oo I 1s10.001s10,001s10.001s10.oot tncl I
I Cinemax (Pay 5) I N/A I N/A ' N/A I 1s10.oo 1s10.oo l$lO.oo I l$l0,001s10.001s10.001s10,001s10.001
I Other Services I I I I I I I I I I I I I I I Remote Converter I N/A I N/A I NIA I IS 4,oo I$ 4.oo IS 4,oo I IS •.001 incl I incl I incl I incl I
I FH/ Audio ts 3,50 I s 3,50 t incl I I$ 3,50 IS 3,50 IS 3.50 I IS 3,501$ 3.so1s 3,so1s 3,501$ 3.501
I ON Cable IS 2.00 I incl t incl I IS 2.00 IS 2.00 I$ 2.00 I IS 2,001 incl I 1ncl I ,incl I incl!
I Ol!tional Tiera I I I I ! I I I I I I I I I I Tier 1 I N/A I N/A I N/A I IS 3.00 I incl I$ 3.oo I I incl I tncl I incl I incl I tncl I I Tier 2 I N/A I N/A I N/A I I$ 3.00 f$ 3.00 I incl I I incl I incl I incl I incl I incl I
I I I I ! I I I I I I I I I I I SUMMARY: I ! I I I I I I I I I I I I
I Nmber Basic Channell I 16 I 16 I 16 I I 12 I 20 I 19 I I 21 I 27 I 27 I 27 I 27 I I Number Pay Qiannel• I 0 I 1 I 2 I I 0 I 0 I 0 I I 0 I l I 2 I 3 I 4 I I Other Services I 0 I I ! 2 I I 0 I 0 I 0 I I 0 I 2 I 2 I 2 I 2 I
I I ! I I I I I I I I ·I I I I I MONTHLY I.ATE: 1.1.!!:.2!1...I $2t.oo I $3t.oo I l~tsu.go l~I lfU•oo1us.001§32.yo1$39.ool§47.yo1 I • Plua One Pay 1$20-21 I incl I incl I 1s1a. fs21. o I$ 1. o I I$ .001 incl I inc I incl I inc I
I • Plua '1'\10 Paye 1$27-31 I $29•31 I incl I l$28.0o+f$31,00 1$31,00 I l$32,00f$35,00I incl ! incl I incl I
I • Plus Three Fays 1$3&.oo I $39.oo I S39,oo I f$38,0o+ts41,oo 1841.oo I I $42,00J $45,001 $42,001 incl I incl I
I • Plus l'our Pays I N/A I N/A I N/A I I $48,0o+1$51,oo I $51.00 I l$52.00l$55,00f$52.00f$49,00I incl I
I a Plus Five Paya I N/A I N/A I N/A I l$58.0o+l$61.oo IS61,oo I l$62.00f$65,00l$62.00l$59,001ss1.001
I • Plus Remote converter I N/A I N/A I NIA I 1s12.oo IS15.oo 1$15.oo I 1$16.00I incl I fncl I incl I incl!
I • Plus FM 1$14.50 I $24,50 I incl I 1$11,50 1$14,50 1$14,SO I ($15.50f$28,SOl$35,50f$42,50f$50.50I I • Plue ON cable 1$13.00 I incl I incl I 1s10.oo 1$13.oo 1$13,00 I 1$14,001 incl I incl I incl I incl I I • Plus Tier I I NIA I N/A I N/A I 1$11,00 I incl 1$14,00 I I incl I incl I incl I incl I 1ncl I I • Plua Tier 2 I NIA I N/A I N/A I ISll.00 IS14,00 I incl I I incl I incl I incl I incl I incl I I • Plue Tier I and 2 I_JJJ,,!_1 NIA I N/A I I §14 ,oo 1--=--1__:__l_l..!!!!.,.1..!!!!.,.l...!!!£!._l..!!!!.,.1..!!!!.,.I I I X • Channel Allocation
Not included with deacribed package
Incl• Included with monthly rate listed
N/A• Hot Available
" -Galaviaion i• $8,00 if aecond or third pay
+. A $3.00 converter fee required th1• level only
III-4
expressly in these imported "super-station" channels, no increase in expendi-
ture would be required.
2. AUTOMATED SERVICES
One automated service, an alphanumeric program guide is currently avail-
able to Cox's Lubbock subscribers, and this remains unchanged •. The restruc-
turing of the packages would put this channel on the $8.00 Basic package.
3. SATELLITE SERVICES
The current line up of satellite services offered on the $11.00 basic
tier includes seven channels offering religious, Spanish language, children's,
news, sports, musical and entertainment programming. The proposal offers a
total of 14 satellite services, adding a variety of the popular types of
programming available today. These channels include public service, country
music, cultural, additional religious, financial news, health, women's and
additional news programming services. Not represented are several services
offering programming for several special interests such as Black Entertainment
Television, National Jewish Television, an educational service, The Learning
Channel, and a few other religious services. Two satellite channels are in-
cluded with the $8.00 basic service, five channels are available on Tier 1 and
seven are available on Tier 2. These have been grouped into non-cumulative
packages of entertainment and information categories to allow subscribers to
selectively choose programming interests. The Basic package plus one of the
tiers has a cost of $11.00; however, Discount Package Nwnber One, for $12.00
includes Basic, Tier 1 and Tier 2. This marketing strategy offers a nice
discount to the consumer as the "a la carte" price would total $14.00. The
111-5
$12.00 pack.age represents only $1.00 increase in the current basic rate, and
includes 11 new services.
4. COMMUNITY PROGRAMMING
A new type of programming is included with Cox's proposal. Four channels
are proposed, including one local origination channel and three access -channels,
each designated for primary use by certain affiliated users. These desig-
nations include religious, governmental and educational access. All four
channels are included on the $8.00 Basic tier, A description of proposed
facilities and equipment for program production is included in Section C of
this chapter.
Traditionally, both local origination and access channels are designed
for community programming. Origination programming is largely under the cable
operator's control, usually utilizing company staff for production, possibly
with community input. Access programming, on the other hand, is programming
produced by community individuals, organizations or institutions; they main-
tain final control over the program and its content.
The inclusion of access channels was originally required by the FCC
several years ago, with one channel to be allocated each for public, govern-
mental and educational access. These requirements were struck down by a 1979
Supreme Court decision (FCC vs. Midwest VideoCorp., 440 U.S. 689 -1979);
however, these channel categories have stayed with the industry. Cox has
not proposed a public access channel, and we have some concern regarding
those community members not aligned with education, government or religious
entities as to how their access needs might be met. However, it is our
understanding that Cox appears to be flexible and that some channel sharing
III-6
arrangements could occur for independent programmers. Additionally, proposed
channel capacity is such that a public access channel possibly could be allo-
cated should demand arise.
5. PREMIUM SERVICES
Currently, Lubbock subscribers have as options three pay channels, HBO,
Showtime and Galavision for $10.00, $9.00 and $10.00 per month respectively,
with a discount for Galavision to $8.00 if it is a second pay service. These
pay channels are also included with two discount packages, which reduces
costs from what the "a la carte" prices would be. The existing "3-Star"
package for $21.00 includes Basic and Showtime and the "5-Star" package
includes Basic, Showtime and HBO, plus FM/Audio services and On-Cable (program
guide) for $31.00. (Further discussion of discount packages is provided in
Section B-8 of this Chapter).
In its proposal, Cox has offered to provide the same three channels plus
two additional pay options, The Disney Channel and Cinemax. All five pay
channels would have a monthly cost of $10.00 each; however, there are a
variety of discount packages which offer savings to consumers interested in
multi-pay subscriptions. (See Section B-8 of this chapter.)
6. FM AND AUDIO SERVICES
Currently Cox offers a package of FM and Audio Services for $3.50
monthly which includes satellite service, WFMT from Chicago and three simul-
cast services, for HBO, MTV and Showtime. The FM service is available on an
a la carte basis, and is also included with the 5-Star discount package.
III-7
Cox offers a significant increase in Audio services in its proposal to
include up to 14 local AM and FM off-air radio stations and a variety of
simulcast services to include MTV, Nashville Network and pay services. Final
selection has not been determined. This package would have a $3.50 monthly
fee and would be available only on an "a la carte" basis, not as part of a
discount package.
7. OTHER SERVICES
Currently as part of the 3-Star and 5-Star packages, a published program
guide is included. This guide also may be purchased separately for $2.00 per
month.
Cox proposes to continue to offer this guide for $2.00 monthly; also to
be included with Discount Packages Numbers 2 through 5. A remote converter
with a $4.00 a la carte monthly fee would also be offered with the discount
packages. This is discussed below in further detail.
8. SUMMARY: BASIC AND PAY SERVICES AND DISCOUNT PACKAGES
In its proposal, Cox has offered a significant increase in the variety of
services which would be available to Lubbock subscribers. For those primarily
interested in basic services, no radical cost increases are proposed, as the
existing $11.00 fee which offers 16 channels can be compared with Discount
Package Number One offering 27 channels for $12.00.
Cox has offered five discount packages which provide significant dis-
counts compared with a la carte prices. This will function as a useful mar-
keting strategy. The inclusion of the remote converter and the published
III-8
program guide complement the basic and pay options, and for subscribers inte-
rested in multi-pay offerings, savings can be achieved over a la carte prices.
Discount Package Number One at $12.00 offers a $2.00 savings over the
a la carte prices of ,Basic, Tier 1 and Tier 2 and this is clearly a good buy
for the consumer. Discount Package Number Two includes Basic, Tier 1, Tier 2,
one pay service, the program guide and the remote converter, for $25.00, a
$5.00 savings from the a la carte totals. However, a subscriber interested
primarily in one pay service could take Basic, Tier 1, Tier 2 and one pay
service on an a la carte basis for a total cost of $24.00. Moreover, a sub-
scriber could take Discount Package Number One at $12.00 and one pay service
at $10.00, and reduce the cost to $22.00. Since an automated program guide is
available, and possibly the local newspaper carries cable listings, this may
be of interest to some subscribers.
Discount Package Number Three is the same as Number Two, plus it adds a
second pay service for a total of $32.00 monthly, an $8.00 discount over the a
la carte sum. Again, if the remote converter and the program guide are
deleted, the sum of the a la carte rates of Basic, Tier 1, Tier 2 and two pay
services would be $34.00 so a $2.00 savings would be realized by purchasing
Discount Package Number Three. If we took Discount Package Number One plus
two pays at $10.00 each, the monthly rate would be $32.00, which is the same
as the Discount Package Number Three which therefore represents a better buy
for the money as the remote converter and the program guide are included.
At the next two levels the savings of the discount packages are at least
$3.00 no matter how services are purchased, so the cost conscious consumer
would be advised to subscribe to these discount packages when interested in
multipay programming.
..
III-9
The point of the preceeding discussion is not to find fault with the
proposed discount packag~s; on the contrary, they represent a functional mar-
keting strategy for Cox and offer attractive discounts for subscribers. The
only point is that selective buying could be beneficial to those subscribers
interested in only one pay channel at minimal cost. The minimum prerequisite
costs for one pay service would involve limiting the scope of basic services
received to either the $8.00 Basic Package or to Basic plus one tier of the
two. Both of these selections would cost $21.00 ($8.00 Basic plus $3.00
required converter plus $10.00 pay equals $21.00; or $8.00 Basic plus $3.00
for Tier 1 or Tier 2 plus $10.00 pay equals $21.00) and the extra basic ser-
vices are worth the extra $1.00 to $4.00 per month.
The proposed discount service packages do not include the expanded FM/
Audio package at any level; it would be an "add on" service for $3.50 monthly.
Overall, Cox has proposed a good variety of additional -basic and pay
services at rates that would not be significantly higher than existing rates.
A further point should be noted regarding second set fees for multiple out-
lets in the subscribers' homes; if the $8.00 Basic service only is subscribed
to, an additional outlet would be $3.50 per month. At any other level of
service, from Basic plus Tier 1 through Discount Package Number Five, each
• • second set would cost $5.50 for a total duplicate of the first set. This is
a reasonable price for what could amount to packages costing $47.00 or more.
III-10
C. COMMUNITY PROGRAMMING
As discussed in the previous section of this chapter, Cox has proposed
one local origination channel and three access channels, one each for use by
educational, governmental and religious groups.
In its proposal, Cox noted that it plans to allocate $109,000 for the
creation of community·production services. This money is specifically bud-
geted for purchase of production equipment which would be "stored in a facil-
ity readily accessible to all citizens of Lubbock."
Cox states that "[l]imited production capability will be available after
completion of phase one ••• "which according to construction estimates would
be 6 months after start of construction. The full production capabilities
would be available upon completion of the system upgrade, which would be 18
months after the start of construction. The $109,000 is budgeted in the pro
forma in Year 7, which would be 1985, with $10,000 replacement in Years 12
and 15.
In a letter, Cox clarified a few items relating to community program-
ming. A sample list of production equipment was included.
Cox envisions a flexible production unit with 4 portable cameras which
are adaptable for studio use. Gear for portable production units is included,
such as battery packs, tripods, 4 portable 3/4" VCR's, 2 light kits, and
microphones. The equipment list also contains complete post-production and
playback facilities, including an edit controller, several monitors, four 3/4"
VCR's, one 1/2" VHS VCR, and one 1/2" Beta VCR. Control room equipment
includes a switcher, a special effects generator, a character generator, a
III-11
dual monitor and test equipment. Audio equipment would also be provided,
including an audio board, amplifier, speakers and a cassette deck.
Cox states that the production equipment would be available between
8:30 a.m. and 5:00 p.m., Monday through Friday with night and weekend time
available with advance scheduling. Bi-monthly eight hour training classes
are planned.
Overall, Cox appears to have made a reasonable commitment to community
production. It appears from the proforma payroll projections that $25,000
annually for staff will be available with a limited operating budget. The
equipment package as proposed seems to offer adequate facilities for community
producers.
D. ENHANCED SERVICES
In this section of the report, we provide some descriptive information
about the utilization of a cable system for non-entertainment services.
Generally, implementation of these services requires activation of the two-way
capabilities of the cable plant. Althoµgh no plans have been proposed by Cox
for Lubbock, this cable company has been experimenting in this field in other
markets. Although the economic feasibility for most enhanced services at this
time is tenuous at best, City officials should be aware of future possibili-
ties. The technical chapter Qf this report addresses Cox's proposed system
and its capabilities for introduction of enhanced services.
Enhanced services can be grouped into five general categories: (1)
interactive services; (2) transactional services; (3) information retrieval;
(4) messaging/electronic mail; and (5) telemonitoring. Many of these services
III-12
are currently in operation utilizing telephone lines as the primary means of
transmission; however the development of two-way cable systems, interactive
subscriber converters and sophisticated headend computers has led to explora-
tion of cable's potential for providing these types of services. Industry
sources predict continued growth for a variety of cable communication uses for
residential, institutional and business users; however, both the technical and
business aspects of these services are largely untested. Many companies are
currently conducting small scale field tests, and hard data about marketabil-
ity and costs are just being generated. There are also many technical issues
to be resolved before these services are available on a wide basis, including
reliable user equipment, headend computers and switching equipment capable of
handling a large volume of users. The current lack of national technical
standards for text services also has contributed to some delays in the United
States.
The following types of services are defined for Lubbock city officials'
information and reference.
a. INTERACTIVE or Two-Way cable systems have the ability to send signals
both downstream from the headend computer to the subscriber's residence, and
upstream from the subscriber's residence back to the cable headend. Subscri-
ber equipment is a terminal (converter) capable of receiving and sending these
signals, usually via a numerical entry keypad which also functions as a remote
control device. Interactive service can be somewhat passive, as in home
security or telemetry, in which the headend computer constantly monitors the
system and reports on the status, or it can be active, in which a subscriber
purposefully sends a signal upstream, as in opinion polling. Generally,
111-13
simple interactive services are confined to interactions between the subscri-
ber and the cable operator. Interactive capabilities may also be used for
remote and live cablecasting from community settings. Interactive capability
is fundamental to many of the following services.
b. TRANSACTIONAL services utilize interactive technology and can dis-
play textual, graphic and/or video information. Third parties such as banks
and merchants are usually involved with providing tele-shopping, tele-banking,
and ticket or travel reservations. Subscribers may utilize individual, private
access codes to order merchandise or to conduct financial transactions such
as bill paying or funds transfer. Payments can be made by entering credit
card numbers or other authorized account numbers.
c. INFORMATION-RETRIEVAL SERVICES can be grouped into three categories:
Teletext; (one-way) Videotext (two-way); and Computer Gateway Access.
(1) Teletext is a one-way service in which subscribers need some
form of text decoder. Information in a preformatted page format may be down-
loaded from the headend either on the Vertical Blanking Interval (VBI) of a
video channel, or on a full 6 MHz video channel. Teletext databases may be
obtained from a third party information provider, such as services distributed
on the VBI of satellite channels, or a cable operator may develop a database
in conjunction with a local information provider. As this information is
transmitted continuously, in a cyclical page format, the method of access is
often referred to as "frame-grabbing". The subscriber will view a menu, or
table of contents, make a selection by pushing an appropriate numerical code,
III-14
and the decoder will wait for the 'page' of interest to come around in the
cycle, and grab it for display on the TV screen. The important characteris-
tics to recall for teletext are that information is preformatted into pages
and distributed on a non-interactive basis to the users. Access time is
dependent upon the rate and method of transmission and the amount of memory in
the decoder. Teletext services are often referred to as "pseudo-interactive"
because requests made utilizing the decoder appear to be interactive to the
user.
(2) Videotext is very similar to teletext, except that it uses full
two-way capability. Subscribers need interactive converters/decoders or
terminals to access pre-formatted pages of information; however, in this mode
requests go directly to the computer database. Cable operators may provide
local databases for subscribers, or may access other information providers'
databases from remote locations. Charges may be levied on a use sensitive
basis for computer hook up time. Because users interact directly with a com-
puter, access time for videotext services may be quicker than in the teletext
mode, but this is also dependent upon rate and method of transmission.
(3) Computer Gateway services can be provided to subscribers by the
cable operator by the provision of headend computer tie-ins with other exter-
nal computer services. Information is loaded downstream in a pure data stream
format, and subscribers need a compatible terminal (such as a microcomputer)
and an appropriate interface device (such as a modem). Services can include
database access, computing, data processing, storage and retrieval. The
cable operator may provide this service by tying in with organizations as
Telenet or Tymnet, public telecomputing networks which provide gateways to
III-15
major computers across the country. In this mode, a cable system functions
similarly to telephone lines for transmitting data signals. A variety of
charges may be levied to users, including monthly hook-up charges paid to the
cable operator and use charges paid to the information provider.
d. ELECTRONIC MAIL or Message Services (EMS), provide the capability
for users of a particular common network to communicate with one another by
sending data or electronic textual messages. Messages may be preformatted,
such as greeting cards, or alphanumeric "notes" may be sent between indivi-
duals. Other uses can be point-to-multipoint advertisements or community
announcements. Reception of electronic messages requires compatible decoding
equipment and a display screen; sending of messages may require more capable
terminals, such as alphanumeric keyboards or home computers. GTE's Telenet
service is a national EMS which presupposes intelligent, alphanumeric key-
boards. Other software exists for local EMS using simpler equipment.
e. TELEMONITORING generally involves headend computer activated status
monitoring of the cable system. Services include home security, energy manage-
ment and telemetry.
The use of cable systems to provide security monitoring services is one
· · of the more common uses of two-way systems. They function virtually identical
to other kinds of security systems except that transmission occurs via the
cable line rather than the telephone lines. A two-way cable plant is required.
Configurations may be as simple as a manual alert button for police, fire
and/or medical emergencies. More complicated monitoring devices can include
intrusion sensors, audio alerts and other automatic home protection devices.
III-16
Cable operators may operate home security systems as an integral part of the
cable system, or in a joint venture with local companies.
Although Cox is not offering any enhanced services for Lubbock at this
time, it is suggested that city officials ask Cox to reevaluate the economic
feasibility of enhanced services at a later time in consideration of future
communication needs. The technical chapter of this report discusses the system
capabilities; Lubbock officials may wish Cox to comment on future adaptations.
E. SUMMARY
Cox has proposed a good variety of new services at reasonable rates for
Lubbock. It should be noted that several details in this chapter were based
on telephone clarifications with Cox cable Lubbock, and, therefore, should be
confirmed. Overall, we find a satisfactory upgrade of the cable system
services.
IV. FINANCIAL EVALUATION
This section reviews Cox Cable's financial performance in Lubbock over
the past 5 years and analyzes its expected performance over the next 10 years
of operation. Cox has provided a very detailed and complete set of financial
data which has been documented by its inclusion of the requested FCC Form 326
and audited annual statements verifying reported revenues. We examined actual
and projected revenues, expenses, and capital expenditures. We also discuss
the impact of the proposed rebuild on system profitability.
A. REVENUES
Appendix Tables I through IV show historical and projected subscriber
and revenue detail. over the past 5 years, Cox reports $4.956 million in ave-
rage annual revenues. This revenue was received from the following sources:
I Average Annual Revenue 1979-19831 l _____ (_$_oo_o_s) _____ I
I I
!Basic (includes 2nd set I
I and installation) 29061
jPay Service 20051
!Other 451 I -,
!Total 49561
The basic service revenues were obtained from a subscriber base which
equalled 18,215 in 1979 and increased to 28,357 in 1983. This is a 55 percent
increase in basic subscribership and represents healthy growth. Some of this
IV-2
growth in the subscriber base is attributable to the increase in cable plant
miles and regional density. In 1979 the system passed 43,000 homes with 400
miles of plant. By 1983 the system passed 56,023 homes with 458 miles of
plant. Over this 5 year period, the system has increased its density of homes
per mile of cable plant from 107 homes per mile to 117 homes per mile.
The basic service penetration rate (the percent of homes which subscribe
to cable service when it is available) also appears to have improved markedly
over the past 5 years. In 1979 and 1980, the basic penetration rate was 42
percent. In 1981, the basic penetration rate increased dramatically to 51
percent and has maintained that level since.
Over the 1979-1983 period, basic service revenues have increased by 123
percent. This is partly due to large increases in the subscriber base, but
also because of the frequent rate increases obtained by the cable operator.
In 1979, Cox reports its basic service rate at $8.00 per month. This rate
increased to $8.50 in 1980 then to $9.50 in 1981. The current rate of $11.00
per month for the 15 channel basic service is 38 percent higher than the 1979
basic service rate.
Cox currently offers 3 pay services; HBO, Spotlight, and Galavision.
Pay subscription increased from 11,222 in 1979 to 23,500 in 1983. The average
pay service to basic subscriber ratio has increased from .61 to .82 and pay
service revenues have increased by 207 percent over the last 5 years. Pay
service rates have increased from $8.00 per month in 1979 to $9.00 and $10.00
per month in 1983.
Average monthly revenue per subscriber for all services has steadily in-
creased over the past 5 years reflecting the steady increase in basic and pay
IV-3
services rates as well as the increased percent of subscribers selecting pay
services. The typical subscriber in. Lubbock now spends about $19.66 for cable
service per month compared with $12.19 per month in 1979, an increase of over
61 percent.
The substantial increase in the subscriber base as well as the frequent
increases in basic rates have yielded a very favorable increase in system
revenues. Total revenues reported in 1979 were $2.665 million. In 1983, the
system report $6.690 million revenues, a 151 percent increase.
Over the next 10 years, Cox forecasts continued growth in system revenues
due to the implementation of new services and additional expansion of the sub-
scriber base. According to the information provided, Cox plans to construe t
137 additional plant miles and pass 11,230 more homes. The result will be a
slightly lower density of homes per cable mile, declining from the current 117
homes per cable mile to 109 homes per cable mile.
Basic service penetration is expected to improve substantially over the
next 10 years. Cox forecasts an increase in penetration in 1984 to 55 percent
from 51 percent currently experienced. The market penetration rate is expec-
ted to gradually increase to 63 percent by 1993. In its operating expense
budget for the next 10 years, Cox does forecast substantial funds for advertis-
ing and promotion. An average of $260,000 per year is forecast for this pur-
pose. This level of commitment should aid the ability of Cox to realize these
subscriber growth projections. Over the next 10 years, Cox anticipates that
the number of basic subscribers will average 37,571 or 32 percent higher than
1983 levels.
IV-4
Cox forecasts that basic service revenues, including revenues from the
new tiers, installation and second set, will average $6.638 million per year
over the next 10 years, up 128 percent over the 1979-1983 average.
Cox appears to anticipate that its proposed tier package will attract
substantial subscriber interest. As is noted in other sections of this
report, Cox is proposing to revise its service structure from a single 16
channel basic service package for $11.00 per month to a 12 channel basic
service package for $8.00 per month and 2 optional tier packages containing
7 and 8 additional services respectively for an additional $3.00 per month
each. · Total.cost to a subscriber selecting the basic package with 1 tier
option is $11.00 per month, consistent with the current rate but offering
5 more channels of programming than are currently available. A discount of
$2.00 would be available for those subscribers desiring both options as rep-
resented by Discount Package Number One. (Subscriber services are addressed
in substantially more detail in the services analysis presented in this
report.)
By 1986, Cox expects that close to 50 percent of the subscriber base
would select each option. Obviously, there is some overlap expected in these
figures for subscribers selecting both options. We believe this is a reason-
able forecast since the price for basic plus one tier does not exceed the
current rate and thus should encourage the subscriber to add the tier service.
Pay service projections reveal an expected steady increase in subscrip-
tions. This increase appears to be more of a function of increases in basic
subscribers rather than increased subscription to pay services on a per
subscriber basis. As noted earlier, Cox is achieving a .82 pay service to
basic subscriber ratio. Cox expects to achieve a 1.00 pay service to basic
. .
•
IV-5
subscriber ratio by 1986. This is a reasonable albeit conservative forecast
for the future since Cox is planning to add three new pay services: The
Disney Channel, Showtime and Cinemax.
Cox's current pay service to basic subscriber ratio is consistent with
industry averages in older cable systems.
Cox expects pay services revenue to average $5.654 million per year.
In both its basic and pay revenue projections, Cox appears to have in-
cluded rate increases over the next 10 years. For example, average expected
revenue from basic service (including installation, second set and the tier
options) is expected to be $10.53 in 1985. The average monthly basic service
revenue per subscriber is forecasted to increase to $16.80 by 1993. Simi-
larly, the average cost of a pay service is expected to be $9.15 in 1985 and
increase to $16.65 in 1993.
Average revenue per subscriber is forecasted at $21.64 in 1985 and is
expected to increase to $36.05 by 1993; an increase of 67%.
overall, we believe Cox has developed reasonable revenue projections.
They anticipate substantial interest in the tier packages and this is consis-
tent with industry experience. Their expected revenue per subscriber over
the next few years is realistic.
B. OPERATING EXPENSES
Operating expenses are the day-to-day costs for wages, benefits and other
expenses a business incurs. In the cable industry, annual operating expenses
are often broken down into three categories; plant expenses, origination ex-
penses and general, selling and administrative expenses (GS&A).
IV-6
Cox experienced the following average annual expenses in Lubbock over the
past 5 years.
I Average Annual Expense 1979-19831
1 _____ ~<$-0_o_os~> _____ I
I I
!Plant 6381
!Origination 10901
IGS&A 10671
!Corporate overhead 3451
I -,
!Total 31401
over the past 5 years, the system has experienced substantial increases
in all categories of operating expenses, but, most especially, origination and
GS&A expenses.
over the next 10 years, Cox expects average annual expenses as follows:
I Projected I
I Average .Annual Expense 1984-19931 l _______ (-$O_o_o_s) ______ I
I I I Plant 16241
!Origination 33061
IGS&A 32451
!Corporate overhead 6621
I -,
!Total 88371
Under the category of plant expenses, salaries represent the major cost
item. In 1983, salaries and benefits represented 82 percent of total plant
expenses. Salary expense has increased an average of 9 percent per year over
the last three years. Cox forecasts expected increases in salary cost between
8 and 12 percent per year over the next ten years. Benefit expenses are ex-
pected to average 18 percent of salary cost.
IV-7
Maintenance expense is that expense associated with maintaining the dis-
tribution plant and headend equipment.
In 1983, Cox reports an average $250.00 per plant mile to maintain the
system. Th.is is high by industry averages but reflects the increased costs
associated with maintaining an older system. As the rebuild progresses over
the next few years, Cox expects maintenance cost to drop to around $150.00 per
mile and increase gradually as the plant ages and because of inflation.
Converter maintenance expense has dropped from $57,000 in 1981 to $26,000
in 1983. Currently converters are available to all subscribers. Cox is using
Oak 26 or 35 channel converters. Converter maintenance averaged slightly under
a dollar per subscriber in 1983. Converter maintenance costs are expected to
increase somewhat after the rebuild. Cox plans to replace its existing conver-
ters with Sylvania 4040 models and expects converter maintenance to average
about $1.60 per subscriber by 1985.
It appears Cox is paying around $3.00 per pole for pole rental fees. In
its projections, Cox has included substantial inflation in its pole site
rental budget and assumes in 10 years it will be spending close to $9.00 per
pole per year for pole rental.
We are surprised by Cox's power expense. In 1983, Cox reports an average
of $2.00 per mile for power expense. Usually power expense averages close to
$100 per mile. Cox has verified that this amount represents its actual cost.
Because Cox is continually building plant and adding subscribers, it is
able to capitalize a substantial amount of plant expense. In 1983, Cox capi-
talized a little more than 20 percent of its plant costs or $215,000. Over
the next 10 years, Cox expects to be able to capitalize approximately 19 per-
cent of its plant costs.
IV-8
As with all of its expense projections, Cox has included inflation in the
development of its plant expense forecasts. Costs are expected to increase
more rapidly over the next few years at around 14 percent due to per annum the
addition of new subscribers, rebuild cost and inflation. After 1986, Cox
anticipates that plant costs will increase annually at rates of 11 percent
declining to 8 percent by 1993.
Because Cox currently does not offer local programming in Lubbock, it re-
ports no associated salary or expense. Over the next 10 years, it does plan
to offer local access in programming and has budgeted an initial $25,000 per
year for staffing and some funds for access promotion.
Pay cable expense, the cost of acquiring pay signals from program_produ-
cers, was reported at $1.239 million in 1983 or approximately 48 percent of
pay revenues. This figure appears quite high to us since most multiple system
operators of Cox's size are able to acquire pay programming at a cost averag-
ing around or even under 40 percent of revenues. Cox expects that pay cable
expense will average around 47 percent of pay services over the next 10 years.
Cox expects that the cost of independent signals will double from 1983 le-
vels in 1984 due to recent increases in copyright royalty fees. Cox currently
carries three distant signals, WTBS, WOR and WGN. It will continue to carry
these signals after the rebuild.
Under the category of general selling and administrative expense, salary
.expense has averaged $387,000 per year over the past 3 years, or approximately
27 percent of total GS&A expense. Over the next 10 years, GS&A salary expense
is forecast to increase by 260 percent. Benefits are forecasted at about 18
percent of total salary expense.
•
IV-9
The other major items of expense under GS&A are advertising and promo-
tion, bad debt, and franchise fees.
over the past year, Cox has doubled its advertising and promotion expense
from $50,000 in 1982 to $100,000 in 1983. '!be 1983 advertising expense averaged
$3.52 per subscriber. Cox continues to anticipate substantial expenditure for
advertising over the next 10 years. Cox budgets an average of $260,000 per year
for this purpose or an average of $6.65 per year per subscriber.
Bad debt expense has fluctuated substantially over the past three years.
In 1981, bad debt represented 3 percent of system revenues. The percentage
increased to 9 percent in 1982 and fell to 2 percent in 1983. Typically, bad
debt expense averages l to 2 percent of system revenues in most cable systems.
Over the next 10 years, Cox forecasts bad debt expense at 1.9 percent of
system revenues.
Franchise fee payments to the City have averaged $191,000 per year over
the past three years. Cox bases its franchise fee payment on 3 percent of
total revenues less bad debt expense.
over the next 10 years, Cox forecasts franchise fee payments equalling
about 3.4 percent of total system revenues. In its projections, Cox assumed
that it would be paying a 5 percent franchise fee in the latter years of the
franchise, thus resulting in the 3.4 percent average.
Corporate overhead expenses paid to the parent company have averaged
$345,000 per year over the past five years. Cox states that overhead costs
are allocated to the Cox systems based on the ratio of system homes in the
franchise area to total homes in franchises held by Cox. Programming and data
processing cost are not included in the corporate overhead costs because each
system purchases these services from the parent company based upon direct
IV-10
costs incurred. In 1983, the system paid $251,000 in customer billing and
miscellaneous costs. '!he amount of the corporate overhead costs billed to
Lubbock averaged 3.1 percent of the parent company's total corporate costs.
The following table shows total operating expense per subscriber over the
past 5 years.
I Operating Expense Per
I
11979
11980
11981
11982
11983
Subscriber I
I
$ 78.671
108.961
126.171
154.981
147.481
'!he low level of inflation experienced in 1983 probably accounts for
the small decline in operating expenses per subscriber in 1983 over 1982.
Over the next 10 years, annual operating expense per subscriber is expec-
ted to average $231.20. As noted previously, Cox's forecast assumes a sub-
stantial amount of inflation per year in its forecasts.
'!he operating ratio (operating expenses divided by revenues) is a common-
ly used measure of system profitability and efficiency in the cable industry.
Over the past 5 years, the operating ratio has averaged .63. Over the next
10 years, it is expected to average .70. Both measures reflect efficient and
reasonable operating ratios.
C. CAPITAL EXPENDITURES
Cox reported the following historical and projected capital expenditures:
, .
IV-11
I Historical and Projected Capital I
1 ______ ~<~$o_o_o~s> ________ I
I Historical Projected I
I 1979-1983 1984-1993 I
I I
I I
!Antenna+ I
I Tower 10 I
I Microwave I
jHeadend 182 423 I
I Distribution I
I Aerial 755 6217 I
I Underground 935 4063 I
I Pole Arrange-I
I ment 216 137 I
!Interconnect 663 I
I Drops 1208 1581 I
I Converters -(Included in pay converters)!
I Buildings I
I Headend 146 I
I Studios I
I Offices 369 60 I
I Leasehold I
I Improvement 75 131 I
!Program Origina-I
I tion I
I Remote Mobiles I
I Studio Equip-I
I ment 129 I
!Land 8 6 I
jTools, Test I
I Equipment 36 124 I
I Spare parts, in-I
I ventory I
!Engineering I
!Vehicles 198 96 I
jPreoperating I
jPay TV Converters 3561 4731 I
I Capitalized Over-I
I head I
!Other 259 876 I
I I
jTotal 7958 19237 I
According to the information provided, Cox has expended approximately
$7.9 million in the system over the past 5 years. 'tta.ese funds have been
IV-12
primarily used for additional plant, drops and converters. Over the next 10
years, Cox forecasts a $19.2 million expenditure, of which $14.3 million is
forecasted to be spent over the next 3 years for system rebuild.
Over the past 5 years, Cox has constructed 80 miles of plant. Most of
the additional mileage has been underground plant. Underground cable miles
have increased from 64 in 1979 to 139 in 1983, an addition of 75 miles. Cox
reports a total of $935,000 expended for underground plant, which averages
only $12,466 per mile. According to the figures provided in the demographic
data, 5 additional miles of aerial plant was built. A total of $971,000 was
reported for aerial plant construction including make-ready. This works out
to about $194,000 per aerial mile added. Since underground construction is
significantly more expensive than aerial plant construction, Cox's historical
costs for distribution plant are somewhat confusing. However, the total
amount reported seems reasonable for 80 miles of additional plant.
Cox has stated that it appears that its reported distribution of funds
between aerial and underground were in error. In addition to rebuilding the
subscriber network, Cox expects to add 137 miles of plant over the next 10
years according to the demographic information provided in Form F.
In 1984 and 1985, Cox expects to spend $8.3 million for rebuilding
existing aerial and undergound plant as well as adding an additional 47 miles.
The rebuild would be accomplished at about $15,000 to $16,000 per mile under
these assumptions.
Under the category of buildings, Cox has reported a $146,000 expenditure
for headend building in 1979 and a $362,000 expenditure for offices in 1981.
Cox does not forecast any significant additional expenditure in this area over
the next 10 years.
•
IV-13
Cox has not invested any funds for local program origination over the
past 5 years. In 1985, it budgets $109,000 for studio equipment.
The only other major area of expenditures is converters. Currently all
subscribers have converters. Over the past 5 years, Cox claims to have spent
$3.561 million on converters. This significant expenditure is the result of
Cox's midband upgrade in 1981 which required the purchase of all new conver-
ters so that subscribers could view the 16 channel service.
As part of its rebuild plan, Cox plans to change out all converters to
use Sylvania models. Only subscribers to the new 12 channel basic service
without any pay services would not require converters. However, the number of
subscribers to basic service only is expected to be quite small.
Over the next three years, Cox plans a $3.854 million expenditure in con-
verter replacement. This amount appears reasonable. An additional $877,000
is budgeted over the remaining franchise period for converter replacement and
new subscribers.
Overall, we believe Cox's capital forecast for the rebuild appears rea-
sonable, with the exception of funds budgeted for underground plant.
The $7.958 million invested in the Lubbock system by Cox over the past 5
years has been derived primarily from the system is internal cash flow. Addi-
tional borrowings of $.98 million in 1981 and $.271 million in 1982 were also
used. As of 1983, the system had $1.588 million in outstanding notes payable
to the parent company (Cox cable).
According to the Sources and Uses of Funds Statement, the rebuild expense
will require additional borrowings of $10.3 million from the parent company.
IV-14
D. SYSTEM PROFITABILITY
Despite rapid increases in operating costs and additional capital expen-
ditures, the system appears to be operating profitably. The following table
presents the Average Annual Income Statement for the system over the past 5
years as well as the Projected Average Income Statement.
I Average Annual Income Statement I
I ~OOOs I
I Historical Projected Combined I
I 1979-1983 1984-1993 1979-19931 I Revenue I
I Basic 2906 6638 5394 I
I Pay 2005 5654 4437 I
I Other 45 294 211 I
I I
I Total 4956 12586 10042 I
I I I Operating Expenses I
I Plant 638 1624 1295 I
I Origination 1090 3306 2567 I
I GSA 1067 3245 2519 I
I Corporate Over-I
I head 345 662 556 I
I -I
I Total 3140 8837 6937 I
!Depreciation I I Expense 626 2164 1652 I
!Interest Expense 483 1070 874 I
!Pretax Income 707 515 579 I I Income Tax 223 33 97 I . I Net Income 484 482 482 I
The average net income for the system over the past 5 years has been
$484,000. As stated earilier, the system has $1.588 million in outstanding
indebtedness to the parent company and has been paying off some of that debt
over the past 5 years.
•
•
IV-15
As discussed, the system will borrow slightly more than $10 ~illion over
the next few years to accomplish the rebuild. These funds will be borrowed at
a projected 12.J percent interest rate. The system expects to begin paying off
its debt to the parent company in 1987 and expects to pay off the entire amount
due by 1991. We were slightly confused by Cox's reporting of interest expense
in the last two years of the franchise since it would have no outstanding in-
debtedness at that point. Cox has explained that this was the result of an
error in the development of its projections and clarifies that no interest ex-
pense should have been reported for the final two years of the projections. This
does not have any measurable effect on the system's projected profitability.
As is seen in the Average Income Statement for the next 10 years, Cox
expects to maintain approximately the same level of average net income exper-
ienced over the past 5 years. At no point over the next 10 years does it
expect to operate with a negative cash flow, although J years of operating
losses are forecast for 1986 through 1988. Net income is expected to climb to
about $2 million by 1993, higher if the system does not pay the reported
interest expense in the last few years.
In this situation, we believe the best measure of system profitability is
rate of return on net investment. Th.is measure relates the return to the
sources of capital to the investment made by that capital. The return to debt
capital is interest expense. The return to the equity capital is net income •
Since Cox has provided both the debt and equity funds, we believe it is best
to include both sources of return on capital to measure Cox's profitability.
The following table shows the Average Annual Rate of Return on Net
Investment in plant over the past 5 years, projected over the next 10 years
and combined.
IV-16
I Average Annual Rate of Return
I on Net Investment
I in property, plant and equipment l __________ (.,..$_00 __ 0_s ___ ) _______ _
I
I
I I Net Income
I Interest
I Net Investment
I Rate of Return
1979-1983
484
483
4009
24%
1984-1993
482
1070
10327
15%
1979-1993
482
874
8221
16%
over the past 5 years, the system has been operating with an average 24
percent rate of return on net investment. 'Ibis is a strong level of return
typical of a mature cable system. 'lhe rapid growth experienced by the system
as well as the number of rate increases have also enhanced the systems profit-
ability.
Due to the large increase in the net investment base and the few years of
operating losses projected over the next 10 years, the system's average annual
rate or return is expected to fall to 15 percent. This is still an adequate
level of return considering that the projected cost of debt capital is 12
percent. It should be noted that by 1993 the franchise annual rate of return
is expected to exceed 40 percent, indicating that if the operator is granted a
15 year extension the average annual rate of return over the next franchise
should equal or exceed the 24 percent level experienced over the past 5
years.
overall, Cox has developed very reasonable financial projections for the
rebuild period. We have noted some rather unusually high expenditures over
the past 5 years such as converter expenditures and drop costs. However, the
•
•
IV-17
system, despite these higher than would be expected costs, appears very strong
financially.
The parent company, Cox Communications, is one of the largest and most
financially solvent MSO. It certainly has sufficient resources to substanti-
ate its proposed commitment to the rebuild. This commitment appears to be a
very worthwhile investment in that it is likely to increase subscriber satis-
faction and participation while yielding the parent company a sufficient
return on its investment.
..
APPENDIX
TABLE I
I Historical Subscriber Data I
I I
I Miles Homes Basic Basic Pay I
!Year of Plant Passed Subs. Penet. Subs. I
I I ::'. • 11979 400 43000 18215 42% 112221
11980 435 52105 21787 42% 204751
11981 457 53990 27313 51% 265791 ..
11982 458 54085 27532 51% 218691
11983 480 56023 28357 51% 235001
TABLE II
I Projected Subscriber Data I I I
I Miles Homes Basic Basic Pay I
!Year of Plant Passed Subs. Penet. Subs. I
I I
11984 506 57672 31805 55% 273491
11985 527 59588 33369 56% 300321
11986 545 61133 34846 57% 348461
11987 561 62422 36205 58% 362051
I 1988 577 63683 37573 59% 375731
I 1989 593 64874 38273 59% 382761
11990 599 65291 39703 61% 397031
11991 605 65945 40497 61% 404971
11992 611 66599 41307 62% 41307 j
11993 617 67253 42133 63% 42133 I
TABLE III
I Source of Revenue I
I $000s I
I Actual and forecasted I • I Basic Average I ..
I (Includes Monthly I
I Tier, 2nd Revenue I • !Year Set and In-Pay Total Per Sub-I • I stallation) scriber I
11979 1770 869 2665 12.19 I I 1980 2239 1389 3658 13.99 I
11981 2941 2222 5203 15.87 I 11982 3628 2881 6562 19.87 I
11983 3952 2664 6690 19.66 I I 1984 4162 3219 7506 19.67 I
11985 4754 3722 8665 21.64 I
11986 5274 4232 9726 23.26 I
11987 5779 4726 10757 24.76 I
11988 6323 5261 11864 26.31 I
11989 6825 5795 12931 28.16 I
11990 7379 6374 14094 29.58 I
11991 7974 7012 15358 31.60 I
11992 8612 7713 16733 33.77 I
11993 9300 8483 18226 36.05 I
TABLE IV
I Average Monthly I
I Revenue Per Subscriber I
I I
!Year Basic Pay Total I
I I
11981 7.55 6.69 15.87 I
11982 9.44 8.54 19.87 I
• • 11983 10.03 7.66 19.66 I
11984 9.57 8.28 19.67 I
11985 10.53 9.15 21.64 I • 11986 11.25 9.97 23.66 I • 11987 ll.91 10.74 24.76 I I 1988 12.60 11.53 26.31 I I 1989 13.44 12.48 28.16 I
11990 14.04 13.25 29.58 I
11991 14.91 14.30 31.60 I
11992 15.83 15.43 33.77 I
11993 16.80 16.65 36.05 I