October 14, 1999 News » Cover Story

Cutting the Cable 

The pending franchise deal is a sweet one for local education groups and city coffers. But what about the average customer?

Here's a $64,000 question: If the city of Colorado Springs wanted to secure a voter-approved cable-franchise agreement so badly, then why did it spend 18 months negotiating a contract in which:

A highly-paid city employee with no cable experience was assigned to head the negotiating process for the $51 million contract?

An outside group was allowed to bring in a high-priced lobbyist to help lead the negotiating process?

City Council-appointed, citizens telecommunications advisory commissioners, meanwhile, were barred from participating in the negotiations?

And no one bothered to file reasons why voters should approve the deal in the November election guide that is distributed to all 259,126 registered voters in El Paso County?

Some questions always remain mysteries. But one thing is clear: If the cable-franchise fee and agreement fail to win voter approval next month, chances are, the city has only itself to blame.

For 18 months, the city negotiated in secret with Century Communications -- which just last week was purchased by Pennsylvania-based Adelphia Corporation.

The goal was to develop an agreement whereby the cable company would pay the city a franchise fee and commit additional resources to benefit the public in exchange for access to public rights of way.

Such franchise agreements and fees are routine fare in most cities; however, for the past 20 years, Colorado Springs has not collected anything from the local cable provider. Colorado Springs is unique, because the city charter requires such an agreement be voter-approved, and currently, Century Communications -- now Adelphia -- operates on a month-to-month agreement with Colorado Springs.

"It is a crime for the city of Colorado Springs to not have collected a franchise free for the last 20 years," said Fred Joyce, the chairman of the City Council's Telecommunications Policy Advisory Committee (TPAC). "I don't understand why that happened; it's stupid."

Who benefits?

If the agreement and fee are approved, the city would enter into a 151/2-year contract with the cable company.

In essence, the deal would give Adelphia access to the city's public rights-of-way, including roads, on which it could lay its cable network.

In exchange, the company would pay the city an estimated $51 million over the life of the contract -- which, city officials say, would be used for police and fire communications programs. In addition, the city would get an additional TV channel on which they could televise government programs and City Council meetings.

And, area school districts, the library district and the city's two publicly-funded colleges would also benefit with added TV services and access.

But critics believe that cable subscribers -- who would pay an additional $2.66 per month, or $32 a year, for basic service -- got shafted with the deal.

The deal, which has been highly criticized by TPAC members, was largely engineered by a paid lobbyist and other representatives from the Southern Colorado Educational Television Consortium.

TPAC, meanwhile, was largely excluded from the discussions and was only allowed in at the last minute after the City Council ordered they be allowed to participate.

Tim Sullivan, a member of the citizen advisory group, said that he fully supports the city entering into a franchise agreement, complete with the accompanying fees and grants paid in exchange for right-of-way access. However, this particular agreement, he said, is shortsighted and doesn't benefit the city as much as it should.

When the deal was initially unveiled on Aug. 10, the majority of City Council was unconvinced as well.

Initially, the proposal did not include such basic requirements as a public-access channel, a common requirement in similar contracts around the country.

In addition, the contract did not address cable rates. In the past three years, customers have seen their cable rates soar by 30 percent. Some Council members were critical, because the proposal did not require the cable company to network city-owned community centers, police headquarters or the new fire station on the northwest side of Colorado Springs.

And there was no requirement that two areas of the city which currently do not have cable access -- including the downtown core and the exclusive Cedar Heights subdivision -- be brought into service.

Council members also questioned whether the technology included in the 15-plus-year contract was adequate in the fast-evolving telecommunications field. Specifically, the contract requires the cable company to provide a six-fiber network at a time when 12 or even 18 fibers are being advised to handle fast-growing technology.

Finding God

Amid the concerns during an Aug. 10 meeting, the City Council ordered the city to go back to the bargaining table and to include TPAC to help tweak the proposed agreement.

In the next two weeks, several items were amended that would directly benefit cable customers, not just the government or the education consortium. A public-access channel, for example, was added.

However, in an Aug. 20 report to the City Council, TPAC members recommended that the city basically can the proposal and start from scratch.

"TPAC's influence in this late stage of the negotiation was very limited," read the memo. "One week is truly an insufficient period of time to assist in creating a more enhanced document."

The amended agreement still did not address cable rates, nor did it call for the cable company to provide service to the city's urban core. The cable company did, however, agree to add a public-access channel -- which they would control -- and to link cable to access the city's police and fire operations.

Still, Councilman Ted Eastburn questioned the wisdom of locking the city into such a long contract.

Members of TPAC agreed with Eastburn's logic.

"The direction of telecommunications in the next 15 to 20 years is impossible [to predict]," the group noted in its report to Council.

The citizen advisory group had been handed the 57-page agreement for review six weeks before it went to City Council. The committee, made up of citizen volunteers with expertise in legal, consulting and telecommunications-related fields, strongly rejected the proposal, claiming that citizens -- and cable subscribers -- were not getting a good deal.

TPAC member Bob Null (who is Councilman Jim Null's brother) said the negotiation itself was flawed. While the government and the education consortium had secured good deals, no one had argued forcefully as a strong city or customer advocate, he said.

"This franchise built a three-legged stool where four legs are needed," he said. "The fourth leg is the citizens' involvement."

The lack of restriction on cable rate increases raised the ire of Councilman Jim Null, who complained, "It's a black hole, to give you my opinion. I would want us to be able to say we're monitoring it to the public."

Under the cloud of these criticisms, the Council sent the proposal back to the drawing board, instructing city staff to include TPAC members in the talks.

Two weeks later, facing a deadline of either putting the measure on the November ballot or postponing a vote for another year, the City Council suddenly found God.

Their great awakening came when powerful members of the educational consortium packed Council chambers to support the cable deal. Included among the speakers were Pikes Peak Community College President Marijane Axtell Paulson, University of Colorado at Colorado Springs Chancellor Linda Bunnell Shade, representatives from the Pikes Peak Library District, D-11 Superintendent Kenneth Burnley and superintendents from several other regional school districts. All of them argued passionately before the Council in support of the proposal.

City Manager Jim Mullen also got in on the act. In an impassioned speech, Mullen suggested that his City Council bosses should consider Colorado Springs' reputation and what corporations might think of our community -- should we be a tough negotiator or a group of collaborative thinkers who cares about education?

In the face of such political heavy pitching, TPAC members suddenly found themselves faced with the implication that they oppose educational programs.

Under such pressure, the City Council ordered -- by a 7 to 1 vote -- that the franchise agreement and fee be placed before the voters. With Councilman Lionel Rivera absent, Councilman Ted Eastburn was the lone dissenter, claiming that he was still uncomfortable with the length of the contract. Other Council members, who had just two weeks before expressed serious concerns, exhibited newfound confidence in the measure.

"I came in with some doubts, but those questions have been answered for me," said Councilman Richard Skorman, who had initially expressed doubts about the long life of the agreement.

City officials argued the 15 1/2-year contract was necessary to make the proposal enticing for the cable company.

"We've been fighting against the Powers That Be," complained TPAC Chairman Fred Joyce shortly after the vote. "We're not anti-tax people, or anti-education or anti-city or anti-cable people. We're citizens looking out for citizens.

"We just could do better. And the bottom line is, they weren't really listening."

Limited influence

Last week, Mike Diaz, currently the city director of information technology, said members of TPAC were not allowed to play a part in the negotiations, because Century officials were concerned that several of them had potential conflicts of interests. Diaz, who had no prior cable experience, negotiated the bulk of the $51 million contract for the city.

Some TPAC commissioners worked, he said, in one form or another, for companies that could be considered potential competitors of Century Communications.

However, in an April 16 memo to TPAC members, Diaz claimed his decision to exclude the citizen commissioners from the negotiating process was based on the fact that they were not city employees.

"These negotiations are considered to be a confidential work in process, and no public information will be released until the final negotiations are approved by City Council," he wrote. "By the terms of the City Charter, no written documentation touching a confidential work in progress can be given to any person who is not a City employee."

In that memo, Diaz did not explain why members of the education consortium and their paid lobbyist -- who are not employed by the city -- were allowed to participate in negotiations. By Diaz's own reasoning, their involvement violated the city charter.

In its Aug. 20 report to the City Council, TPAC noted that "95 percent of franchise authorities around the nation allow their telecommunications/cable boards direct participation in the franchise negotiation process. This allows for needed input and community evaluation."

Being allowed into the negotiations so late in the game -- with only a week's worth of input -- made TPAC's influence very limited, members said.

Probably more importantly, TPAC members noted the breakneck speed at which cable technology is advancing and recommended city officials adjust their eyes to the future.

"What does the future hold for the cable subscriber in Colorado Springs? Plenty ... Market conditions govern how a franchise upgrades its system, not a governmental entity. Cable franchises deliver a product, and have to deliver this product better than its competition. If they fail to do so, their competition will," TPAC noted in its report.

Among TPAC's concerns were the long life of the contract in an everchanging cable landscape, as well as allowing the education consortium's extensive control. "The cable franchise agreement itself should not mandate a role for SCETC for 15 years, as having sole responsibility for educational access channels. These channels are public access and their use should be controlled by city policy, not an outside group."

The city experts

Diaz acknowledged that while he had no experience negotiating cable contracts, he was directed to negotiate the contract anyway. He was not given any money or a budget to hire outside advisors to help him secure the best deal for the city.

Initially, he said, he had his secretary research models of other cable deals that have been struck in other cities.

So, he was relieved when the SCETC offered to hire a consultant in exchange for the right to play an active role in the negotiations. Diaz said the education consortium's role was that of "advisor" and said they offered to provide expertise "out of their own goodwill."

However, the education group had another reason for its kind offer: They wanted the best deal they could get for their own cable programs. The resulting contract, say members of the City Council's technical advisory group, is a sweet deal for members of the education consortium, but not for the city or its cable subscribers.

Diaz was forced to resign his post in May after it was discovered that another of his negotiated contracts would cost city taxpayers $2.5 million. It was disclosed that a Florida company he had hired to oversee the city's Y2K computer-conversion plan left town before finishing the job. Now, the city is scrambling to meet the fast-approaching deadline to ensure the city's payroll, finance and human-resources program will be up and running come Jan. 1. Diaz is still on the city's payroll, earning a $96,000 per annum salary until he departs at the end of the year.

Now, he dismisses TPAC's concerns over the cable proposal as irrelevant.

"I just see this as a resolved issue, and I see that TPAC just doesn't seem to be on board," Diaz said.

Diaz's role as the overseer of the city's cable franchise has since been assumed by Ron Mitchell, the former manager of the city of Castle Rock. In August, Mitchell told the City Council that hiring an administrator to oversee the franchise contract if it is approved would be unnecessary because of his experience.

However, Mitchell's experience is in cities far smaller than Colorado Springs. He said he was "briefly involved" in a cable-contract negotiation in Idaho Springs two years ago, and another when he worked for the town of Aspen in the early 1980s.

Mitchell said he also was part of a 10- to 15-member consortium that negotiated a cable-franchise agreement for the Denver metropolitan area when he worked for Castle Rock. He oversaw the Castle Rock contract until he left that job in June 1998 after he was sued by a female employee for sexual harassment. That suit -- which also names the city of Castle Rock as a defendant -- is still pending in Denver federal court.

Virtual classrooms

Recently, Diaz praised the SCETC for hiring a negotiator, which he implied they did merely to help out the city.

"They went into this knowing they could get nothing in return," Diaz said. "They hoped they would get an agreement, but it depended on City Council approval."

Actually, if the deal is approved by voters next month, the consortium would benefit a great deal. In addition to an estimated $15 million worth of additional equipment and services, the education consortium would get, over the life of the contract, three additional cable TV stations to broadcast virtual TV classrooms and other educational programming.

The education consortium is a lobbying group whose members include several area public-school districts, the Pikes Peak Library District, CU-Springs and Pikes Peak Community College.

Together, they paid consultant Tom Dushan about $100,000 to negotiate the cable-franchise deal on their behalf, said Terry Bishop, the chief information officer for D-11. The government agencies split up the cost of the work depending on the size of their group. D-11 taxpayers, for example, coughed up $30,000 for the consulting work.

Bishop, who was part of the negotiations, said the franchise agreement and fee is an important tool for educators.

"In the modern technological age, it's a way of delivering instruction and a way of reaching parents and citizens that have no other opportunities for education," Bishop said.

For example, if the fee is approved, the region's largest school district could expand education -- and even entertainment -- via television. D-11 would use the increased technology and access to broadcast high-school graduations, sporting events and even plays and dances. And, the district could even use the TV to teach students. Home schoolers could benefit, and accelerated math and science courses -- and even foreign languages -- could be taught via virtual classrooms, Bishop said. A Russian teacher, for example, could be shared by multiple schools via the TV set.

It's unclear how effective TV classes would be compared to those with real live teachers. TPAC's Sullivan is incredulous over the concept.

"If that's the case for education, then why bother going to school?" he asked. "My grandkids could just sit home and watch TV.

"Kids need more one-on-one in education versus just putting a monitor in front of them."

For his part, Bishop was reticent: "I'm not saying it's as effective, but sometimes, it's better than the alternative of not being able to [take a course] at all."

The new cable guys

Last week, Century Communications was bought by Adelphia. Adelphia, a Greek word meaning "brother," was founded in 1952 by John Rigas and his brother Gus. The merger with Century Communications is valued at approximately $5.2 billion and makes Adelphia the country's fifth-largest cable operator, with nearly 5 million subscribers.

"The merger makes Adelphia a major player in the telecommunications industry; one morning, they woke up with 2.3 million subscribers, and the next day, they woke up to 5 million subscribers," said DonnaRay Anderson, spokeswoman for Adelphia.

The company now owns cable running from Maine to California. Here, Anderson said the franchise agreement and fee, if approved by the voters, will not be affected by the merger.

"Adelphia will now assume that franchise agreement as negotiated," she said. "Despite the growth of Adelphia as a whole it will continue to retain its tiny-operation philosophy. Adelphia will be committed to prompt customer service and community involvement, which are addressed in the agreement."

If the franchise agreement and fee fail to pass, Anderson said, the company will continue its local operations and will continue to upgrade its systems. The difference is, it won't be required to provide the services and programs as outlined in the agreement, including the funds and equipment designated for the city police and fire communications operations and for educational purposes.

Rather, any of those extras would be contingent on whatever philanthropy Adelphia decides to demonstrate.

Bruce's tirades

After the education consortium spent more than $100,000 on a lobbyist who specializes in securing cable deals, it didn't bother to tell voters about the importance of approving the franchise agreement.

Specifically, the Colorado Constitution requires voting guides be mailed to every registered voter prior to elections. In the guide, both supporters and opponents of a ballot issue are allowed to provide written comments specifying their positions.

Anti-tax activist Douglas Bruce, who has been an vocal opponent of the cable proposal, submitted nine comments blasting the measure. While his remarks are, in some cases, misleading (for instance, he calls the franchise fee a "tax" despite court rulings that such payments are indeed fees), they are written in Bruce's lively, blustery style.

In one of his opposing comments, Bruce complains that the measure does not require any firm commitment on the revenues it would receive from the cable company. And, he writes, claiming the money would be used for police and fire is "bait to attract gullible voters."

"The city and other colluding governments can spend it all on building Big Brother media empires to educate us for the next tax increase," Bruce warns. "Bureaucrats seldom fix things; it is easier to spend taxes on public relations, telling us they will fix them (someday)."

Another of Bruce's tirades advises voters to "tell devious politicians on the council and their arrogant administrators we want honest ballot issues."

Remarkably, proponents of the measure did not file any written comments telling voters why they should support the franchise fee and agreement. D-11's Bishop said his group purposely did not file any pro comments, because they were unsure whether they, as representatives of government agencies, could submit arguments in favor of the agreement that they had helped orchestrate.

"From a legal point of view, we were not sure where we could stand on doing that," he said.

So, what happens to the city and to educators if the measure doesn't pass? The city won't get its $1.8 million a year in franchise fees, and the education consortium won't be able to push forward with state-of-the-art television programming.

And as for cable subscribers?

"It will be business as usual," said Adelphia's spokewoman Anderson.

"Adelphia will continue to operate and offer services to customers and will continue to upgrade the system and will bring in better services and more choice -- high-speed Internet access, cable and Digital TV. The company will continue to honor its commitment to the community."

But will rates go up?

That's part of the $64,000 question.


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