City of Oak Creek

Common Council Report

Meeting Date:   5/1/07

Item No.:        

Recommendation:  That the Common Council adopt Resolution No. 10752-050107, a Resolution Regarding AB 207, The State Video Franchising Bill. 

Background:  AB 207, the State Video Franchising Bill was introduced in the state legislature on March 22, 2007.  There are a number of problems with the bill.  They can be summarized as follows:

1. Current Cable Operators.  The incumbent cable operators can get out of their current franchises obligations upon enactment of legislation.  
2. Franchise Fees.  The definition of "gross receipts" is very limited.  Estimates are that this will cost municipalities about 30% per year.  This is because the definition excludes Home Shopping revenues, advertising revenues, and revenue sources that are not paid by the subscriber.  The new definition will also apply to any incumbent that chooses to opt out of its current franchise agreement. 
3. Fees Capped.  The only fees a municipality can collect from the cable operator are franchise fees and nothing else.  No right-of-way permit fees.  Right-of-way bonds are called into question.
4. Free Drops and Cable Service to School and Municipal Buildings.  Incumbent cable operators can stop providing this service and you cannot require new entrants to provide the service.
5. Franchising Authority.  DFI will be the franchising authority and DATCP will be the consumer protection agency.  Municipalities will not have any say in who uses their right-of-way to provide video services and will have no consumer protection role.
6. Term.  The new state franchises will be perpetual.

Prior to the introduction of the State bill, the City of Milwaukee and AT&T have negotiated the terms of an interim operating agreement.  Previously the City of Milwaukee had brought a lawsuit in the federal court for the eastern district of Wisconsin challenging AT&T’s U-Verse proposal that it was a franchise and subject to the franchise agreement.  The interim agreement which was the subject of long and difficult negotiations between the City of Milwaukee had the effect of putting the lawsuit on hold.  There are a number of salient provisions of the City of Milwaukee Agreement that are better for municipalities than the state legislation.  However, if the state law is adopted it will essentially make the City of Milwaukee agreement null and void.  The purpose of the resolution is to urge either the defeat of the current legislation or alternatively to have the legislation mirror the terms of the agreement between AT&T and the City of Milwaukee.  The key provisions of the City of Milwaukee/AT&T agreement are as follows:

• The term is three years.
• The City receives a 5% license fee of gross revenues related to U-Verse TV services. 
• The City receives an additional PEG grant of 2% of gross revenues related to U-Verse TV services.  Gross revenues are fairly allocated between telephone, internet and video services to determine these fees. 
• The company will build out at least 25% of the households within three years.  The agreement sets reasonable consumer protection requirements. 
• The company agrees not to discriminate, not to require exclusive contracts nor to unlawfully impede competition. 
• The agreement cannot be transferred without the City’s consent. 
• AT&T acknowledges and will comply with Milwaukee Code of Ordinances controlling right of way occupancy. 
• AT&T will provide free use of U-Verse services to schools and other public buildings. 
• AT&T will provide the City a performance bond security fund indemnification and insurance coverage comparable to Time Warner. 
• AT&T agrees to a schedule of liquidated damages for violations of the agreement. 
• AT&T and Milwaukee agree to an expedited dispute resolution procedure. 

For many reasons, the City of Milwaukee Agreement is a far better alternative than the state legislation and AT&T has agreed to it.  A copy of the proposed bill and the agreement between AT&T and the City of Milwaukee are on file with the Clerk’s office.

Fiscal Impact:  If the State bill is adopted, in its April 16, 2007 version, there will be a reduction in revenue to the City of Oak Creek.

Prepared by: Lawrence J. Haskin City Attorney	Respectfully submitted, Patrick DeGrave City Administrator
Fiscal Review by: Beverly A. Buretta, CMC City Clerk