- Begin preparation today (or yesterday)
- Assemble a renewal team
- Be prepared for the worst
- Learn your community's cable-related and other telecommunications needs and interests
- Establish renewal goals that take the future into account
- Don't underestimate, or overestimate, the cable operator
- Don't accept "no" for an answer
- Be flexible
- Persevere, and take the time necessary to reach a successful conclusion
- Enjoy yourself; never lose your sense of humor
- THE RENEWAL PROCESS
- BRUNSWICK AND BRUNSWICK HILLS TOWNSHIP: A CASE OF PRELIMINARY DENIAL
- The Franchise Renewal Process
- conducted a contract compliance review of the current franchise;
- conducted a technical/engineering review of the cable system to determine the condition of current cable plant and how well the system has been maintained;
- conducted a financial review of Cablevision to determine:
- the overall financial performance of the cable system; and
- whether correct franchise fees payments had been made to the City by Cablevision;
- the overall financial performance of the cable system; and
- conducted a series of six community focus group workshops to identify community cable-related needs and interests;
- distributed a survey to representatives of community groups, organizations, institutions, and government agencies to identify community cable-related needs and interests;
- distributed a survey designed to ascertain current institutional communications uses and to identify future cable-related needs and interest specific to telecommunications;
- reviewed and analyzed letters and other documents provided by K-12 schools, local government agencies, community organizations, and libraries;
- conducted a review of current public, educational and governmental ("PEG") access equipment, facilities, and services;
- reviewed testimony and documents submitted during the public hearings; and
- analyzed all data gathered.
- Enabling Ordinance
- Issuance of Request for Renewal Proposals
- Cablevision's Response to the RFP
- Preliminary Denial of Renewal
- The Administrative Hearing
1. The Principal Issues in Dispute The principal issues in dispute involve PEG access, the I-Net and Cablevision's failure to provide local programming as required by the franchise. Cablevision proposed an upgrade of its system that is reasonable under today's technology. Therefore, unlike many other renewals, there was no issue with respect to the upgrade except as related to Cablevision's failure to address PEG and I-Net requirements adequately. The outstanding issues with respect to past non-compliance are:
- Cablevision's failure to provide a production facility to be used for public access and local origination purposes located in Brunswick as required by the franchise;
- Cablevision's refusal to provide a separate channel for public access, as required by the franchise (a shared public/local origination channel has been provided instead);
- Cablevision's failure to provide 20 hours per week of locally produced programming as required by the franchise;
- Cablevision's failure to provide and maintain the system so that it is two-way activated (i.e., capable of sending a signal from headend to subscriber and from subscriber to headend) as required by the franchise (Cablevision cannibalized the system and removed equipment necessary to accomplish two-way activation); and
- Cablevision's failure to make a local access production specialist available in Brunswick as required by the franchise.
- does not propose a PEG access facility to be located in Brunswick as required by the RFP;
- proposes substantially fewer resources for PEG access equipment and facilities than required by the RFP;
- does not propose a separate channel dedicated to public access, but instead proposes to continue a channel to be shared with local origination programming;
- does not propose to supply staff for anything other than training to support PEG access until a separate PEG access management entity is operational; and
- provides only the fiber optics for the I-Net, but not the electronics necessary to use the fiber optic lines, linking selected government buildings.
2. Brunswick's Reasons for Preliminary Denial With limited exceptions, the provisions of the 1981 cable franchise were honored and observed by the original franchisee and by the first transferee (Shamrock Cable Corporation). When the franchise was transferred to Cablevision in 1988, the company agreed to abide by the terms of the franchise. Subsequently, Cablevision reneged on several important obligations in the franchise, apparently because they required the provision of local facilities and services that did not fit within Cablevision's approach of a regional system for the Northern Ohio (including Cleveland) area. Cablevision's failure to honor and observe these material terms of the franchise dealing with local matters important to Brunswick constitute what Brunswick considered to be material noncompliance with the terms of the franchise. Cablevision's disregard for the Brunswick community's cable-related needs and interests carried over to its renewal proposal submitted in response to Brunswick's RFP, where Cablevision refused to provide the services and resources determined by Brunswick during the ascertainment process to be appropriate. There is a substantial overlap and relationship between Cablevision's past noncompliance and what Brunswick considered to be Cablevision's "woefully inadequate" renewal proposal in that the issues relate (almost entirely) to the requirement that adequate capacity and support be provided for PEG access and an I-Net. When Cablevision began operating in Brunswick there was a production facility located in Brunswick that was used for public access and local origination programming. Cablevision sought permission to relocate the staff for the Brunswick studio to Strongsville, the city immediately to the north, and was granted a six-month trial period of variance which expired by its own terms unless the parties agreed to amend the franchise. That provision was not amended following the six-month trial (although there were amendments with regard to other variances). Nonetheless, Cablevision never reinstated the staff to Brunswick and instead stripped the studio in Brunswick of equipment in 1989 or the early 1990's based on its unilateral decision that it was no longer necessary to provide the equipment in Brunswick. Cablevision never operated the local studio, and required those seeking to produce public access programming to travel to Cleveland Heights or Brook Park for necessary training and to obtain equipment. Those cities are a 45 to 60 minute or 20 to 30 minute drive from Brunswick. These actions, together with other actions by Cablevision, reflected a corporate hostility to public access that is inconsistent with Brunswick's determination of its needs and interests. For example, although Cablevision pays lip service to the principle that it may not exercise editorial control over PEG access, it has insisted on pre-screening public access programming and controlling access to equipment in order to exercise such program content control. This attitude was embodied in the Company's refusal to permit Brunswick to establish a separate management entity to run public access, a role that Cablevision insists on retaining for itself. Cablevision never provided a separate dedicated public access channel as required by the franchise. The franchise Cablevision accepted in 1988 requires it to provide 20 hours per week of locally produced programming, an obligation Cablevision never met or attempted to meet. Also significant to Brunswick was Cablevision's failure to provide and maintain a two-way activated subscriber system as a result of its cannibalization of the system by removing equipment. When Brunswick adopted a resolution notifying Cablevision of areas of noncompliance, Cablevision's first response was that it had no obligation to provide a studio in Brunswick and that it had no obligation to provide 20 hours a week of local programming. At hearing, Cablevision claimed that Brunswick waived these provisions of the franchise. However, it has provided no documentation of any waiver as required by Section 626(d) of the Cable Act. Instead, it presented multiple different and contradictory recountings of Brunswick's purported waivers, each of which is contradicted by contemporaneous documents, the parties' contemporaneous behavior, testimony by Brunswick's witnesses, and by the testimony of a Cablevision witness. Cablevision's principal defenses to Brunswick's findings that the renewal proposal failed to meet future community-related needs and interests are that Brunswick did not consider the costs of the PEG access and I-Net obligations in the RFP and that Brunswick's determination of needs and interest was biased and failed to adequately consider subscriber needs and interests. The only reliable and valid evidence in the record, however, is that the PEG access and I-Net obligations in the RFP would not impose any cost obligations above those already embedded in Cablevision's rates in Brunswick. Although Cablevision offered testimony intended to show a substantial cost burden, its witness failed to recognize any offset for costs in the current franchise that were embedded in rates, although he conceded that such offsets are appropriate. Brunswick undertook numerous measures to identify community needs and interests, including: the formation of an Ad Hoc Advisory Committee of Brunswick community leaders; several public hearings; six community focus group meetings; a community programming questionnaire and analysis; an institutional telecommunications survey and analysis; a review of customer service and complaints; an inspection of current PEG access equipment, facilities, and services; a review and analysis of position papers and letters submitted by Brunswick residents and representatives of local agencies, educational institutions, and community groups; a cable television subscriber survey; and the hiring of Sue Buske, an expert consultant familiar with the Brunswick community, to assist in the analysis and to make recommendations concerning future community cable needs. Cablevision criticized Brunswick's ascertainment as allegedly being based on its consultant's bias. Contrary to Cablevision's claims, however, the community was the source of the PEG access and I-Net needs identified in the RFP. Skip Trimble, Brunswick's City Manager since the mid 1970s, explained in testimony that Brunswick's objective in the renewal process, in substantial part, was to recoup the PEG and local benefits it was entitled to, but denied, under the existing franchise. A substantial source of very valuable information was obtained through informal contacts and communication with community members. The focus groups, questionnaire responses and relevant letters demonstrate the Brunswick community's interest in PEG access and I-Net resources. Much of this information was in response to Brunswick's and Ms. Buske's efforts to educate the community as to the technological advances and communication possibilities associated with the advent of fiber optics. By focusing on key institutions, decisionmakers, persons "potentially ... interested in the technology and services possible with the technology," and persons intimately familiar with the Brunswick PEG access community, Brunswick gained a wealth of information concerning community needs and interests. In contrast to Brunswick's extensive ascertainment process, Cablevision did virtually nothing to ascertain community cable-related needs and interests in Brunswick. Brunswick attempted to elicit from Cablevision in response to the RFP information as to why Cablevision believed its proposal would be reasonable to meet the community's cable-related needs and interests; it received a response asserting, without support, that "Cablevision maintains that the items identified in the RFP do not accurately reflect the community needs of Brunswick with respect to Access programming ..." At hearing, and for the first time, Cablevision presented testimony that the basis for Cablevision's assessment was nothing more than oral discussions between the official who prepared the response and other Cablevision personnel as to their "sense of what public access demand is ... in the City of Brunswick based upon its prior use ...." Subsequently, and for purposes of the administrative hearing, Cablevision had a subscriber survey conducted. That survey, which was conducted by an independent firm using questions developed by Cablevision's public relations firm and by Cablevision's governmental affairs department, does not pass muster as valid survey evidence. There were no validation criteria, the questions were improper, the respondent base was problematic, and the survey was designed improperly.
3. The Ascertainment Evidence at Issue Other than requiring notice and opportunity for participation, the Cable Act does not delineate the process to be used for identifying community needs and interests (or acts of non-compliance), but instead only requires that the renewal process be "orderly" and "fair." Section 601(5). Both Brunswick and Cablevision submitted evidence at hearing to support their respective positions. Brunswick's information, in significant part, was gathered by means of focus groups, and survey questionnaire responses submitted after the focus group sessions. Cablevision relied principally upon a telephone subscriber survey (apparently done solely for the purpose of litigation) that has not been used by the Company's marketing department.
a. The Survey Issues The identification of future cable-related needs and interests raises significant survey considerations. Brunswick retained an outside expert, Dr. Claude Martin, the Isadore and Leon Winkelman Professor of Retail Marketing at the University of Michigan School of Business, a national (and indeed, international) expert in the areas of survey research and marketing, to review the research done for Cablevision and for Brunswick. He found that:
From the perspective of survey and research methodology [the research] objective has three significant components: 1) the need to identify community needs and interests (as distinguished from only cable subscriber needs and interests); the need to identify future needs and interests (as distinguished from past or present needs and interests); and 3) the need to identify cable-related needs and interests, which involves survey and research work concerning highly technical matter and product and service innovations (as distinguished from a survey of TV viewing preferences).
It is my conclusion that the Buske Group accomplished a creative, diligent and professional evaluation of community needs and interests responsive to the task of researching such needs and interests with respect to new and evolving cable telecommunications technologies. In the seminal marketing textbook for many MBA programs Philip Kotler supports this type of approach saying "at its best, marketing research develops innovative ways to solve a problem."* This type of approach is similar to "requirements" research found in the services marketing field. Requirements research involves identifying the benefits and attributes that customers expect. It is a basic and essential type of research useful to determine the type of questions to be asked on surveys and ultimately the improvements that will be attempted by the organization. It appears that Cablevision did no requirements research preparatory to the CPAT survey, and like many companies, improperly developed its survey on the basis of intuition or company direction, rather than through customer probing.
An example of requirements research is structured brainstorming a technique developed by researchers in IBM's Advanced Business Systems unit.** In this technique a sample of customers and potential customers is assembled. A facilitator leads the group through a series of exercises on creativity and then has the customers describe the ideal provider of the service -- what the customers would want if they could have their ideal service. The facilitator asks "what" the customers want (to elicit fundamental requirements), "why" they want it (to elicit the underlying need or benefit sought), and "how" they will know when they receive it (to elicit specific service features).
The Buske Group research is also similar to future expectations research. Customer expectations are dynamic and can change very rapidly in markets that are highly competitive and volatile. As competition increases, as tastes change, and as customers become more knowledgeable, companies must continue to update their information and strategies.
* Philip Kotler, Marketing Management (8th ed. Prentice-Hall, 1994).
** Edith E. Lueke and Thomas W. Suther III, "Market Driven Quality: A Market Research and Product Requirements Methodology," IBM Technical Report (June, 1991).
b. The Focus Groups Brunswick showed that the focus group survey methodology is particularly well suited to the task of ascertaining future community cable related needs and interests. By focusing on key institutions, decisionmakers, persons potentially interested in the technology and services possible with the technology, and persons intimately familiar with the Brunswick PEG access community, Brunswick gained a wealth of information concerning community needs and interests. For example, the Brunswick Chief of Police wrote Jeff Neidert, the City's Cable Facilitator, an extensive policy memo explaining that "the community policing law enforcement strategy could be best served by upgraded technology and application" that could enhance, among other things, internal and regional law enforcement computer networks, permit video arraignment, and support vendor training. The major purposes of the focus group methodology include:
providing overall background information on a category;
getting impressions on new concepts for which there is little available information;
stimulating new ideas about older products and/or technologies; and
generating ideas for new creative concepts.Other focus group standards include:
respondent groups composed of persons with fairly homogenous characteristics;
the use of highly skilled moderators to ensure that proper respondent rapport is established and that the discussion is directed along relevant lines, and the degree of probing and depth of insight are sufficient to accomplish the research objectives.Dr. Martin reviewed video-tapes of four of the six focus group sessions and testified that they met the above standards. The use of focus groups is a survey tool that yields qualitative information. Dr. Martin observed that Brunswick and the Buske Group obtained valuable qualitative information from the decisionmakers representing likely users of a community based cable communication system and from community members in general. A significant part of Brunswick's ascertainment, as Dr. Martin testified, was "looking at ... those people who are in a leadership role in those constituencies and what are going to be the needs and interests of those constituencies over the future time period. Which seems to me ... that this is the major research question ...." The ascertainment process was "fair" and "orderly" in providing Cablevision the opportunity to provide information bearing on its assessment of future community cable needs and interests. During the informal negotiations (and during the ascertainment process) Cablevision claimed to possess survey information contradicting what the Buske Group had found. However, Cablevision failed to produce any such surveys and conceded at the hearing that it had no such surveys, other than the survey that was done for Cablevision after its renewal proposal was submitted. Cablevision employees also routinely attended Joint Cable Board meetings and City Council meetings concerning the franchise but never availed themselves of the opportunity to state their understanding of the community's future cable needs and interests. Brunswick attempted to solicit from Cablevision in response to the RFP a narrative summary of its proposal's responsiveness to local needs with "[e]mphasis ... [on] explaining why [Cablevision] believes its proposal is reasonable to meet the cable-related needs and interests of the community, taking into account the cost of meeting such needs and interests." Cablevision failed to provide the requested information and failed to explain why it did not do so other than to state at hearing that the basis for Cablevision's assessment of the level of Brunswick community cable needs in the areas of PEG access was nothing more than the oral discussions with other Cablevision personnel as to their "sense of what public access demand is ... in the City of Brunswick based upon its prior use ...."
c. The Cablevision Telephone Survey The Cablevision survey, done for litigation purposes, was fundamentally flawed. Dr. Martin, who has extensive forensic experience with respect to market research and surveys, explained that: "Cablevision's ... subscriber survey is not a proper survey for ascertaining Brunswick future community cable-related needs and interests. The problems fall into four general areas: 1) lack of validation criteria; 2) improper survey questions; 3) problematic respondent base; and 4) improper survey design." Dr. Martin's criticisms are fully supported in fact and law. The Federal Judicial Center has published a Reference Manual on Scientific Evidence intended to assist judges in managing expert evidence, primarily in cases involving issues of science or technology. The Manual contains a specific Reference Guide on Survey Research. The Reference Guide addresses in numerous places and makes clear the need for proper survey documentation. For example, "instructions [provided to interviewers] should be made available to the opposing party and to the trier of fact." The Reference Guide also states that a survey report should contain "copies of interviewer instructions, validation results and codebooks." Further, "copies of all questionnaires should be made available upon request so that the opposing party may have an opportunity to evaluate the raw data." Dr. Martin explained that Cablevision's documentation was so inadequate that it could not even provide the underlying survey responses, let alone other documentation essential for verifying the reliability and accuracy of a telephone survey. Dr. Martin observed that:
There's nothing for verification and validation in here. And quite frankly, that means we don't know whether these interviews ever were conducted. It's possible you know, they might not have been. The rule is you have to validate and verify.The Reference Guide also addresses the need for proper Survey Questions and explains that "[w]hen unclear questions are included on a survey, they may threaten the validity of the survey by systematically distorting responses if respondents are misled in a particular direction, or by inflating random error if respondents guess because they do not understand the question." Dr. Martin explained that "[c]ertain of the questions seem heavily biased or loaded, such as the question asking subscribers whether they would be willing to 'give up' a typically very popular program such as ESPN or C-SPAN in exchange for an additional public access channel." The Reference Guide also states that "[i]dentification of the proper universe is recognized uniformly as a key element in the development of a survey." A threshold shortcoming in the Cablevision subscriber survey is that, rather than surveying the Brunswick community, the survey focuses exclusively on Cablevision's Brunswick subscribers. Also, the Reference Manual instructs that, if a survey is intended to be used as evidence, "[t]he report describing the results of a survey should include a statement describing the purpose or purposes of the survey. One indication that a survey offers probative evidence is that it was designed to collect information relevant to the legal controversy ...." Cablevision failed to produce the individuals from its public relations firm or the Cablevision employees who designed the survey, and there is no evidence that these (unknown) individuals have sufficient familiarity with fiber optics technology, PEG access or I-Nets to design a proper survey to ascertain the Brunswick community's future cable-related needs and interests. Dr. Martin explained that:
I question whether any of the ... survey questions accurately communicate or probe the complexity of issues related to future cable-related needs and interests. The telling shortcomings of the ... survey for these purposes is most evident when compared to the cable telecommunications possibilities discussed and explored in The Buske Group's community workshops. The ... survey fails to educate respondents as to the technological richness of issues they could evaluate in addressing their future cable system. It is also structured in such a way that it fails to capture any information that respondents might have voluntarily provided along these lines. Subscriber comments concerning such matters, e.g., as an institutional network, were neither solicited nor recorded. The survey appears to be backwards looking and focused on viewer preferences (or more accurately, interest) as opposed to evaluating attitudes towards future cable-related needs and interests.
4. The Issue of Cost Reasonableness
a. Embedded Costs Throughout the franchise negotiations, Cablevision objected to meeting Brunswick's identified PEG access and I-Net needs on cost grounds. At hearing, however, Cablevision failed to submit any evidence as to the extent to which these costs were above the PEG and I-Net costs already embedded in its rates. Brunswick did present such evidence, and, based upon information provided by Cablevision in the course of the ascertainment process, showed that there is forty cents more embedded in the existing rate than the amount the Buske Group determined would be required to meet PEG access and I-Net requirements of the RFP. Cablevision's cost witness conceded on cross-examination that, for purposes of determining the cost impact to Cablevision of meeting Brunswick's PEG and I-Net requests, it was appropriate to offset against the costs of the requests the amount of the existing PEG and I-Net costs incurred by Cablevision. He testified that "[i]f you could quantify the cost now to the company, which I haven't done, which could be done, that could be an offset." The acknowledgment that an offset is appropriate is in accordance with prevailing FCC ratemaking policy. That policy provides for rate adjustments to reflect changes in the costs associated with PEG under a renewal franchise that are in addition to, or a reduction in, the PEG costs already built into the rates for subscribers. Under the FCC's benchmark rate regulation scheme, rate increases calculated under the benchmark formula may not exceed general inflation except for increases in "external costs" that are beyond the cable operator's control. Under the FCC's regulations, costs associated with PEG, as well as other costs of meeting franchise requirements (other than the costs of franchise fees) qualify as external costs. External costs are considered to be embedded in rates and only changes in such costs are reflected in changed rates.
- The Naperville Decision
Franchise renewal is a time of opportunity for local franchising authorities and should not be treated lightly. Examples of recent cable franchise renewals compiled by the Buske Group are appended to this paper. They indicate the kinds of provisions that can be achieved when the local franchising authority is diligent and works hard to obtain a franchise to meet its future community needs and interests. The eventual outcome of the Brunswick renewal will provide guidance on how to obtain a reasonable franchise for a community. Hopefully, the City's and Township's judgment will prevail and Brunswick will be vindicated as was the City of Sturgis, Kentucky in its renewal denial (in a case where the cable operator had waived the administrative hearing). The U.S. Court of Appeals for the Sixth Circuit held:
The Cable Act recognizes that municipalities are best able to determine a community's cable-related needs and interests. The city council's knowledge of the community gives it an institutional advantage in identifying the community's needs and interests. It would be inappropriate for a federal court to second-guess the city in its identification of such needs and interests.