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HomeMy WebLinkAbout5 FTTH Project Ott Staff Report To: Board of Directors From: Alan Harry, Director of Telecommunications Services Date: May 29, 2002 Subject: Consideration of Broadband Issues— FTTH Project On May 22 you held a Special meeting of the District's Board of Directors to discuss the proposed fiber to the home project, its timing and the work items that must be completed prior to, during and following it's construction. During the Special Meeting the Board, by verbal consensus, agreed to place the following items on the agenda for consideration. a) Consideration of expressing the Board's intent to enter into the Broadband business; b) Consideration of authorizing District staff to enter into formal negotiations, with the Town of Truckee and the Counties of Nevada and Placer, for a Franchise to operate a Cable Television System within the District's service area; c) Consideration of authorizing staff to hold Technology and Programming Forums; d) Consideration of authorizing staff to communicate the aforementioned actions to Nevada County LAFCo; and e) Consideration of directing staff to update the District's Fiber-optic Project CECA dated September 1999. It is recommended that the Board take affirmative action on each of the items listed above. Additionally, as requested, I have attached a glossary of terms readily used in the field of broadband technology for your edification. 0 Page 1 i ATTOl2N)[ I CLIENT I'RIVILE Ia RANI}CONEIDEN' LUI MEMO`RA]11DT11 I , C? Boacl of Dijrecfors,TD 'ST " Cc Peter Holzne�cster�;�eneral.ltila>xa ��r; ,. " . ,; FROM Sieve counsel RED, Regulatory Author of Nevada Count:LAFCO`AA l ranchising Autlt©rite of Town of Truckee re Broacll}antl I. Background Information TDPUD has been exploring the idea of offering cable television, broadband Internet access, and perhaps telephony over a fiber optic network to be constructed by TDPUD. Nevada County LAFCO has asserted jurisdiction over this expansion of services by TDPUD, and the Town of Truckee has informed TDPUD that a Town franchise will need to be obtained in order for TDPUD to provide cable television service. A definitive opinion has been requested as to whether LAFCO and the Town have the legal authority under state and federal law to exercise the regulatory authority these entities have sought to assert over TDPUD. II. Questions Presented A. Under state and federal law, is TDPUD required to obtain a franchise from the Town of Truckee and Nevada and Placer Counties in order to offer cable service? B. Does Nevada County LAFCO have the authority to require, as a condition of approval of TDPUD's application, that TDPUD obtain franchises? III. Conclusions A. Yes. B. Perhaps not,but TDPUD is going to have to obtain franchises in any event. 1 IA. Discussion A. Authority of Town to Require Franchise 1. State Law Section 53066(e) of the California Government Code provides that"no person may commence the construction of a cable television system without a franchise or license granted by the city, county, or city and county in which the cable television system will operate." Section 53066(a) grants cities and counties the authority to issue franchises or licenses for the construction of cable television systems. The Town of Truckee, like every other municipality in California, thus has general authority to issue cable franchises. The Town's general authority to issue cable franchises is not in dispute. The question which has been raised is whether, in light of TDPUD's independent statutory right of access to the public rights-of-way,l the Town can require TDPUD to obtain a franchise. It appears that the Town does have this authority, notwithstanding TDPUD's right of access to the rights-of-way. a. TDPUD as "Person" in Government Code §53066 This is the case for three reasons. First of all, Government Code section 53066 includes TDPUD in its prohibition on building cable systems without a franchise. It could perhaps be argued that TDPUD is not subject to the Government Code section 53066 prohibition on "any person" building a cable system without a franchise. We have reviewed the statutory history of section 53066(e) in order to determine what "person" means in this section. The statutory history is not clear on this point. The record does contain, however, a single comment in a report written by the chief consultant to the Assembly committee responsible for what became section 53066(e) which indicates that the "no person" language "codif[ies] existing federal law which requires that a cable television service be provided pursuant to a franchise granted by a franchising authority." This indicates that the intent was probably to track the 1984 Cable Act, which does require all cable operators to obtain franchises, subject only to certain exceptions. q P l Y As discussed below, the only possibly relevant exception is for "franchising authorities", and TDPUD does not qualify. 2 b. Purposes of Franchise Fee The second reason is that the justification for requiring cable operators to pay franchise fees is that cities and counties, at least in theory, perform several functions with respect to cable operators. The fee is intended not only to pay for access to rights-of-way, but also to pay for a city's efforts in overseeing and managing the rights-of-way. These are functions which the Town and Counties perform, not TDPUD. For example, the Town of Truckee is the entity which coordinates and issues encroachment permits for work in the rights-of-way. Although TDPUD has independent rights to access the rights-of-way, TDPUD does not maintain the streets, and does not attempt to control encroachments by contractors and utilities. Also, franchising authorities are supposed to be protecting cable television consumers by regulating and monitoring the quality of cable service; the franchise fee is also intended to defray some of the cost of these regulatory efforts. The result is that although TDPUD's rights are indeed equal to the Town's in some respects concerning rights-of-way, in other respects the Town still has more authority and responsibility. C. Conflict Among Statutes The final reason why it does not appear that the Town is precluded from requiring a franchise is because of the maxim of statutory construction concerning conflicts between statutes. This maxim is well-established in California law, and holds that in cases where there are conflicting statutes, the more specific statute will prevail over the more general. In this case, TDPUD enjoys a very broad grant of access to rights-of-way, which would be considered a fairly general statute. Arrayed against this is the specific prohibition against anyone building or operating a cable system without a franchise. Since the latter provision is more specific, it prevails over the former to the extent they are in conflict. For all these reasons, TDPUD appears to be required by state law to obtain cable franchises from the Town of Truckee and the Counties of Nevada and Placer. However, ' Section 16464 of the Public Utilities Code provides that"A district may construct works across or along any street or public highway...and has the same rights or privileges appertaining thereto as are granted to cities within the 3 there is more to the regulatory landscape than state law. 2. Federal Law Federal law, specifically the 1984 Cable Act (the "Act"), requires a somewhat different analysis.2 The Act provides that no "cable operator" can provide cable service without a franchise from a "franchising authority".3 If TDPUD were providing cable service, it would fall within the definition of"cable operator". The "franchising authorities" in this case would be the Town and Nevada and Placer Counties. The effect of this is that unless an exception exists, TDPUD would be required to obtain a franchise from the Town and Counties under federal law. An exception to this franchise requirement exists for entities which are themselves "franchising authorities", or are affiliated with a "franchising authority". TDPUD is not affiliated with any such entity5, and does not seem to be a "franchising authority" itself. A "franchising authority" is "any governmental entity empowered by Federal, State, or local law to grant a franchise".6 Nothing in federal law authorizes TDPUD to grant a cable franchise, and the provisions of section 53066 are clear in specifying that only cities and counties may issue cable franchises. Nor does section 16464 of the Public Utilities Code (which grants TDPUD access to rights-of-way), or any other provision of the Public Utilities Code, confer any cable franchising authority on TDPUD. B. LAFCO The Cortese-Knox-Hertzberg Act gives LAFCOs authority to review "new or different functions or classes of service" offered by special districts.7 Nevada County LAFCO has state". 'Most of the provisions of the 1984 Act were not affected by the passage of the 1996 Telecommunications Act,and are thus still in force. 3 47 U.S.C. 54l(b). 4 47 U.S.C. 541(f). 5"Affiliated with"is defined as"owns or controls,is owned or controlled by, or is under common ownership or control with"another person. The District is neither owned nor controlled by the Town of Truckee or Nevada and Placer Counties. 6 47 U.S.C. 522(10). California Government Code§56824.10-56824.14. Similar provisions existed in the former Cortese-Knox Act as authority to regulate"activation of latent powers". 4 determined that cable service would be a "new or different function or class of service" for TDPUD, since nothing like it is currently being offered. This seems to be a legitimate conclusion on the part of LAFCO. As part of its review of TDPUD's entry into the cable field, Nevada County LAFCO has imposed a condition of approval that requires TDPUD to enter into cable franchise agreements with the Town and the two counties. Given that LAFCO has the authority to review TDPUD's application to offer a new class of service, and that state and federal law require TDPUD to obtain a franchise from the Town and the two counties, it seems to be irrelevant whether LAFCO has statutory authority for requiring TDPUD to obtain a franchise as a condition of LAFCO approval. The condition that LAFCO is seeking to impose is one that TDPUD will have to comply with in any event. TDPUD could argue that this condition exceeds LAFCO's authority, but there does not appear to be anything to be gained by picking a fight with LAFCO over something TDPUD is going to have to do regardless. V. Summary California law provides that no person may construct a cable system without a franchise agreement, and does not appear to contain an exception for entities like TDPUD with independent rights to access rights-of-way. Federal law requires TDPUD to obtain a cable franchise unless it is itself a franchising authority. TDPUD is not a franchising authority, so the franchise requirement applies. Even if TDPUD could find an exemption under state law, the federal law's franchise requirement would still apply and TDPUD would have to obtain a franchise. LAFCO clearly has the authority to review TDPUD's provision of a new kind of service. Since the franchise requirement is imposed by both state and federal law, it seems irrelevant whether LAFCO has the ability to require TDPUD to obtain a franchise; TDPUD is going to have to do so regardless of anything LAFCO does. 5 Wolin Gilboy,Ply httpellwww.4spees.com/ 10581 Heather Rd Truckee CA 96161 colin@4speesacom 530.582.8008 I publish an Internet directory for architects, with over 2,000 users per day on an outside server. I rely heavily on my USAMedia connection, and have had excellent success with their service. I am concerned that the PUD has not done a realistic count on the number of users of the Internet and cable TV before having proceeded this far. My rough calculations reveal that the PUD must have a substantial market share before being able to cover debt service. Further, while this is being called a broadband proposal,the real revenues must come from cable TV,which is being presented as a side issue to broadband. Debt - 14 million C 6%,30 year terra = $83,937 in debt service a month Each Cable Subscriber- $40 in revenues per month 16 (40%) in programming costs 12 (30%)in operations and maintenance $12 contribution to debt service Each Internet Subscriber- $50 in revenues per month 30 (60%) in connectivity and ISP charges 10 (20%) for operations and maintenance $10 contribution to debt service It would take; 5,000 cable subscriber @ $12 = $60,000 2,500 Internet broadband subscribers @ $10 each= $25,000 Total= $85,000 contribution to debt With 7,500 houses, means 66%penetration on cable and 33%on broadband. These numbers exceed nation broadband penetration numbers, and they are split up among several providers, not all going to the PUD. If you lower costs to consumer, then the revenue numbers are loaner. Does not consider: 1. 3 cable providers to share market-Dish Satellite, USA Media and PUD 2. 4 broadband providers to share market-PacBell DSL, USA Media,Dish Satellite and PUD 3. Losses during ramp up time 4. Cost overruns on construction of system. 5. Money invested by PUD to date to develop the system, with consultants and design work already completed Recommendations: I recommend not spending any more money on the telecommunications/broadband item until a hard survey of the number of subscribers that will switch to the PUD system once it is completed.