FEBRUARY 1, 2005 SECOND SYSTEM PERFORMANCE AUDIT OF 2000 CABLE TELEVISION FRANCHISE AGREEMENT WITH COX COMMUNICATIONS FEBRUARY 1, 2005 SECOND SYSTEM PERFORMANCE AUDIT OF 2000 CABLE TELEVISION FRANCHISE AGREEMENT WITH COX COMMUNICATIONS

TO: HONORABLE MAYOR AND CITY COUNCIL

FROM: ASSISTANT CITY MANAGER/CITY CLERK

DATE: FEBRUARY 1, 2005

SUBJECT: SECOND SYSTEM PERFORMANCE AUDIT OF 2000 CABLE TELEVISION FRANCHISE AGREEMENT WITH COX COMMUNICATIONS

RECOMMENDATION

Provide staff and Cox Communications with feedback regarding the second scheduled system performance audit of the 2000 Cable Television Franchise Agreement.

BACKGROUND

On October 17, 2000, the City Council adopted Resolution No. 2000-71, thereby entering into a non-exclusive, ten year Cable Television Franchise Renewal Agreement with Cox Communications. This was the first renewal of the Franchise Agreement that the City originally entered into with Times Mirror Cable in 1985. During the 15-year term of the original Agreement, the name of the franchise was changed to Dimension Cable and, in 1994, the City approved a transfer of the franchise from Dimension Cable to the current owner, Cox Communications.

The 2000 Franchise Renewal Agreement includes a requirement that three system performance audits be conducted following the second, fourth and sixth anniversary dates of the Agreement. The City Council conducted the first system performance audit on January 7, 2003 and on February 4, 2003 adopted Resolution No. 2003-06 finding that the cable operator was not in compliance with seven specific items. Over the course of the next two years, staff worked with the cable operator to address these items. Consequently, it was reported to Council on October 19, 2004 that only two of the original seven items remained unresolved. At that time, Council directed staff to include the remaining items as part of the upcoming second performance audit.

October 17, 2004 marked the fourth anniversary of the Franchise Renewal Agreement. Pursuant to Section 8.1(b) of the Agreement, the City and Cox Communications are to meet within 90 days following the second anniversary date of the Agreement (by January 14, 2005) to review the performance of the cable television system. However, Art Yoon, Manager of Governmental Affairs for Cox Communications, submitted a letter in December 2004 requesting additional time to compile the required data for the audit. On December 21, 2004, the City Council agreed to the request and continued the Second Cable Television System Performance Audit to tonight’s agenda. Pursuant to Section 8.1(c) of the Agreement, within 30 days after the conclusion of the performance audit, the City may issue findings with respect to system compliance. If any noncompliance is identified, the City may direct Cox Communications to correct the noncompliance within a reasonable period of time.

PERFORMANCE CRITERIA

As specified in Section 8.1(b) the Agreement, the performance audit may include consideration of the following:

1. The test results relating to the cable operator’s compliance with technical standards and specifications.

2. The reports required by the Agreement that relate to subscriber complaints received by the City concerning technical problems or service-related issues.

3. The types and quality of services provided by the cable operator, and the extent to which the cable operator’s 750 MHz bandwidth is adequate to accommodate those services without degradation or loss of quality.

4. The results of any subscriber surveys that may be conducted by the cable operator or the City.

5. Reports submitted by the cable operator or any other person that address the cable operator’s compliance with the terms of the Agreement granting the Franchise.

6. Changes in cable television system technology and services, including, but not limited to an evaluation of established, operating state-of-the-art technology in comparable communities within the greater Los Angeles metropolitan area, and the economic and technical feasibility of providing interactive, addressable, and security monitoring services.

7. Changes in state and federal laws and regulations that affect the operation of the cable television system.

DISCUSSION

Based on the performance criteria included in the Agreement and the additional issues raised by Council members, staff has divided the Discussion section of this report into four topic areas: 1) cable system improvements; 2) customer service; 3) support of local government programming; and, 4) technical performance of the cable television network. Each of these four areas is discussed below.

1. Cable System Improvements

When the current Agreement was executed in October 2000, Cox Communications was just completing re-construction of its cable network from hybrid coaxial cable to fiber optic technology with a total bandwidth of 750 Megahertz (MHz). Pursuant to Exhibit C of the Franchise Renewal Agreement (Technology Implementation Plan), Cox completed the system upgrade by December 31, 2000. The new system was required to have greater system reliability, enhanced picture quality, a fiber optic network capable of supporting new services and future technologies and an expanded channel capacity. The greater reliability and picture quality of the new system will be discussed under the "Technical Performance" section of this report.

Since the upgrade, the cable operator has provided the following three services to the community: basic cable programming, digital cable programming, and high-speed data service (Internet access). The 2003 and 2004 subscriber data for the use of these three services is presented in the chart below:

Cox Cable Subscriber Statistics

2003

2004

Basic Cable

Beginning Amount

12,305

11,816

 

"Churn %" is the percent of disconnects per month.

Connects

1,663

1,735

Disconnects

2,152

1,920

Net Gain

(489)

(171)

Ending Amount

11,818

11,645

Churn %

0.0%

1.4%

Ending Homes Passed

16,214

16,386

% Basic Penetration

72.9%

71.1%

Digital Cable

Beginning Amount

4,243

4,235

 

"% Digital Penetration" is a percentage of basic cable subscribers.

Connects

1,665

1,906

Disconnects

1,673

1,391

Net Gain

(8)

523

Ending Amount

4,235

4,758

Churn %

0.0%

2.7%

Ending Homes Passed

16,214

16,386

% Digital Penetration

35.8%

40.9%

High Speed Data

Beginning Amount

5,580

5,582

 

"% High Speed Data Penetration" is a percentage of the number of homes passed by the cable network.

Connects

2,009

2,173

Disconnects

2,007

1,264

Net Gain

2

907

Ending Amount

5,582

6,489

Churn %

0.0%

1.9%

Ending Homes Passed

16,214

16,386

% High Speed Data Penetration

34.4%

39.6%

In the past two years, the cable operator has experienced a slight net drop in Basic Cable subscribers. In 2002, the company’s basic cable penetration was 75.35%. However, Cox’s Digital Cable and High Speed Internet service have continued to grow. In 2002, the penetration for these two services was 20.62% and 22.71%, respectively.

During the past two years, Cox Communications has also launched three new services for its customers:

High Definition Television: In 2003, the cable operator began providing specific channels in High Definition Television (HDTV). Customers with HDTV capable equipment are able to receive a high definition TV signal that has twice the color resolution and a picture that is six times sharper than a traditional analog signal. HDTV also provides enhanced audio, such as Dolby Digital.

Digital Video Recorder: In 2004, the cable operator launched High Definition Digital Video Recorder (HD-DVR). This hard drive device provides HDTV customers with the ability to record programs to watch later, pause and rewind live television and watch recorded programs while simultaneously recording two live programs on different channels.

Entertainment on Demand: In 2005, the cable operator launched Entertainment On Demand (EOD). With EOD, cable television customers will be able to order movies, as well as other cable programming, and view their selections as many times as they want within a 24 hour period. This feature also allows the customer to control their selection with full VCR-like functionality - starting the film whenever they like, pausing, rewinding and fast-forwarding their selections. The most current channel schedule includes 4 channels of EOD, one analog and 3 digital.

As required in Exhibit C of the Agreement, Cox Communications has continued to expand its channel offerings. As shown in the table below, in the last two years, Cox has added 4 new analog channels, 17 new digital channels and 3 high definition channels to its line up. During this same period, Cox deleted a total of 9 channels, 5 pay-per-view channels, two analog channels and two digital channels. A complete list of the available channels is attached to this report for the Council’s information.

CABLE CHANNEL ADDITIONS

2003

Analog Channels

Digital Channels

High Definition Channels

TV Guide

ESPN Classic

Nick GAS

iNHD

RPV Educations Access

G4

MTV Hits

iNHD 2

 

Tennis Channel

VH1 Classics

 
 

TVG

VH1 Megahits

 
 

HRTV

VH1 Country

 
 

Noggin

NBA TV

 
 

Nick Toons

   

2004

Analog Channels

Digital Channels

High Definition Channels

FX

Outdoor Life Network

KTTV HD

MTV 2

BYU

90’s (music)

R&B Hits (music)

With 750 MHz of total bandwidth, the new fiber optic system has a very large channel capacity. The use of the bandwidth and its current and maximum channel capacity is presented in the table below:

Bandwidth

Purpose

Current Level of Use

Maximum Capacity

0 to 50 MHz

Two-Way Transmissions

N/A

N/A

50 to 550 MHz

Analog Channels

76

83 channels

550 to 750 MHz

Digital/HDTV Channels

231

333 channels

2. Customer Service

A. Customer Call Centers

For the last two years, Cox Communications has used a customer call center located in San Diego. Section 76.309(c) of Title 47 of the Code of Federal Regulations, which is incorporated as an attachment to the Franchise Renewal Agreement, contains standards regarding the cable operator’s customer service obligations. The standards require that customer calls be answered with thirty (30) seconds of the connection being made and that the cable operator achieve this standard ninety (90) percent of the time, under normal operating conditions. The term "Service Level %" refers to the percentage of incoming calls that were answered within 30 seconds. The table below contains data on how the cable operator’s customer service call centers have responded to calls over the last two years.

Customer Call Performance

 

2003

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Calls Received

8771

7208

7848

6650

6644

4088

7965

6847

7364

6662

6397

7337

Calls Answered

8489

6995

7640

6505

6334

3915

7428

6384

6624

6244

6136

7186

Calls Abandoned

154

213

208

145

310

173

537

463

740

418

261

151

Service Level %

84.1

86.3

90.4

89.9

79.0

81.1

65.7

64.9

53.1

69.2

79.8

91.7

Average Speed of Answer

15

16

12

11

38

32

62

68

107

53

36

13

 

2004

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec*

Calls Received

11789

10738

13410

7532

7971

8496

8919

8399

9131

11478

10975

 

Calls Answered

11333

10314

12754

7378

7724

8065

8408

7761

7990

10218

10574

 

Calls Abandoned

456

424

656

154

247

431

511

638

1141

401

401

 

Service Level %

82.4

85.3

82.3

91.4

87.5

73.7

74.0

63.3

54.3

59.1

78.7

 

Average Speed of Answer

29

18

33

42

20

42

50

73

118

90

33

 

* Data not yet available for December 2004

As shown in the chart above, the cable operator was in compliance with the federal customer service standards during only two months in the last two years: March 2003 and April 2005. In the past, the cable operator has attributed the low performance to a high volume of calls routed to the San Diego call center during peak emergency periods, such as during the fire storms in October 2003 and when other natural disasters that have occurred in other parts of the country that have required calls to be rerouted to the San Diego call center. However, this does not adequately explain why the cable operator has been unable to meet the federal standard during 21 months out of the 23-month period. Staff has discussed this issue with Art Yoon, Manager of Government Affairs, and he acknowledged that the poor performance is more pervasive. He indicated that Cox is currently taking steps to improve the service level by adding more staff to the call center and providing more training.

B. Additional Customer Service Standards in Franchise Renewal Agreement

In addition to the state and federal customer service requirements that are incorporated as attachments to the Franchise Renewal Agreement, the City has required the cable operator to comply with some additional customer service requirements, which are included in Exhibit D (Customer Protection Standards) of the Agreement:

The cable operator is in compliance with this requirement. In fact, instead of once a year as required by the Agreement, Cox sends out the required notification twice a year to all its subscribers as an insert in the billing statement. A sample of the customer information pamphlet is attached for the Council’s information.

The cable operator is in compliance with this requirement. While it is the company’s policy to not sell its customers’ information to other companies, Cox offers the privacy flag to its customers and includes information about this service in the new subscriber and twice-yearly information packets described in the previous bullet point.

The Acceptable Use Policy that is currently posted on the Cox web site contains the following instructions to High Speed Internet subscribers: "You should consult this document regularly to ensure that your activities conform to the most recent version." This method of informing subscribers about changes in the AUP does not comply with specific requirements of the City’s customer service standard, which requires the cable operator to provide written notice by mail 30 days in advance of the change.

All of the pricing tiers advertised in Cox’s printed materials and on its website include the City’s 5% franchise fee as part of the total price quoted for each package.

Prior to the Franchise Renewal, the "limited basic" package was not advertised on any of cable company’s printed price lists. Since that time, the "limited basic" package has been included on all pricing lists. Although this information has not been specifically targeted to senior citizen and low-income subscribers, staff feels that because all of Cox’s printed materials and on-line information have been modified in this manner, the intent of the condition has been satisfied.

During the first performance audit, Cox was found to not be in compliance with this requirement. However, in May 2004 the cable operator resolved the issue by posting the required information regarding "must carry" stations and complaint procedures on the Channel 3 Reader Board. Staff has recently confirmed that this information is still being posted at the head of the scrolling text for the City of Rancho Palos Verdes. So long as this continues, staff considers these two franchise requirements to be satisfied.

Similar to the item above, during the first performance audit Cox was found to not be in compliance with this requirement. However, in May 2004 the cable operator resolved the issue by posting the required information regarding complaint procedures on the Channel 3 Reader Board. Staff has recently confirmed that this information is still being posted at the head of the scrolling text for the City of Rancho Palos Verdes. So long as this continues, staff considers these two franchise requirements to be satisfied.

The call center in San Diego has an automated phone system or automated response unit (ARU). However, customers have the option of bypassing the automated system to speak to a live attendant. Staff is not aware of any instances where the customer did not receive an answer the customer’s question and did not call back within 24 hours.

Federal standards required Cox to begin action to correct routine service problems by the next business day after the request has been received. The City’s requirement is more specific, in that the service appointment must be scheduled within three (3) days of the request. Federal standards also allow seven (7) business days for installations, while the City’s requirement is more stringent.

During the first performance audit in January 2003, the cable operator indicated that it has not kept statistics to document compliance with the City’s standard. At the May 5, 2004 public hearing, Cox’s Manager of Government Affairs Arthur Yoon provided staff with a printout of all cable television service calls the company received during 2003 and the first four months of 2004. Staff reported in October 2004 that it was unable to draw any meaningful conclusions about the cable operator’s compliance with the franchise requirement from the data provided because it was in raw form and did not relate to the number of business days taken to set up a service appointment with the customer. The City Council deferred this item to the second performance audit. Unfortunately, staff did not receive the data in time to include an analysis in the second performance audit report. Therefore, staff will present its findings regarding this issue as part of its oral presentation at the City Council meeting at tonight’s meeting.

C. Customer Complaints to City

The staff keeps track of all the complaints it receives from residents regarding the cable service and follows up with the cable operator to make sure that the residents receive a response and the issues are resolved. The chart below indicates the type and number of complaints the City has received over the last six years (two years before and four years after the Franchise Renewal and commensurate cable system upgrade):

CUSTOMER COMPLAINTS RECEIVED BY CITY

 

1999

2000

2001

2002

2003

2004

Billing

4

1

2

0

1

2

Construction Impacts

6

2

2

0

0

0

Customer Service

4

6

2

0

1

1

High Speed Data Service

2

0

0

2

1

0

Picture or Sound Quality

4

3

0

1

2

2

Pricing Tiers and Special Promotions

2

1

0

1

0

0

Programming

7

2

0

2

1

0

Quality of Repair Service/Missed Appointments

2

2

1

0

2

1

Rate Increase

10

3

4

3

0

1

TOTAL:

41

18

11

9

8

7

Given the fact that Cox Communications serves approximately 72% of the households in Ranchos Palos Verdes, the City receives a very low number of resident complaints each year. In addition, often customers have multiple complaints associated with a single call, although the City still tallies them separately by topic. For example, a customer who calls about poor reception and a rate increase is recorded as two complaints.

D. Customer Service Tracking Study

For the last four years, Cox Communications has used a professional consulting firm (C&R Research) to conduct a quarterly customer service tracking study to measure the satisfaction of its customers. Each quarter, the consulting firm contacts a minimum of 200 customers by telephone that have recently contacted the cable company. The data collected for the current quarter is compared to the previous four quarters. A copy of the survey conducted for the fourth quarter of 2004 is attached for the Council’s information. Due to length, staff has not attached copies of the other quarterly reports to this staff report. However, if any Council member would like copies of these studies, staff will make them available. The acronym "ARU" used in the study refers to the "automated response unit" or automated answering system and "CSR" refers to a "customer service representative." The study examines three service areas: 1) phone experience, 2) installation experience, and 3) repair visit experience. Using the 4th Quarter of 2004 as a representative sample, in most of the areas the cable company received favorable ratings from 80% to 90% of the customers surveyed. The only exception was the use of the automated phone system, which received favorable ratings in the 60% range of the customers surveyed. It should be noted that the sample size was small for this particular category, which seems to bear out other statistics in the report indicating that most customers by-passed the system in order to speak to the live person.

3. Support of Local Government Programming

A. RPV Channel 33

As part of the 2000 Franchise Renewal Agreement, the City eliminated Public Access Channel 33 because most of the programming that was aired on this channel was "bicycled in" from outside the Peninsula and was not found to have particular relevance or value to the local community. In 2003, the City exercised its option under of the Franchise Agreement to provide a new government and educational access channel on Channel 33. To support the new channel, the City established a multi-media studio at City Hall, which is operated by Palos Verdes on the Net. Up to this point in time, the multi-media studio has been used to produce programming, such as RPV City Talk, and public service announcements, that have been shown on the local government access channel, Channel 3, which the City shares with the other Peninsula cities and special districts. The cable operator is in the process of placing the fiber optic cable needed to connect the studio to the cable network head end. In addition, the cable operator will provide the equipment necessary to allow the City to schedule and air programs on the new channel. This work is to be completed by March 2005, at which time the City’s channel will "go live."

B. Community Bulletin Board

Exhibit E of the Franchise Agreement states: "Grantee will accommodate local origination programming and the community bulletin board service on the KCOX local channel." Beginning in early 2002, the cable operator has provided the community bulletin board service on Channel 12 as stipulated in the Franchise Renewal Agreement. The cable operator produces a half-hour "KCOX 12 Community Calendar" program that airs each day from 11:30 AM to 12:00 noon. The program includes a split-screen format, with a host describing current community events on the left side of the screen, while written information and graphics appears on the right.

4. Technical Performance

As discussed at the beginning of this report, in 2000 the cable operator completed an upgrade to its entire cable network to provide a minimum bandwidth of 750 Megahertz (MHz). This amount of bandwidth allowed the new system to provide two-way interactive capability for high-speed Internet access and other high-speed/high bandwidth cable services (such as DVR and HDTV), as well as provided capacity for the cable operator to add non-cable services in the future (such as telephony). This section of the report examines how well the new cable network system is performing on a technical level and will examine signal leakage, back-up power supply and the emergency alert system. Cox provided staff with technical studies on which the following discussion is based. Due to length, staff has not attached copies to this staff report. However, if any Council member would like copies of these studies, staff will make them available.

A. Signal Leakage

Since January 1993, the FCC has required mandatory testing cable network systems to ensure that a minimum standard is maintained for television signal quality and efficient field distribution to its customers. The FCC requires cable operators to conduct the required "proof-of-performance" testing every six months. Because Cox broadcasts its programming over aeronautical frequencies, the FCC and the FAA have mandated Cumulative Leakage Index (CLI) testing, in addition to video testing. CLI is radio frequency leakage into our local airways and is caused by defective or damaged cable and connectors both inside and outside the home or illegal connections to the system.

Cox has achieved a score of 99.77% in 2003 and in 100% in 2004. A perfect score (100%) means that no CLI was found to exist in the cable network system.

B. Back-Up Power Supply

Exhibit C required the cable system to maintain a back-up power supply and continuous monitoring of the cable system in order to provide the most reliable system for the community. Therefore, the system’s power supplies, fiber nodes and high-speed data routers are continuously monitored (24 hours a day, seven days a week) from the Cox Network Operations Center in Orange County and the company’s national headquarters in Atlanta, Georgia. Each fiber node is equipped with its own stand-up power supply that can operate for four hours and the Master Telecommunications Center (MTC) is equipped with a diesel generator in the event of an extended power outage. In addition, Cox has equipped its MTC with an Uninterrupted Power Supply (UPS) to protect against power surges. These modifications to the cable system have resulted in Cox achieving a reliability index of 99.99870% in 2003 and 99.99827% in 2004, which indicates the "up time" of the cable system per year (includes both video and high-speed data services).

C. Emergency Alert System

Cox has continued to maintain an Emergency Alert System (EAS) that exceeds FCC minimum requirements. The system is capable of sending local emergency messages to its cable television subscribers via "text crawls" at the top of the screen or by overriding audio and/or video. The EAS was activated twice during the last year due to emergencies associated with a gas leak in the Ridgecrest neighborhood in March 2004 and the road closures on Western Avenue in January 2004. Both of these EAS activations were done at the request of the City and provided valuable information to residents and instructions pertaining to these events. The system can also be activated by law enforcement, fire and local utility companies.

CONCLUSION

Staff has initiated the second system performance audit for the 2000 Cable Television Franchise Renewal Agreement with Cox Communications. Staff found that the cable operator has continued to expand the types of services available to the community, such as high definition television and video on demand services. Staff also found that the able network system is continuing to perform well on a technical level and is exceeding FCC performance standards. The cable operator is also supporting local programming by providing a cable connection and equipment for the City’s Channel 33. However, although the number of complaints received by the City is low compared to the number of residents that subscribe to cable service, staff found that the cable operator is not in compliance with the following customer service standards specified in the Agreement:

1. The Service Level % (call answered with 30 seconds at the call center) has not complied with federal requirements.

2. The cable operator has not provided adequate notice to customers of changes to the Acceptable Use Policy.

In addition, staff is still analyzing the data submitted regarding the cable operator’s responsiveness to service requests. Staff will report it’s finding to Council at the meeting.

FISCAL IMPACT

There is no fiscal impact to the City associated with the system performance audit.

Respectfully submitted:

Carolynn Petru

Assistant City Manager/City Clerk

Reviewed,

Les Evans

City Manager

Attachments:

Cable Channel Line Up

Customer Information pamphlet

Customer Service Tracking Study (4TH Quarter ‘04)