February 10, 2016
Delivered as a .pdf file attachment emailed to the following recipients:
DOWNLOAD COMPLETE .PDF HERE: whatcom county cable tv history narrative_02102016.pdf
TO: Office of Whatcom County Executive: Jack Louws
Whatcom County Council Members:
Barbara Brenner
Rudd Brown
Barry Buchanan
Todd Donovan
Ken Mann
Satpal Sidhu
Carl Weimer
Robert Simmons – Independent Journalist
Tim Johnson – Editor Cascadia Weekly
FR: Michael A Kominsky – E-mail Me
RE: COMCAST – WHATCOM COUNTY CABLE TV FRANCHISE AGREEMENT ETC.
My name is Michael Kominsky. I have been a resident of Whatcom County since 1997 and a subscriber of cable tv and internet service starting with TCI and eventually the successor in assignment, Comcast Inc. on and off for almost twenty(20) years. I currently subscribe to Comcast broadband internet service and I am a customer of Directv, DBS(Direct Broadcast Satellite) for video services for the past several years. And frankly if there was an efficient competitive alternative for Broadband Internet available in my area at the 100mbs speed I need for my business, I’d leave Comcast in a NY minute.
By way of background, I was an executive with TCI from 1982 for about ten(10) years, as a regional manager involved in cable tv system operations, including the negotiation and renewal of cable tv franchise agreements in California and Nevada. Part of my job description was the implementation/operation of PEG (Public Educational Government) channels and local origination/public access channels.
As president of the Nevada State Cable TV Association in the early 1980’s, my legislative responsibility included lobbying for cable tv deregulation legislation at the state level and Washington DC, ultimately spawning The Cable Communication Act of 1984. This federal legislation was the result of an intense lobbying effort for various state and national NGO’s, including the NCTA(National Cable TV Association) with a great deal of telecom/cable corporate influence AKA money behind it. It greatly diminished local, state and federal regulatory authority over cable tv franchises and its purveyors. Some for the good…but much more for the not-so-good side of the ledger for regulatory entities. In retrospect, frankly not one of my proudest professional accomplishments.
Because of my cumulative professional experience working in telecommunications I believe it may offer some unique insight in the technical, operational and contractual aspects and issues of the relationship between a franchisor, like Whatcom County and the franchisee, Comcast.
So you are probably asking yourselves, why would he bother to invest so much of his time to write this meandering technical tome? Doesn’t he have a life? Fair question…one which I confess I have asked myself many times over the past now five(5) months. Trying to get information, which I feel should be available to the public without bureaucratic road blocks from Whatcom County/Comcast, at times, has been one of the more exasperating experiences of my professional life. Sorry, but it’s just not supposed to be this hard…or excessively time consuming. In this case—gratuitously so.
Frankly it is in stark contrast with the level of cooperation and responsiveness I have received from same/similar requests for information from the City of Bellingham just last week. All of the questions proffered (as relevant), below were answered completely and comprehensively by the City of Bellingham within three(3) days of request with several follow-up questions answered in another two(2) days.
But the more I begin to investigate…to dig deeper, the more I realized that there was a fundamentally unfair, superior bargaining position held, and exploited, by Comcast Corporation, over its customers/subscribers(as an ostensible monopoly by virtue of the economic impracticability of an over-built, efficient competitive alternative cable tv/broadband internet provider). And that any attempts at correction or reform would be met with substantial corporate bureaucratic resistance—a frustrating gauntlet, designed eventually to cause the customer to throw up their hands in disgust and give up. I know this, because it almost worked with me…almost.
So the answer to the question of why, is a very simple one. After numerous rancorous dealings with Comcast and hearing the horror stories of other customers locally and on the internet, with same or similar unsatisfactory resolution of complaints, I can best distill my motivation as eloquently stated by Howard Beale, the disaffected antihero main character in the 1976 film Network, “I’m mad as hell…and I’m not going to take it any more…”
What follows is a narrative of my impressions, of the status of cable tv/internet service, my critique of contractual performance by both Whatcom County and Comcast Inc. based on information released by the County, (albeit limited and in some cases non-responsive and incomplete) with the desired result that perhaps an amelioration of the quality of service and customer satisfaction can be a achieved, both on the supply side, and the regulatory side. You will notice that some of the issues raised appear more than once, sometimes in multiple sections. Because of their perceived critical importance, I felt it necessary to reaffirm the point, in different sections and different ways. I apologize for any perceived unnecessary redundancy.
Should the County be interested, I would be willing to entertain the possibility of the submission of a more detailed list of my recommendations, which perhaps could provide constructive input in crafting a franchise renewal. Your questions or comments can be forwarded to my email at: E-mail Me
—using line numbers in the left margin (of the .pdf) only, to more easily reference sections of this document.
A Caveat:
While not brief, this narrative is extremely direct and candid, by some standards perhaps gratuitously so. It was not my intention to cause offense to anyone…it’s a gift. If I have done so I do apologize. Please forgive, I’m sure, the many typos etc. That now out of the way, please read on…
I. – CABLE TV FRANCHISE HISTORY – WHATCOM COUNTY/CITY OF BELLINGHAM:
1. 1996 – January: Franchise Agreement ratified between Whatcom County and TCI
2. 1996 – February: Franchise Agreement ratified between the City of Bellingham and TCI
3. 1999 – TCI was purchased in 1999 by AT&T, whose cable television assets were later acquired by Charter Communications and then Comcast Corporation. The franchise is assigned to AT&T with tacit ratification by Whatcom County of all the original terms/conditions without apparent review or revision.
4. 2002 – Comcast acquired all assets of AT&T Broadband, thus making Comcast the largest cable television company in the United States with over 22 million subscribers. The franchise is assigned to Comcast with tacit ratification by Whatcom County of all the original terms/conditions without apparent review or revision.
5. 2008 – The City of Bellingham received a renewal notice from Comcast in March 2008, which was in advance of budget and planning efforts. The City budgeted for legal consulting and began negotiating in 2010 ending with a renewal agreement in December of 2011.
6. 2008 – Whatcom County received a renewal notice from Comcast in March 2008, in which no formal action was taken by Whatcom County to initiate negotiation for a franchise renewal.
7. 2011 – Cable TV Franchise agreements with the City of Bellingham and Whatcom County expired.
8. 2011 – City of Bellingham and Comcast complete negotiations and ratification of Cable TV franchise in December of 2011. There is no record provided to me by Whatcom County as to any response to Comcast or the disposition of that request.
9. 2011 – July of 2011, Comcast formally files an application for Franchise (renewal). After querying Whatcom County there is no record of any substantive/meaningful or otherwise attempts at initiating negotiations with Comcast for a franchise until February of 2016.
10. 2014 – COMCAST OF WASHINGTON IV, INC.,a Washington corporation merges into COMCAST CABLE COMMUNICATIONS MANAGEMENT, LLC, a Delaware limited liability company with tacit ratification by Whatcom County of all the original terms/conditions without apparent review or revision.
11. 2016 – There is no record of Whatcom County having made any attempt to enter into negotiations with Comcast to renew the original franchise agreement of 1996, which again, expired in 2011. When asked the direct question by me on January 29, 2016:
If not, what are the official reasons of record for the County not pursuing a franchise agreement renewal, especially in light of the fact that it was common knowledge that the City of Bellingham had initiated renewal negotiations (a concurrently expiring county franchise agreement) with Comcast in 2011 and completed the renewal process in 2011? There has been no meaningful explanation from Whatcom County from the County as of February 5, 2016 as to why(?).
II. – COMCAST INC. – A BRIEF CORPORATE HISTORY:
1. 1969 – The company was re-incorporated in Pennsylvania in 1969, under the new name Comcast Corporation. The name “Comcast” is a portmanteau of the words “Communication” and “Broadcast”. Comcast’s initial public offering occurred on June 29, 1972, with a market capitalization of US $3,010,000.
2. 2002 – Comcast acquired all assets of AT&T Broadband (the successor to TCI), thus making Comcast the largest cable television company in the United States with over 22 million subscribers.
3. 2014 – COMCAST OF WASHINGTON IV, INC.,a Washington corporation merges into COMCAST CABLE COMMUNICATIONS MANAGEMENT, LLC, a Delaware limited liability company.
III. – COMCAST INC. – RECORD FOR CUSTOMER SATISFACTION AND SERVICE:
1. In 2004 and 2007, the American Customer Satisfaction Index (ACSI) survey found that Comcast had the worst customer satisfaction rating of any company or government agency in the country, including the Internal Revenue Service. The ACSI indicates that almost half of all cable customers (regardless of company) have registered complaints, and that cable is the only industry to score below 60 in the ACSI. Comcast’s Customer Service Rating by the ACSI surveys indicate that the company’s customer service has not improved since the surveys began in 2001. Analysis of the surveys states that “Comcast is one of the lowest scoring companies in ACSI.
(Source: Wikipedia Jan 2016 https://en.wikipedia.org/wiki/American_Customer_Satisfaction_Index )
2. As its customer satisfaction eroded by 7% over the past year, revenue increased by 12%.” The ACSI analysis also addresses this contradiction, stating that “Such pricing power usually comes with some level of monopoly protection and most cable companies have little competition at the local level. This also means that a cable company can do well financially even though its customers are not particularly satisfied.”
3. The Consumerist runs an annual “Worst Company In America” contest with the winner determined by a series of reader polls. The single-elimination tournament is similar in format to college basketball’s March Madness being held simultaneously. Companies that have advanced to the final four are included in the table below. The winning company is sent a “Golden Poo” trophy. In recent years, silver and bronze poos have been sent to the other finalists (Source Wikipedia Jan 2016 – https://en.wikipedia.org/wiki/Consumerist) :
4. Comcast customers filed more than 2,000 complaints against the company from April to June 2015, according to documents released by the Federal Communications Commission.
The documents were obtained from the FCC through a Freedom of Information Act request by CityExplainer, a Baltimore-based blog. CityExplainer yesterday posted an article about the complaints and made them all available to read in a spreadsheet:
FCC Complaints – Spreadsheet
and PDF:
FCC Complaints – PDF
There were many complaints about data caps, billing problems, service outages, slow speeds, and poor responses from customer service representatives.
“You’ll see senior citizens and others complaining about unrelenting billing errors, people complaining about alleged data throttling and data caps, and residents’ sad tales of dealing with technicians who come—or don’t come—to their homes to fix problems,” the blog post said.
Some consumers claimed Comcast is violating net neutrality rules, though this was often due to people misunderstanding the FCC’s regulations. One person claimed that Comcast “charg[ing] more for faster Internet services… violates the regulations on net neutrality,” which is not correct. The core net neutrality rules prohibit blocking, throttling, and charging Web services for faster access to consumers, but not different price tiers for home Internet service.
Comcast is the largest cable and broadband provider in the country, with about 22.3 million TV customers and 22.5 million Internet customers (with a lot of overlap between those two groups).
5. TV, phone, and Internet providers are required to respond to consumers who file complaints on the FCC’s complaint site (https://consumercomplaints.fcc.gov/hc/en-us). As we’ve previously reported (http://arstechnica.com/business/2015/06/want%C2%AD-a-lower-comcast-bill-complain-to-the-fcc/), customers of Comcast and other companies have sometimes had better luck resolving problems by complaining to the FCC than to the providers directly.
6. A personal note:
The genesis of my efforts to undertake this mission to attempt to help insure local governmental transparency and accountability in dealing with Comcast Inc. started with a Letter to Comcast Corporate Customer Complaint Resolution Dept. of September 18, 2015 after a tedious, unpleasant and very unsatisfactory resolution with Comcast on billing and service issues, commencing in August of 2015.
My exposure to the Byzantine Comcast complaint resolution process, subjected me to:
● a gauntlet of protracted periods on hold, being ping-ponged from one rep to another, some of which sadly were barely intelligible, with English a second language at best, from remote locations like India, the Philippines and Mexico, with little or no authority to make any exceptions/concessions to the dogmatic parochial company policy.
● incompetence, incoherence and arrogance. All too familiar to many customers.
● Comcast’s “corporate resolution team” reeked with high-handed disdain. I found their rote recitations of arguments against, for essentially fair customer treatment, shallow, condescending and without merit—legal or otherwise delivered with relative impunity, due to their dominant market share.
As one can see from the chart below Comcast’s subscriber base of 22.3 million is twice that of it’s nearest cable tv purveyor competitor, Times Warner at 11 million subs. In 2015, Comcast attempted to acquire Times Warner Cable, but in April of 2015 Federal Regulators refused to allow the merger based on an anti-competitive hegemonic market share. But it clearly demonstrates the intent of Comcast Inc. to create a monopolistic market share—a cable cartel.
(Source 2016 NCTA: https://www.ncta.com/industry-data )
After numerous attempts to get some satisfaction from Comcast/Whatcom County for my complaints for poor service and billing/business issues, sufficiently exasperated with the dismissive and unhelpful treatment, I realized that many others were probably suffering from the same kind of corporate misconduct. I begin to record the conversations with Comcast to preserve the discussions for the record. When I informed the corporate complaint representative, he vehemently objected to my doing so. Why, I asked “would you have a problem with recording a conversation with your company, especially when your company at the very beginning of each call states, “This call may recorded for quality assurance purposes…” “No…You cannot do that!” he said.
“Oh?” I replied, “Unless Comcast is concerned with the poor quality of customer service offered being documented, what is the legal or other basis for this prohibition?” He said “you do not have permission…period.” But refused to offer a legally valid reason for doing so. I then informed him that if a customer had any objection to having the call recorded which might include the release of personal customer information etc.(that Comcast required for authentication) which might allow a nefarious staff person to co-opt one’s identity, that there was no other option for the customer available offered by Comcast to avoid this recording policy. This potentially creates a moral hazard, as some of these customer reps are paid relatively little compared to their American counterparts, living in economically challenged places like Manila, Philippines and Guadalajara, Mexico, which would make it almost impossible to trace the origin of the breach of security/privacy of the customer.
I further advised him that I, and anyone else calling Comcast was granted explicit permission by Comcast’s own initial preamble, “This call may be recorded…” as this statement taken on its face clearly does not differentiate who may…or may not…record the conversation. The recordings speak volumes of the perverse practices of customer service. This I believe demonstrates Comcast’s selective invocation of legal/privacy issues, and high-handed corporate attitude in dealing with its customers. Because of their superior bargaining position and apparent lax regulatory oversight, as was/is the case with Whatcom County, they believe that they can get away with just about anything without fear of regulatory consequence/enforcement.
I suspect this is the real reason Comcast does not want their phone conversations recorded—having had a similar experience “I feel your pain…”:
Time Magazine 2014 – Recording of Man’s Attempt to Cancel Comcast Will Drive You Insane
“If Dante’s Inferno had been written today, an extra circle of hell would be dedicated to dealings with cable providers. Former tech editor Ryan Block posted a maddening 8-minute portion of his phone call with a Comcast “customer retention” specialist desperately (and aggressively) trying to stop Block from canceling his service.
This recording picks up roughly 10 minutes into the call, whereby she and I have already played along and given a myriad of reasons and explanations as to why we are canceling…”
(Source: http://time.com/2985964/comcast-cancel-ryan-block/ )
(8 min. of the actual call https://soundcloud.com/ryan-block-10/comcastic-service)
Customer Recorded 2014 – Comcast’s ‘Embarrassing’ Customer Service Phone Call – You Tube 365,964 views – Over 1,300 almost all negative comments about Comcast.
( https://www.youtube.com/watch?v=yYUvpYE99vg )
Customer Recorded 2013 – Customer Service Meltdown (non-edited) – You Tube 851,215 views (The poor guy has a nervous breakdown…if it wasn’t so pathetic it would be hilarious)
Over 2,600 95% negative comments about Comcast
( https://www.youtube.com/watch?v=RVdNobKNMig )
As one can see from the above references/citations I am not alone in my dissatisfaction. The high volume of complaints to the FCC as referenced above of over 2,000 in just a three month period of 2015 speaks volumes of Comcast’s deficiencies and apparent big-corporation disregard and dismissive attitude toward its customers. From personal experience I can tell you that it is no small investment in time to file a complaint, even on-line, with FCC, usually done as a very last resort after exhausting all avenues of dispute resolution with the local franchising authority and beyond exasperating Comcast “customer service”.
Comcast holds the dubious honor for the highest volume of such FCC complaints for any purveyor of video/internet providers including wireless and DBS (Direct Broadcast Satellite).
7. This prompted further attempts to obtain some semblance of a timely, fair and equitable resolution, which eventually lead me to the revelation that Whatcom County and Comcast were ostensibly operating without a franchise renewal (the original agreement had expired in 2011). This in turn caused me to review the expired agreement as to provisions for redress for unsatisfactory customer service and other issues, such as quality of service. I discovered that Comcast was, in my opinion, in material breach of contract by not meeting the provision specifically addressing customer service and complaints for over thirteen(13) years at least (since the acquisition by Comcast in 2002). More later on that.
After over three(3) months of trying to get some material/comprehensive answers from Whatcom County—for some very simple and direct questions— only after filing a complaint with the Assistant Attorney General of Washington State (Advocate for Open Government) did I begin to receive a written, somewhat material response (January 25, 2016) from the Whatcom County Executive’s Office, which administrates the cable tv franchise agreement.
As alluded to earlier, this spawned the creation of the website Howard Beale. (http://howardbeale.org/)
(Outrage is contagious…catch it here and become a carrier) inspired by the classic never more timely, relevant and prescient film Network (1976).
“I’m mad as hell…and I’m not going to take this anymore!” the immortal clarion call of Howard Beale from the film and the central character therein.
IV. – PAST/CURRENT ISSUES—THE FRANCHISE AGREEMENT
1. Expired Franchise:
As Whatcom County has not responded to the question as to whether there have been any amendments or revisions to the terms/conditions of the original franchise agreement, one would assume that the terms/conditions of the original agreement of 1996 remain unmodified with no written extension for over five years from the expiration date of 2011 which under Washington State RCW 62A.2.201 Formal requirements; statute of frauds.
( http://app.leg.wa.gov/Rcw/default.aspx?cite=62A.2-201 )
and
RCW 18.36.010 Contracts, etc. void unless in writing.
( http://app.leg.wa.gov/RCW/default.aspx?cite=19.36.010 )
In the following cases, specified in this section, any agreement, contract, and promise shall be void, unless such agreement, contract, or promise, or some note or memorandum thereof, be in writing, and signed by the party to be charged therewith, or by some person thereunto by him or her lawfully authorized, that is to say: (1) Every agreement that by its terms is not to be performed in one year from the making thereof; …
it would seem to me, render the franchise agreement/contract void and therefore unenforceable with regard to the obligations of Comcast to Whatcom County, otherwise why even have an effective expiration date? It is now going on 6 years with no new agreement. An ostensibly exclusive contract(natural/functional monopoly) with Comcast of approximately $14 million dollars ($34 million City and County) total annual gross cable tv revenues(not including “unregulated” internet and VOIP telephony) from the County. On a essentially a handshake? Why?
On the COB website under Comcast cable franchise:
(Source: http://www.cob.org/gov/dept/it/Pages/franchise.aspx )
COB Home > Government > Departments > Information Technology
Comcast cable franchise
A cable television franchise agreement is a legal
agreement between the City and Comcast Cable, and
is required by state and federal law. The agreement
authorizes Comcast to install facilities in City streets,
and mandates obligations that Comcast must meet.
Assuming this statement to be factually correct as evidenced by the relatively timely renewal of the franchise agreement with the City of Bellingham, is Comcast’s operation of a cable tv/internet sysem in Whatcom County in violation of state and federal law? As it is now going on six (6) years with no new agreement, at the very least it begs the question: Why?
1.a.) The question as originally proffered to the County on December 18, 2015:
If so, under what legal/contractual basis of an expired agreement? If not, under what legal/contractual basis is Whatcom County administrating the Federal and Statutory legally mandated contractual relationship between the County and Comcast?
The response from Whatcom County on January 25th 2016: By implied working agreement of the parties, which mirrors the prior formal agreement of the parties. Case law arising from disputes between jurisdictions and cable providers over continued payment of franchise fees following expiration of an agreement supports the requirement of continued payments by the providers so long as they continue to use the right-of-way. In this case there has not been any such dispute, and Comcast has continued payment of its franchise fees as it had under the previous agreement.
and;
1.b.) And again on December 18, 2015: While the City of Bellingham renewed the Comcast Franchise Agreement in 2011, which expired in 2010, after over five (5) years, what is the reason that Whatcom County has not complied with Federal and State Law re Cable Franchise Agreements?
Whatcom County on January 25th 2016: The County is not out of compliance with federal or state law pertaining to cable franchise agreements. The County continues to receive the franchise fee and for all practical purposes Whatcom County and Comcast have been working under the terms of the expired agreement.
My response to the above explanations proffered by Whatcom County:
(Disclosure: I am not an attorney)
While I disagree with the legal interpretation/posture advocated by the County, so as not to further waste any more of my valuable time, I do not elect to debate the finer points of the legal argument offered, which would only, in my opinion, succeed as intended in obscuring the larger issues and principal relevant question posed which has never been directly answered: Why would the County with an ostensibly exclusive contract with a date certain expiration of over six(6) years ago, worth by my calculation annual cable tv gross revenues (not including “unregulated” internet and VOIP telephony) of approximately $14 million dollars ($34 million City and County) annual total in the County, pursuant to RCW 18.36.010 Contracts, etc. void unless in writing not deem it necessary to have a current, valid written contract? To allow this condition to persist for over five(5) years, essentially on trust? With not one compliance audit of franchise fees payments in over twenty(20) years?
For further illumination on the requirements of FCC Rules and Regulations re Cable TV:
Please go to: Registration of a Cable System and State and Local Regulation of Cable Systems at: https://www.fcc.gov/media/engineering/cable-television
If even a minute fraction of the large amount of money at stake was personally that of the County Executive or any member of the County Council, would they not demand that the contract be current, enforceable and in writing?
It is quite clear that due to the unique technical and geographic circumstances, that the franchise agreements with the City of Bellingham and Whatcom County, do not exist in a vacuum and as a practical matter their respective interests are indivisible. Because they both utilize one in the same provider with one system of common infrastructure of delivery which extends through the City to the outermost parts of Whatcom County should make it obvious that some sort of symbiotic relationship should have prevailed to preempt this obvious policy/operational inconsistency, and political confusion to prevent:
● further economic detriment to the County and customer dissatisfaction from arbitrary policy by Comcast, and;
● anachronistic technological provisions (1996—which according to Moore’s law equivalent to almost a century ago in technological time, Source: https://en.wikipedia.org/wiki/Moore’s_law).
I can conceive of no beneficial economic, technical, customer…or any other reasons/circumstances whereby it would have been to the advantage of Whatcom County not to have renewed the franchise agreement at the very least concurrently with the City of Bellingham, and preferably in concert with that process, including terms and conditions. The above responses provided by the County seem to reflect more of a protective/defensive posture—rather than advocacy on behalf of its residents and the Comcast ratepayers. On the contrary. This apparent Laissez-faire policy may have inured to the great economic/operational benefit of Comcast, with I submit, perhaps a tacit motivation to perpetuate the expired contractual status quo. Or…a legal term of art, with perhaps applicable meaning here, Cui bono (Latin)…who benefits?
(Source: https://en.wikipedia.org/wiki/Cui_bono)
Frankly, the explanation is perceived by me—intellectually and legally— as lacking merit, even meretricious…a self-serving excuse for inaction. After querying the County in several separate correspondences and several different ways, the absence of the County being open and willing to provide some valid rationale, leaves one being forced to conclude that the why was, just because we can(?), which creates the appearance of hubris—counter-productive to open, transparent governance.
I believe that Whatcom County for the past at least five(5) years, and most probably eight(8) total will have been deprived of franchise fee payments based on the current 4% instead of 5% (by Federal statutory limit, with no justification necessary to the franchisee for the maximum) from Comcast, which extrapolated could potentially be as much $1,000,000 – $1,200,000 of lost revenue, never to be reclaimed. By no means sofa cushion small change. Like the man said, a million here…a million there…pretty soon you’re talking real money. More on that below.
Additionally, this does take into consideration critical issues like the increased liability exposure per occurrence of an excess judgment against the County with liability insurance limits (contractually required of Comcast including the cost of the premiums) almost half of that of the City of Bellingham and a Performance Bond of one-tenth of the City ($25,000 vs $250,000) which would give the County far more leverage(with a higher ceiling of $250K) to enforce a more comprehensive customer satisfaction/service requirements through fines, penalties and liquidated damages. More later below.
According to the County, there is no record of any substantive/meaningful or otherwise, attempts by the County at initiating negotiations with Comcast for a franchise until February of 2016, with the initiation of discussion set on the agenda in late February by the relevant committee of beginning the process of “discussion” before even entering into negotiation/renewal almost six(6) years later. From my experience, typically these negotiations and ratification take a minimum of twelve(12) to twenty-four(24) months as in the case of the City of Bellingham. Which means that the provisions, including but not limited to critical issues such as customer service safeguards, franchise fee payments/percentages, Performance Bonds and Liability Insurance limits etc., in the absence of any mutually agreed amended extension, the expired franchise agreement as initiated in 1996 will continue possibly into 2018, twenty-three(23) years since inception and eight(8) years after expiration.
This fact seems to reinforce an attitude of governmental insouciance by the County, and yes, sadly the malodorous whiff of malfeasance, especially in light of the fact the City of Bellingham franchise renewal (the original of which expired in 2011 concurrently with Whatcom County) is only for ten(10) years expiring on 2021. One has to wonder, just how long this franchise renewal issue would have been further neglected, had it not been raised by the subject inquiry resulting in further lost revenue to the County?
2. Failure to maintain complaint logs as specified in the original franchise agreement:
Pursuant to Section 9. CUSTOMER SERVICE POLICIES:
Section 9. CUSTOMER SERVICE POLICIES.
9.1 Response to Customers and Cooperation with County. TCI shall promptly respond to all requests for service, repair, installation and information from subscribers. TCI acknowledges the County’s interest in the prompt resolution of all cable complaints and shall work in close cooperation with the County to resolve complaints.
Definition of Complaint – For the purposes of Section 9, with the exception of Subsection 9.3, a “complaint” shall mean any communication to TCI or to the County by a subscriber or a person who has requested cable service; a person expressing dissatisfaction with any service, performance, or lack thereof, by TCI under the obligations of this Franchise.
9.4 Reporting Complaints. TCI shall maintain a log of all subscriber complaints and make this log available for County inspection. The log shall include the date, name, address, telephone number of complainant. The log shall also contain the subject of the complaint, date and type of action taken to resolve the complaint, any additional action taken by TCI or the complainant and record whether or not the complainant was satisfied with the resolution or action taken. The log shall be maintained in a way that allows for sorting, deletion of fields, and manipulation of data per County specifications.
Upon request by the County, TCI shall provide a comma delimited ascii file of all subscriber complaints containing the above information.
The log shall be submitted on a monthly basis to the County or person or agency designated by the County. The County may request the log more frequently if it is deemed necessary. The County may contact any complainant listed in the log in order to insure satisfactory resolution of complaints with respect to this franchise.
The official written County response: “While Whatcom County occasionally receives complaints about Comcast from citizens, these are forwarded on to Comcast. No log of such complaints is maintained.”
The expired Franchise Agreement language cited above clearly indicates that this requirement is not discretionary with the unequivocal use of mandatory shall, and therefore should be deemed critically important, and as such, should only be waived by a mutually agreed duly executed document. There is no record with the County of any such waiver being granted.
After pursuing customer complaint logs from Comcast through the County, for over three(3) months, finally this is one example, of five(5) years) of the risible Comcast reports for year ending 2014 declaring only thirty-four (34) total complaints which strains the outer boundaries of credulity/credibility. At best, it can only be characterized, charitably as self-serving. Clearly, the legislative intent of this provision was to enable the County to monitor the performance of Comcast so The County may contact any complainant listed in the log in order to insure satisfactory resolution of complaints with respect to this franchise.(actual language from the agreement):
As such, I believe this to be so serious a contractual transgression, that it should have been, (and currently) considered a material breach of contract with immediate remedial action required by Comcast, subject to:
7.5.1 Remedies. Other than the liquidated damages specified in Section 4.3.3 of this Franchise agreement which relate to the construction schedule, the County shall have the right to assert the remedies set out below in the event TCI violates any provision of this Franchise agreement. These remedies are intended to embody the County’s and/or the public’s rights under The Whatcom County Home Rule Charter to the extent permitted by law.
a) To the extent the County deems necessary to remedy the default, proceeding against
all or any part of any security provided under the Whatcom County Code or this Franchise, including without limitation, any bonds, security funds, or other surety. Should the County take this action, TCI shall be responsible for all direct and actual costs related to the foreclosure action including, but not limited to, legal and administrative costs;
b) Commencing an action at law for monetary damages or seeking other equitable relief,
including specific performance;
c) In the case of a TCI’s default as to a material provision of the Franchise, proceeding to
revoke the Franchise; or,
d) Requiring TCI to correct or otherwise remedy the violation prior to considering the approval of any proposed rate increase if rate regulation is authorized by law and is in effect.
Without compliance with this reporting provision, which has been the case since Comcast was assigned the franchise agreement in 2002, the County is left with no objective data to gauge Comcast’s compliance, and therefore, no power of enforcement of this very critical issue of customer satisfaction and service, especially in light of the highly questionable/dubious record of Comcast as cited in III. – COMCAST INC. – RECORD FOR CUSTOM SATISFACTION AND SERVICE:(supra).
In doing some research with the City of Bellingham it would appear that Comcast has also been derelict in its obligation re Customer service/complaints reporting required under provision:
8. 3 Quarterly Report
Grantee shall, provide City with information which shall describe in detail Grantee’s compliance with customer service standards.
Until called to their attention from this inquiry, COB was not aware of this deficientcy—it is currently being addressed by the COB staff.
3. Franchise Fees:
In response to the County below the question re franchise fees:
3.a.) December 18, 2015: Why hasn’t Comcast tendered the additional 1% franchise fees above the 4% paid for a total as evidenced by the accountings provided to the County by Comcast for the last five(5) years at least?
Whatcom County on January 25th 2016 : The County’s interpretation of implementation of Section 6 as outlined in Section 11 requires the County to have 2 PEG channels to prior to collecting a 5% franchise fee. The County is not aware of the need for additional PEG channels especially with the use of BTV10 from the City of Bellingham.
My response:
Setting legal points and authorities aside for my disagreement with this legal interpretation of contract law of this provision, which frankly, I believe to be a moot point, had Whatcom County renegotiated the franchise agreement in a timely manner and had a final agreement been ratified before the expiration date of 2011, under Federal statute: Franchising authorities may charge the cable operator a fee for the right to operate a cable system in that franchise area; however, the franchise fee paid by the cable system can be no more than five(5) percent of its annual gross revenue. A franchising authority may use the money collected from this fee for any purpose. A cable operator may list any applicable franchise fee as a separate item on the subscriber’s bill.
(Source FCC website: State and Local Regulation of Cable Systems
https://www.fcc.gov/media/engineering/cable-television)
In other words, there is no justification necessary—no state/federal regulations or statutory requirement to list the reasons or how it will be allocated in the franchise agreement to the franchisee(Comcast) for the franchisor(the County) to be able to charge the maximum 5% which then can be internally allocated in any manner that the franchisor sees fit.
4. Difference in Franchise Fees Between the City of Bellingham and Whatcom County:
With regard to the flawed argument some may attempt to proffer that an increase in franchise fees would have just been passed-through to the County subscriber in the form of a rate increase: I am able to find no language in the subject franchise agreement explict or implied, nor should/would there be in a novation of the contract, which would allow a direct pass-through dollar-for-dollar provision by the franchisee. If the City of Bellingham subscribers are paying 1% more on their applicable franchise fee services for the same services at billed the same price( ie. Limited Basic Service $25.91/mo. which has been verified) Comcast is passing through the franchise fees to the subscriber.
This is not to be confused with the collection of state/local sales taxes, FCC Regulatory Fee and Broadcast TV Fee, which are collected and tendered to third parties not a party to the franchise agreement. Franchise fees should be considered part of the general cost of doing business along with any other expensible items like pole rental from telcos/power, rent/lease paid for business offices etc, the increase of which would not be passed-through on the customer bill dollar-for-dollar—in this case rent paid for the use of public land as right-of-way by the company for its cables. Why should Comcast be allowed the use of public-right of way rent-free by passing it through to the landlord? However, the Communications Act provides the transparency of the franchise fee by listing it(only) so that customers of the cable company understand the fee imposed by the government upon the cable company for things like Regulatory – compensation to the government for the cost of regulating cable television: consultants, auditors, administrators, and inspectors.
5. Cablenomics 101 or Corporate Welfare:
The term fee in this instance is somewhat of a misnomer: it is not the same as a tax, for lack of a better term, fee merely defines the methodology—a statutorily uniform and consistent means of calculating the rent/lease for use of public right of way by applying a percentage to the applicable revenues. Since a franchise fee should not be considered a tax, in a so-called “competitive” bidding process in Request for Proposals or Renewal Request, it should be part of the competitive beneficial offerings (financially absorbed as operating overhead by the franchisee) in the negotiation process, and any explicit, or implicit pass-through provisions should be specifically negated contractually. Only utilities like electric and natural gas are allowed to pass-through expenses like franchise fees dollar-for-dollar because of the fact they enjoy a legal/actual monopoly mandated by the state, their rate of return is highly regulated by the state, including executive compensation. Kimberly J. Harris Chief Executive Officer, President and Director of Puget Sound Electric(WA) makes an $898K annual salary.
From my experience as cable tv executive, I can tell you that the pre-tax cashflow for all the systems under my budgetary control was in excess of 45% and in some areas considerably higher. Net profits are only regulated by market forces, such as efficient competitive alternatives or in the case of Comcast, the lack thereof. (in most markets Comcast operates as a relatively unregulated natural/functional monopoly). Brian L. Roberts CEO of Comcast Inc. —net worth is $1.47 Billion(December 2015). He receives annual compensation of $26.4 million (2014).
CEO compensation of an UN-regulated monopoly Comcast versus a regulated monopoly utility PSE is almost thirty(30) times greater. Who do you think pays for that?
In 2014 Comcast reorganized as a state of Delaware Corporation, (even though its corporate headquarters is in Philadelphia PA), including giants like the usual suspects American Airlines, Apple, Bank of America, Berkshire Hathaway, Cargill, Coca-Cola, Ford, General Electric, Google, JPMorgan Chase, and Wal-Mart. These companies do business across the nation and around the world, their Delaware corporate addresses, are essentially tax haven drop boxes. (Source The New York Times 2012 – How Delaware Thrives as a Corporate Tax Haven: http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html?_r=0 )
6. To Pass-through or not to Pass-through:
Since the fee is paid to the local government, when it is broken down on a per-customer basis on the bill it appears to be a tax to the customer, possibly igniting antipathy against government officials. If it just appeared on accounting statements as a lump sum payment by the cable provider, it would be perceived by the public more as a fee-for-service(or rent), which is how local governments regard it—general operating overhead included with the cost of doing business. As such, in the absence of a direct pass-through provision, the increase should not be passed through dollar-for-dollar. However, the Communications Act does provide(heavily lobbied for by the Cable TV Industry) for transparency of the franchise fee so that customers of the cable company understand the fee imposed by the local government upon the cable company. Also, since customers will immediately notice any increase in the (listing of the) fee, and may interpret it as a “tax increase”, listing it on the bill may discourage local governments from pushing for an increase in the fee when the franchise agreement is renewed.
(Source: https://en.wikipedia.org/wiki/Cable_television_franchise_fee )
Further, whether the subscriber realizes it or not, for political reasons because there is an obvious desire to have perceived rate parity between the City of Bellingham and Whatcom County subscribers, all the services offered to subscribers of both franchise areas are most likely billed(highest common denominator) at the same higher franchise rate of the City. The only noticeable difference is the innocuous line item on the subscriber bill indicating the dollar amount of franchise fees paid, which is somewhat misleading because the difference between that number for the same level of service for both City and County subscriber is 1% less for the County, which may be retained by Comcast. Even if, in fact Comcast is passing the franchise fees through, (I believe invalidly so, which should be researched) the net impact on an average expanded basic monthly(about $40/mo) cable tv only (excluding exempt internet/telephony services) including HD upgrade etc. of $44 would be only about $0.44/mo.
7. A Tale of Lost Revenue or Who’s Minding the Store?:
I submit that since the City of Bellingham is charging a 5% franchise fee, the rates that are charged by Comcast for both the City and the County are theoretically predicated on that basis. This means that an increase in franchise fees to 5% by the County should have had a neutral impact on cable tv/internet rates charged by Comcast. The difference would be of course, that Comcast would get to keep approximately an additional $150,000 a year based on a franchise fee rate of only 4%, which goes right to the corporate bottom line. Not a bad deal for Comcast, for providing essentially NO added value to subscribers of the County.
In any case, I believe that Whatcom County for the past five(5) years at least, has been deprived of franchise fee payments of 5% from Comcast, irretrievably lost revenue in the amount of approximately $700,000, and most probably (extrapolated) eight(8) years, the total by the time the renewal is ratified, will have been deprived of, conceivably as much as $1,000,000 – $1,200,000. Unless/until The County is willing to proactively demand “claw-back” revenues retroactively, and/or immediately address this issue re current revenues, which from the above reticent posture stated by County, would tend to make this issue moot. Certainly, at the very least, this issue can be raised as “bargaining chip” in future negotiations for a renewal.
Prepared by Michael Kominsky based on information from Whatcom County records.
The gross revenues do not include exempt internet and telephony(VOIP) revenues as per Federal statue.
As such, the actual gross is probably considerably higher than an average of $14 million annually.
8. Performance Bond and Liability Insurance:
Here is just one example of an important difference, among many, between the City of Bellingham and Whatcom County Franchise agreements which I believe could possibly unnecessarily expose Whatcom County to a potential excess liability judgment, (with Comcast enjoying/benefiting a lower insurance premium which again goes right to the bottom line.
Question:
In an increasingly litigious environment against local/state governments most especially, personal injury and privacy infringement, has Whatcom County amended the requirements for Performance Bond and Liability Insurance of the Franchisee, or is it still at the limits of 1996 as originally negotiated?
Note, the 2011 City of Bellingham performance bond is ten times($250,000 vs $25,000) that of the 1996 agreement with the County, and the liability limits for PI & PD per occurrence almost double ($5,000,000 vs $3,000,000) as well as double for including claims for damages invasion of the right of privacy; for defamation of any person, firm, or corporation ($2,000,000 vs $1,000,000) to wit:
PERFORMANCE BOND:
City of Bellingham 2011:
11.5 Performance Bond
Within 30 days after the Grantee’s acceptance of this Franchise, Grantee shall post a
performance bond, in the amount of two hundred fifty thousand dollars ($250,000), to
ensure Grantee?s faithful performance of the terms of this Franchise.
Neither the provisions of this section, any bond accepted by the City pursuant thereto, nor
any damages recovered by the City thereunder shall be construed to excuse faithful
performance by Grantee or to limit liability of Grantee under the Franchise or for
damages, either to the full amount of the bond or otherwise, except as otherwise provided
herein.
Whatcom County1996:
11.3 Performance Bond. Within 30 days after the award of this Franchise, but in no event sooner than the final reading of the Franchise ordinance, TCI shall submit to the Chief Civil Deputy Prosecuting Attorney, which shall be filed with the County, a performance bond running to the County, with good and sufficient surety licensed to do business in the State of Washington and approved by the County in the amount of $25,000, conditioned that TCI shall well and truly observe, fulfill, and perform each term and condition of the Franchise. This bond shall be conditioned that in the event TCI shall fail to comply with any one or more of the provisions of this Franchise, then there shall be recoverable jointly and severally from the principal and surety of such bond, any damages suffered by the County as a result thereof, including the full amount of any compensation, indemnification, or cost of removal or abandonment of property as prescribed; said condition to be a continuing obligation for the duration of the Franchise and thereafter until TCI has liquidated all of its obligations with the County that may have arisen from the acceptance of the Franchise by TCI or from its exercise of any privilege herein granted…
LIABILITY INSURANCE:
City of Bellingham 2011:
11.8 Grantee Insurance
Grantee shall maintain, throughout the term of the Franchise, liability insurance in the
minimum amounts of:
(a) $2,000,000 for personal injury or death to any one person and $5,000,000
aggregate for personal injury or death per single accident or occurrence.
(b) $2,000,000 for property damage to any one person and $5,000,000
aggregate for property damage per single accident or occurrence.
(c) $2,000,000 for all other types of liability, including claims for damages invasion of the
right of privacy; for defamation of any person, firm, or
corporation; for the violation or infringement of any copyright, trademark,
trade name, service mark or patent; or, for damage to any other person,
firm, or corporation arising out of or alleged to arise out of failure to
comply with the provisions of any statute, regulation or resolution of the
United States, State of Washington, or any local agency with jurisdiction…
Whatcom County 1996:
11.7 TCI Insurance. TCI shall maintain, throughout the term of the Franchise, liability insurance insuring the County and TCI, their respective officers, employees and agents, with regard to all claims and damages specified in Section 11.5 herein, in the minimum amounts of:
(a)$3,000,000 for personal injury or death to any one person;
b) $3,000,000 for personal injury or death resulting from any one accident $3,000,000 for property damage resulting from any one accident; and
c) $1,000,000 for all other types of liability…
9. PEG and Public Access Channels:
BTV10 on cable channel 10 is the local PEG channel which now offers Public Access on a limited basis. It is viewable by virtually every subscriber on Comcast cable tv including the City of Bellingham and all of Whatcom County. It is totally subsidized by the franchise fees revenues from City of Bellingham subscribers, who pay an additional surcharge on their monthly bill of .50/mo. which is allocated for capital expenditures/improvement of equipment and resource. It serves a vital purpose to the community by being a vehicle for providing open and transparent governance, along with a great deal of locally produced public service programming.
A recent and very important, and I believe vital example is the BTV10 production of Earthquake planners are getting ready, are you? VMC Disaster Event on Saturday Jan 23. Building Community Resilience in the Face of the Really Big One. I attended personally, although it was well attended frankly the audio amplification was distorted and the very informative graphic slides projected were not readable from many places in the Whatcom Middle School Auditorium.
Fortunately, about one week later the entire almost two(2) hours of the program which was recorded and post-produced by the staff at BTV10 was available on the COB You Tube Channel
Volunteer Mobilization Orientation on Disasters
The video was professionally shot and edited, viewable in excellent HD quality. But the important distinction from being there in person is that the video and audio quality was excellent, clean and crisp, and the critical support material like the slides was done with close-up and very readable. And of course the video could be paused and portions replayed to allow for a more comprehensive understanding of the material. The presentation by Dr Rebeka Paci-Green, a professor at WWU, was very professional and informative, with some very useful recommendations for preparedness that everyone should become cognizant of for when, not if, the Big One Comes, a potentially catastrophic 9.0 Cascadia subduction fault earthquake. It was followed by a very informative panel discussion with questions taken from the audience.
I believe this dramatically demonstrates the increased reach and promise…and the true community value of locally produced and originated programming for the public good.
County subscribers were able to view this program, and many other important public service programs despite the fact that Whatcom County does not contribute to the underwriting of BTV10. Why doesn’t the County recognize the importance of this important public resource and pay their fair share of subsidy?
Why is it that the County Council airs its meetings by special arrangement with the City, with a fixed insertion rate of $95 per meeting of the regular/general meetings held at least twice per month, plus any other special meetings aired on BTV10? Additionally Whatcom County contracts with an independent outsourced production entity to produce the programs for airing.
So despite the fact that the County collects no franchise fees allocated to the PEG channel, they incur the expense of production and insertion, which is paid out of the general fund revenues. My estimate is that this is costing the County perhaps a $1,000 per month, which begs the following questions:
Why would the County not want to collect an additional amount of franchise fees (up to 5%) to help offset this expenditure?
Why would the County, as a matter or equitability, not want to participate in a partnership with the COB and help fund PEG and Public Access, to pay their fair share, as a good community citizen and help dilute some of the overhead etc., currently being underwritten 100% by the COB, levied completely to the City subscribers?
Finally, as a resident of the County because the County does not contribute to the maintenance of BTV10 I and others, as producers of useful and entertaining video content, including PBS documentaries and PBS How-to programming on teaching oil painting, all the content that I could make available to the Public Access Channel, is not eligible for viewing, because, and rightly so as a matter of equity, the County contributes nothing to this effort.(Source: MetaMEDIA Communications http://metamediacom.tv )
My recommendation is that during the franchise negotiations for renewal with Comcast, that the County and the City of Bellingham enter into discussions to formalize a collaborative effort of providing and nurturing a robust PEG channel and a locally originated programming venue(s) as equal partners— as contributors of content and in the subsidy and administration.
V. – SOME GENERAL RECOMMENDATIONS:
1. A comprehensive review the negotiated final franchise agreement between the City of Bellingham and Comcast. I have reviewed the agreement and I believe that it could serve as a workable template for a County agreement, as all the legal “heavy lifting” has already been done. With some minor modifications, I believe a final draft of an agreement with ratification, could be accomplished in six(6) to twelve(12) months. Otherwise I think it could take up to twenty(24) months for complete novation. Comcast should have no objection to this agreement as it has essentially already been ratified with the COB and Comcast.
2. Appoint and cost-share, a staff person as a designated/dedicated Ombudsman to handle all customer complaints from both County and COB with one contact point via a web portal(a trackable web based complaint form with email status updates to the subscriber) along with a single phone number to avoid confusion and to streamline and expedite the dispute resolution process. The complaints can then be forwared directly to Comcast via the web interface, with the disposition stored in a COB/County database as a means of tracking Comcast’s compliance (customer satisfaction) with the franchise agreement, giving the County greater enforcement.
3. Make the expiration date of the agreement concurrent with the COB agreement, in 2021(and reporting requirements and payment of franchise fees concurrent for comparison purposes etc.). So that the renewal period would have only the number years remaining to 2021, if the agreement is ratified by 2018, three(3) years before further renewal for both the COB and the County concurrently. This will insure consistency, and continuity and avoid the political confusion of two different agreements, with different terms and requirements, and would put the COB and Whatcom County back on the same renewal cycle.
4. At the very least, adopt the strong provisions of the customer service Section 8 Reporting Requirements of the COB franchise agreement. Also pursuant to the existing (expired franchise agreement of 2010) 7.5.1 Remedies. d) Requiring TCI(Comcast) to correct or otherwise remedy the violation prior to considering the approval of any proposed rate increase if rate regulation is authorized by law and is in effect.
In other words, require Comcast to meet the current reporting requirements of customer complaints forthwith under Section 9 Customer Service Policies with 30 days notice to cure the material breach of contract, or face regulatory action from the County to the fullest extent allowable under the franchise agreement (before granting any regulated rate adjustments).
To wit: 9.4 Reporting Complaints:
TCI shall maintain a log of all subscriber complaints and make this log available for County inspection. The log shall include the date, name, address, telephone number of complainant. The log shall also contain the subject of the complaint, date and type of action taken to resolve the complaint, any additional action taken by TCI or the complainant and record whether or not the complainant was satisfied with the resolution or action taken. The log shall be maintained in a way that allows for sorting, deletion of fields, and manipulation of data per County specifications.
5. In the section of the agreement regarding franchise fees, stipulate to 5%(from the current 4%) on all applicable revenues without justification, or earmarking/allocating any portion of the franchise to a specific category such as PEG etc.
Because the funding/underwriting requirements for PEG etc. will be fluid and subject to change from year to year, I would suggest incorporating a reference to a specific interlocal agreement available for public inspection, and online, which would address the issue of allocation of franchise fees internally, with regard to the subsidy/administration of PEG and Public Access etc. which can be addressed at an administrative staff level with ratification if necessary by the both the County and COB councils. This approach would allow both the COB and County more flexibility to make changes, without having to amend or revise the franchise agreement which would of course require ratification by Comcast Inc.
6. As a condition precedent to ratifying a Renewal agreement with Comcast, pursuant to Section 11.2 Auditing and Financial Records, demand a full compliance audit for franchise fees paid (at Comcast’s expense) to include whether Comcast is passing-through franchise fees, if so, that those fees are also not being expensed on the Profit/Loss from 2011 through 2015.
Publication of this Document in its entirety: http://howardbeale.org by February 17, 2016
End of document: approximately 9K words.
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~HB2