SPECIAL MEETING OF THE COUNCIL OF THE CITY OF NOVI

MONDAY, MARCH 3, 1997 AT 6:30 PM

NOVI CIVIC CENTER - ACTIVITIES ROOM - 45175 W. TEN MILE ROAD

 

Mayor ProTem Crawford called the meeting to order at 6:42 PM.

 

 

ROLL CALL: Mayor McLallen (absent/excused), Mayor ProTem Crawford, Council Members Clark, Kramer (absent/excused), Mitzel, Mutch, Schmid

 

 

ALSO PRESENT: City Clerk Tonni Bartholomew

 

 

AUDIENCE PARTICIPATION: None

 

 

PURPOSE OF SPECIAL MEETING: SWOCC Presentation by Caren Collins

 

SWOCC PRESENTATION

 

Caren Collins reported the renewal process has been ongoing since May 1994. She indicated they hired consultants and performed technical audits, financial audits, needs assessment interviews and they also hired Wayne State University to conduct a scientific telephone survey of subscribers and nonsubscriber.

 

Ms. Collins stated their consultant prepared a draft ordinance and a draft contract which have been in the working process for a while. She reported Governor Engler signed the Michigan Telecommunications Act in December of 1995 and President Clinton signed the Federal Telecommunications Bill in January of 1996. She added that because this legislation impacted telecommunications in their city, they had to make some changes.

 

Ms. Collins noted they had financial statement issues to work out with Time Warner before presenting them. She reported SWOCC presented the draft contract and ordinance to them in the beginning of February, and they are expecting a redline version back this week. She said they were looking to begin negotiations the week of March 24, 1997.

 

Ms. Collins indicated the negotiating team consists of Mayor ProTem Crawford and Phil Hartsock from Farmington, who were also on the negotiating team when they went through the transfer process from Metro Vision to Time Warner, and Steve Brock from Farmington Hills. She indicated John Donohue, who has worked very closely with Dennis Watson, also has been involved.

 

Ms. Collins advised that the original contract from 1982 or 1983 actually became the cable ordinance. She explained they are now drafting a specific cable ordinance that will apply to any cable operator who wants to come into the City and added they will also supply a separate cable contract for each of the cable operators. Consequently, this will provide for competition in the City.

Ms. Collins indicated they were also working on right of way and telecommunications ordinances. She added Mr. Donohue is communicating with Mr. Watson and DPW for information. Ms. Collins explained that much of this is required because of the Telecommunications Act in terms of putting them in a position to enact permits and right of way franchises.

 

Ms. Collins reported Ameritechís Master Plan indicated they want to build in Farmington, Farmington Hills and Novi. She noted Ameritech was interested in talking to Novi first. However, because of the benefits involved, SWOCC expressed that they want to negotiate as a consortium of Farmington, Farmington Hills and Novi.

 

Ms. Collins indicated Ameritechís entry into the market has raised many questions and issues. She said other cities were looking closely at Ameritech before signing a contract with them because they were concerned that in communities where Ameritech has ventured, the contract that Ameritech has with that City is not as beneficial as the contract that the City has with their other cable operators.

 

Ms. Collins stated they are open to competition and she has informed Ameritech about what the next step is in terms of where they want to go. However, Ameritech has indicated that their deals with the metro area are purely business decisions.

 

Ms. Collins said their current contract expires in May 1997. Ms. Collins reported they will begin negotiating for renewal at the end of this month and they will negotiate as fast as they can. Further, the members of the negotiating team have expressed that it is very important to keep the benefits they currently have and to look at the future needs of their community. However, if something should happen and they do not meet the deadline, there should be absolutely no problem in coming before Council and asking for an extension of the current contract.

 

Ms. Collins indicated that the ordinance index and the cable contract gives them an idea about areas that are important to them and areas they would negotiate for. She said there have been numerous Cable Commission meetings where issues were raised about areas the Commission does not have jurisdiction. She reminded Council that they can negotiate only in those areas that they have jurisdiction.

 

Mayor ProTem Crawford indicated Ameritech has approached them and the City believes that negotiating any future contract was best, whether it is Ameritech or anyone else as a consortium. In response to residentsí concerns about why Novi is not involved with competition, Mayor ProTem Crawford stated they are and always have been. He further stated Novi never had a provision against competition.

 

 

Ms. Collins added that in their conversations with Ameritech, they would be open to negotiating the contract for all three cities. However, she added they would offer to build in Novi first.

 

Councilman Schmid has difficulty understanding the advantage of joining with Farmington Hills and Farmington. He said if Ameritech wants to come to Novi, why donít they talk to them independently. He also asked if they have conducted a study of all of the cable companies in the area in terms of costs, benefits and services and compared them with Time Warner.

 

Ms. Collins replied SWOCC has not conducted a study of that nature. However, she is aware that the larger cities and/or the larger consortiums have the greatest benefit.

 

Ms. Collins said rates have to be separated from a contract because the FCC regulates them. Consequently, they are unable to negotiate what the rates are or what the rates are going to be. Ms. Collins added SWOCC is frustrated because it is their job to review the rates, but it is the FCC who sets up the guidelines.

 

Councilman Schmid asked if there is any other cable company in any other city less expensive than Time Warner.

 

Mayor ProTem Crawford believes when they have compared rates, services and programming, whether it was Metro Vision or Time Warner, Time Warner probably ranks in the top third.

 

Ms. Collins explained a rate survey is performed each May. However, she added ratings depend upon the category because every city has a different rate for the basic service. Further, she stated they also have to consider the different pay channels that are provided.

 

Councilman Schmid has heard about rising rates and he does not know if Time Warner is competitive. However, if they are not competitive, the City should negotiate with other companies. He again asked why they should not negotiate independently. Ms. Collins explained the City could not negotiate as good a deal and then cited Troy as an example when they attempted to negotiated with Ameritech separately.

 

Ms. Collins noted there is an economy of scale that each of the three cities, Novi, Farmington, Farmington Hills share. Further, Ms. Collins reminded Council that the three cities are interested in governmental access. Further, in terms of economy of scale, she reported all three cities share SWOCCís studio facilities and the costs. As an example, Ms. Collins reported they currently have a contract for $50,000-$60,000 with their consultants for all the preparation involved for negotiating the renewal process. Ms. Collins reported that the City of Southfield has been in negotiations for six months and they have already spent $150,000.

 

Councilman Schmid stated he was more concerned about rates and not negotiations with other companies.

 

Councilman Clark asked for the breakdown of customers. Ms. Collins replied the total was 36,000 customers; 20,000 in Farmington Hills, 10,000 in Novi and 6,000 in Farmington.

 

Councilman Clark read an article about telecommunications that suggested Ameritech was coming into the area. He stated when Ameritech compared themselves with Time Warner and other surrounding communities, specifically in Wayne County, Ameritech was offering more services for lower rates. He felt if Ameritech really wants to get into this area, they will offer a good package.

 

Councilman Clark does not have a problem with negotiating the three communities together, but if they knew that Ameritech was going to come in, they should make a presentation.

 

Councilman Crawford felt Time Warner is fully aware that Ameritech is out there and it would be an important aspect of these negotiations. However, he would not want to bring Ameritech before Council or the Cable Commission and provide false hopes to the residents.

 

Councilman Clark agreed. However, it seems to him that the only thing they can be assured of is that the rates will go up. Mayor ProTem Crawford interjected, they have no control over that and what the FCC allows, does not mandate it.

 

Councilman Clark said if they allow it, then perhaps it is something that should be in the contract. Ms. Collins replied the FCC would supersede any local contract. Ms. Collins added to further complicate the matter, they might have heard of the social contract Time Warner signed with the FCC where it seems that the cable operator just circumvented the City and went directly to the FCC.

 

Ms. Collins remarked many political things are taking place. She explained according to a Washington, D.C. attorney, the FCC is trying to justify they are needed because there are rumors about dissolving them. Ms. Collins added that as a cable commission, SWOCC is charged with looking at the big picture and the long term.

 

Ms. Collins reported a concern raised by the consultant and based on experience is that although there have been short term gains in terms of competition, when one cable operator takes over another, there is a long term disadvantage. She believes everyone is looking at the short term gain when Ameritech comes in. However, she reminded Council that they should look at the overall benefits of the contract.

 

Councilman Schmid asked if Ameritech will match Time Warner. Ms. Collins replied they have not matched in any community. Further, studies from cable attorneys indicate that the best benefit to a City from Ameritech is through a larger subscriber base.

 

Councilwoman Mutch asked how likely is it that a cable company other than Ameritech, would be interested in coming into the community either exclusively or as an alternative, and competitively, at the same time with an existing company.

 

Ms. Collins replied it is very unlikely and she has seen no interest. She believes the reason may be because it costs a tremendous amount of money for operators to build their own lines. She added that Ameritech has the resources and can become a player. However, until now, other cable operators have not.

 

Councilwoman Mutch said regardless of those kinds of changes, it is more likely that they would still have a single cable company wanting to deliver that kind of service.

 

Ms. Collins replied it is possible that Ameritech has over-built and if they signed a contract, it would still be a year or two before services were provided. She added the Ameritech news media suggested that they have over-built in other cities.

 

Councilwoman Mutch asked if Time Warner could continue to operate with another alternative technology that delivers the same service. Ms. Collins said yes and that is exactly what is going on. Councilwoman Mutch believes nothing was said that they had to have an exclusive either/or contract. Ms. Collins replied the contract was a nonexclusive contract.

 

Councilman Crawford said there are other means to provide service and cited satellite dishes as an example.

 

Councilwoman Mutch asked if the technology is changing in such a way that while Ameritech is coming into the market now, isnít it possible that they can bypasses them altogether. She believes the only reason they have to come to them now is because they need the right of way. Ms. Collins replied that was correct and satellite dishes might be considered as a way to bypass them. However, many people who have the satellite dishes also have the basic service so they can get local and access channels.

 

Councilwoman Mutch asked why would they care about basic. She explained if they were the provider and making business decisions, they would realize there are probably more people interested in pay for view, etc., than interested in Channels 12 or 13.

Ms. Collins replied cable has access to local channels and the satellites do not and there is a benefit to having access to the local channels. Further, there are two local channels and nationwide studies show that the most watched access programs are City Council.

 

Councilwoman Mutch asked how many access channels are there. Ms. Collins replied the City has a channel, a public access channel, two school channels, one for public and one for OCC, and a community channel.

 

Councilman Clark would like to see an invitation sent to Ameritech on the basis that although the City is not making any commitments, they would like them to make a presentation about what they would offer the residents of Novi.

 

Councilwoman Mutch believes it does not matter what they say because from what she understands, the City is not in a position to hold them to any initial promises even with a contract in terms of rates, programming, etc.

 

Councilman Clark still believes they should present an entire package about their services.

 

Ms. Collins replied Ameritech would answer in terms of cable, but they do not know who Noviís current operators are.

 

Councilman Schmid said it is difficult for a lay member to understand why competition is not healthy.

 

Ms. Collins said the Cable Commission encouraged competition and Ameritech came to the Commission with their presentation and now it is up to Ameritech to decide where their interests lie.

 

Ms. Collins has seen Ameritech negotiate intensely with communities and then nothing happens. However, she has also seen them sign contracts in other cities with minor negotiations.

 

Councilman Schmid asked if Time Warner uses fiber optics. Ms. Collins reported they have used fiber optics as of December 1, 1996.

 

Mayor ProTem Crawford said universal coverage is important to Novi and is something that they can negotiate.

 

Councilman Schmid asked what is the term of contract that they sign. Ms. Collins replied it is negotiable. Further, is the last thing to negotiate because it has the biggest leverage. Councilman Crawford said it used to be that the industry wanted short term contracts and cities wanted longer contracts, but that role has reversed. Ms. Collins agreed that it was changing because of the political climate, court cases, and the new technology.

 

Ms. Collins reported there are other things they now have to think about. She reminded Council that the federal government took away some of the benefits in their original contract and now there is discussion about taking away more. Further, there is always the scare of franchises leaving. She believes they would not want to be in a situation of a short term contract and lose all their benefits. However, if the federal government took the benefits away and they had a longer contract, they can uphold the contract through the term of that contract.

 

Ms. Collins concluded by stating she will try to keep everyone updated about meetings with Council concerning the ordinances, contracts and possible extensions. She indicated Mayor ProTem Crawford was their representative on the negotiating team and she would strongly recommend that if anyone has any ideas or issues, to discuss them with him. She wanted everyone to be aware of what is going on so when the time comes to pass this, they would be as educated as possible.

 

 

ADJOURNMENT

 

There being no further business before City Council, the meeting was adjourned at 7:30 P.M.

 

 

 

 

 

Mayor City Clerk

 

 

Transcribed by Sharon Hendrian

 

Date Approved: March 17, 1997