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05-1171�_, Council File # 0 S ��� Green Sheet #�(�� � U a� RESOLUTION SAINT PAUL, MINNESOTA 1 2 3 4 5 6 7 8 9 10 il 12 13 14 15 16 17 18 19 20 21 22 23 24 Presented WHEREaS, under Section 623 of the Cable Communications Policy Act of 1984, 47 U.S.C. § 543, as amended (Cable Act) the City of Saint Paul, Minnesota, (City) is permitted to regulate rates for basic cable service and equipment (including installations); and 7 WHEREAS, Comcast of Saint Paul, Inc., (Comcast) submitted a filing on or about February 27, 2004 purporting to justify its equipment rates for the period June 1, 2004 through May 31, 2005 (the 2004 Form 1205 Filing); and WHEREas, after a review conducted by the City, the City by Resolution No. QS-243 adopted a rate order setting equipment rates and ordering refunds (the 2004 Rate Order); and WHEREnS, Comcast appealed the Rate Order to the FCC; and WHEREAS, Comcast submitted a filing on or about March 1, 2005 purporting to justify its equipment rates for the period June 1, 2005 through May 31, 2006 (the 2005 Form 1205 Filing); and WHEREas, by letter dated November 4, 2005, Comcast has made an offer to settle outstanding issues with respect to the Form 1205 for the past and to settle certain issues for future filings (the Settlement Offer); and WHEREAS, the Saint Paul City Council finds it is in the best interest of City to enter into the settlement. Now, TxEREFORE, BE IT RESOLVED, by the City Council of Saint Paul of the City of Saint Paul, Minnesota as follows: The appropriate city officials are hereby authorized to accept the Settlement Offer. 1. 25 26 2. The City adopts the rates set forth in Appendix C of the Settlement Offer attached hereto and incorporated 27 herein, as the maxinium pennitted rates under the 2005 Form 1205 Filing, subject to the sarisfaction of the 28 conditions in paragraph 4 herein. If those conditions are not satisfied, or Comcast in fact fails to satisfy its 29 obligations under the Settlement Offer, the City may modify or rescind this rate order, and the rates set forth in 30 Appendix C. 31 32 3. The City finds that if the conditions of pazagraph 4 herein are satisfied, and Comcast satisfies its obligations 33 with respect to the 2004 Rate Review under the Settlement Offer, Comcast will have sarisfied its refund obligations 34 under the 2004 Rate Order. If Comcast does not satisfy these conditions, or if for any reason the Settlement Offer is 35 not fully enforceable according to its terms, then Resolution No. OS-243 shall remain in full force and effect as 36 adopted. 37 ps- ll�l 38 4. Comcast must confirm, by January 15, 2006: 39 (a) that condition 4 of the Settlement Offer has been satisfied, or waived by Comcast; and 40 (b) it will comply with each and every one of its obligations under the Settlement Offer, and has not 41 withdrawn the Offer. 42 43 5. This Resolution does not approve any maximum permitted rate other than the rates approved in Appendix C. 44 Subject to applicable FCC rules, Comcast may not levy additional chazges for Form 1205-regulated equipment or 45 acrivities which are not approved in Appendix C, or levy charges for activities or equipment where the cost of the 46 activity or equipment was not included and justified in the 2005 Form 1205 Filing. 47 48 6. The City's approval of this Resolution and the Settlement Offer is made subject to the Conditions set forth in 49 the Settlement Offer. It shall not be conshued to be an endorsement or approval of any Comcast notices or 50 disclosures of FCC Form 1205 rates calculated hereunder. The City reserves any rights it may have to review such 51 notices. 52 53 7. This Resolution shall be effective immediately upon passage by the city council and approval by mayor, per 54 city charter Sec. 6.07. Yeas Nays Absent Benanav � Bostrom ;/ Harris ✓ Helgen ✓ Lantry ✓ Montgomery ✓ Thune �� cv / - - - Date �cz m 6Z� d�� �J bO� ;ouncil Secretary �uvy�cu oy i,vwicu. Adoption Certified by $Y � _/___/�d�� Requeste by Office of Technology: BY� �G�..1���1/lL �"C J���� Form Approved by City D"ate 1 L=.14� � ! r By: 55 � Dep�artrnen�bffice(council: Date Initiated OJ _',�/ Office of Cable Communications i2-a-os Green Sheet No. 3029025 .•. CaMact Person & Phone: � InitiaVdate Initialfdate Mike Reazdon j� rn� 4 �m,� . ��9� z c;ryAaumey 5 ciryctertc Mtst Be crt Cuuncil A9e�da b!! ��) l3tanher Fm�cial Serv D'u. Fmancial Srn/ Fo► 3 Mayot(OrAsst) - _CivilServiceCommission December 21, 2005 �� order � Total # of Sig�ture Paqes _(Clip All Locatiw�s for Signature) aceo� Reyu��oea: Approve Resolution for Setting Equipment and Installation Rates Chazged by Comcast of St. Paul, ' Inc., Pursuaut to Settlement Between the City of Saint Paul and Comcast of St. Paul, Inc., Regarding FCC Form 1205's Filed in 2004 and 2005. , Recommendations: Approve (A) or Rejed (R) Personal Service Contracts Must Answer the Foilowing Questior�s: � 1. HasthispersonlfirtneverworkedunderacontraGforthisdepartment? - Planning Commission Yes No ' CIB Committee 2. Has this personffirtrr ever been a city employee? Civil Service Commission Yes No � 3. Does this personffrtn possess a skill not nortnally possessed by any current city � - employee? Yes No .� E�cplain all yes an5wers on separate sheet and attach to green sheet Initiating Problem, lssue, OppoRunity (Who, What, YVhen, VYhere,lNhy): � ' On March 23, 2005, the City of Saint Paul set the rates for ComcasYs Equipment and Installation activitiesfservices, far the period of June 1, 2004 — May 31, 2005, based on the City's review of Comcast's FCC 1205 Form. Comcast appealed this decision to the FCC. In addition, Comcast filed FCC Form 1205 for June 1, ' 2005 — May 31, 2006 in March, 2005. Since Comcast appeal, and subsequent FCC decision to Stay the City's Mazch 23 Rate Order, the City and Comcast have reached a settlement for both the 2004 and 2005 1205 rate � filings. , naraoa9� iraPProved: 1) Current St. Paul Comcast cable subscribers will receive a credit of $2.50 on their bill ' within approxunately 60 days from time of enactment; 2) Subscribers will receive credit for slight fee overcharges for remote controls and converters since June, 2005; 3) These fee rates and some installation service fees will be reduced going forwazd; and, 4) Comcast wiil drop the appeal to the FCC and agree to ahide by the November 4, , 2005 Settlement Offer submitted to the City. o � Disadvantages If Approved: NOIlO ��� 0 a 20�5 ���� ������� n�a�ar�eag� ir Na aPProrea: Equipment and installatian rates dispute for 2004 and 2005 will not be resolved and ` subscribers will not see any benefits from the rate review process during past yeaz. Total AmouM of Trensaction: no CosURevenue Budgeted No Funding Source: Aetivity Number: Fina�ial Mfonnation: (Explain) � as- ii�/ Executive Summary 1205 Settlement Offer for Setting Equipment & Installation Rates Background In late February, 2004, as part of Comcast's annual rate adjustment filings with the City of Saint Paul (City), Comcast filed FCC Form 1205 that sought the City's approval of a change in the company's equipment rates; i.e., converters, remotes, etc., and installation rates for the period of June 1, 2004 — May 31, 2005. This same 2004 1205 filing was submitted to all Comcast communities nationwide, using the data for setting the same rates for a11 communities. The City of St. Paul joined 19 other local government entities, wluch represented over 1%2 million Comcast subscribers nationwide, and retained a financial consultant (Consultant) to review the 2004 1205 rate filing. Based on the findings from the Consultant's report, presented to the City in February, 2005, the Consultant determined that ComcasYs filed rates for equipment and installation were "unreasonable" and did not "comply with the FCC rules and applicable law." On March 23, 2005 the Saint Paul City Council adopted Resolution #OS-243, which ordered Comcast to make rate reductions and refunds based on the ConsultanYs findings arid report. On Apri18, Comcast appealed the City's Mazch 23 rate order to the FCC. The FCC subsequently issued a temporary Stay of the City's rate order. In addition, to compound the 1205 rate issue, Comcast filed on March 1, 2005 their FCC 2005 1205 for the period of June 1, 2005 — May 31, 2006. As the 2004 1205 rate filing issues had not yet been resolved, the 2005 filing was based on previous assumptions, with some modifications. However, there were now two years of filings that required resolufion. The City'continued to retain the same Consultant, with other national Comcast-served communities, to resolve both filings. The City, Comcast communities and Consultant entered into settlement negotiations. Settlement Offer In November, 2005 Comcast submitted to the City, and the other Comcast nationwide communities, a Settlement Offer (Settlement) that provides a reasonable settleinent to both the 2004 and 2005 1205 filings. If the City adopts the Settlement Offer, Comcast will withdraw its 2004 1205 appeal, and will not appeal its 2005 1205 filing. In sumtnary, the Settlement provides to the City and Saint Paul's Comcast subscribers: 2004 Rate Filin�: All current subscribers will receive a one-time credit in the amount of $2.50 and Comcast will withdraw the current appeal pending before the FCC. Based on the most recent subscriber count, the cumulative savings for Comcast's Saint Paul subscribers will be approximately $128,000. The credit will be appiied within 60 days after final approval. os- �l �J 2005 Rate Filin¢: Subscribers will receive refunds and rate reductions to the extent the rates actually charged by Comcast exceed the rates that aze currently being chazged by Comcast. In Saint Paul, many of the 2005 equipment and installation rates were already lower than what other Comcast subscribers were paying in other communities. However, there were two monthly fee categories that were reduced: • Remote Controls: Filed $.30 - Reduced to $.27 • Non-Basic Converter: Filed $4.70 - Reduced to $4.63 On average, it can be assumed that 75% of Comcast's subscribers pay fox both of these services on a monthly basis. Therefore, three out of four subscribers would then receive a one-tune credit, for the period from June to time of payment (presumably Februazy), of $.80 per customer, or a cumulative savings of $31,000 to Saint Paul cable consumers. In addifion, the subscribers would then benefit from that same savings on a monthly basis going forward. In addition, several one-time servicelinstallation fees were lowered by $.30 to over $4.00 per activity. 2006 1205 Rate Filin� The Settlement resolves currently disputed issues, and thus should reduce dispute over ComcasY s 2006 equipment and installation rate filing. Deadline for Communities' Approvals It should be noted that Condition 4 of the Settlement requires that at least 90% of the Communities (as measured by customer count) take action on the Settlement Offer by December 31, and that if more than 10% of the Communities fail to adopt the Settlement, then Comcast has the ability to withdraw their offer. It is assumed that most, if not all, Communities in the nationwide Settlement, will adopt the Settlement Offer. oS /l'1/ Comcast� Comcast Cable 7500 MarketStreet Philatlelphia, PA 19102 Peter H. Feinberg Associate General Counsel 255.320.7934 Tef 215.320.3572 Fax FOR SETTLEMENT PURPOSES ONLY INADNIISSIBLE AS EVIDENCE November 4, 2005 Michael Reardon Cable Commuzucations Officer City of St. Paul Technology & Management Services 68 City Hall 15 West Kellogg Blvd. St. PauI, MN 55102 Re: SETTLEMENT PROPOSAL REGARDING COMCAST'S FORM 1205 Deaz Mr. Reardon: I am writing on behalf of Comcast Cable Communications, LLC, and its affiliates (collectively, "Comcast" or the "Company") to extend a settlement offer to resolve the pending appeal of ComcasYs FCC Form 1205 for 2004, and to prescribe a framework for the approval of ComcasYs 2005 FCC Form 1205 and for the review of ComcasYs 2006 filing. Comcast believes that this proposal, which reflects the recent discussions between Comcast and Ashpaugh & Sculco, CPAs, PLC and Front Range Consulting, 7na (the "Consultants"), if accepted, would minimize the substantial administrative burdens, uncertainty, and delay otherwise associated with the rate review process. It provides an excellent opportunity to resolve the outstanding rate disputes, thereby benefiting all parties concerned, including local cable customers. This entirety of this offer is being made to each of the franchise communities that participated in the consolidated review of ComcasYs 2004 Form 1205 conducted by the Consultants and adopted adverse rate orders (the "Orders") regarding ComcasYs 2004 filing, and that are also participating in the 2005 review being performed by the Consultants. Any 2004 participant that is not participating in the 2005 review would only receive the benefit of the 2004 portion of this settlement. If a franchise community is only participaring in 2005, only those portions of the settlement relating to 2005 and 2006 would be applicable to that 2005 participant. The affected communities (the "Communities") are identified in Appendix A hereto by each group. os i171 Michael Reardon November 4, 2005 Page 2 TERMS OF SETTLEMENT OFFER: 2004 Rate Review 1. Comcast sha11 issue a$2.50 credit to each subscriber in each of the Communities, except as noted in Appendix B hereto. Credits shall be issued within 60 days of Final Approval. 2. The Communiries shall take all required approval acrions consistent with their local rules and regulations accepring the Comcast credit as satisfaction of the refund obiigations of the Orders. 3. Comcast sha11 promptly withdraw its Appeal of the Orders to the FCC (or shall remove the settling communities from the Appeal if not all Communities settie). 4. Comcast agrees that it shall calculate franchise fees owed as if there were no refunds issued associated with the 2004 filing, and that it shall not take a credit against franchise fees paid to the Communities based on the refund amount. Comcast shall have the option of calculating franchise fees using its standazd methodolog}� and sepazately paying a participating community an amount equal to the product of the local franchise fee percentage multiplied by the designated customer credit (e.g., 5% x$2.50 =$0.125 per customer). 2005 Rate Review 1. Adjustments. Comcast shall modify its existing cost claims in the Communities, as set forth in Appendix C hereto. Adjustments include: a. Unbundling: Reznove the following previously challenged cost categories: property ta�ces, insurance, utilities, building maintenance, equipment maintenance, and tuition reimbursement. Retain the following previously challenged cost categories: bonuses, commissions, and training, to the extent that the amounts claimed are related to equipment and installation rates, are limited to personnel directly involved with regulated equipment and installation, and are allocated to regulated equipment and installation based on the amount of time such personnel actually devotes to equipment and installarion-related acrivifies. b. Other: 9 Comcast understands that the participating communikes aze not endorsing or approving the Comcast standazd methodology as a result of agreeing to this settlement and the participating communities reserve all of their rights with respect to a review of the Comcast standard methodology during a review of ComcasYs francluse fee payments. OS-/J7/ Michael Reardon November 4, 2005 Page 3 Include "contracto�' installation times, in addition to "in-house" installarion times, in the calculation of activity times as depicted in the Form 1205 and statistical sununary included in Appendix C. Remove "converter maintenance" at tnne of installation. Provide survey support for in-house installation and maintenance activity times. 2. Procedures. The Communiries shall take all required approval actions consistent with their local rules and regulations for the 2005 1205 rate review establishing maximum permitted rates consistent with Appendix C, and Comcast shall refrain from appealing any such resolutions. 3. Rate Reductions and Refunds. Based on Appendix C, if a revised "masimum permitted" rate is lower than an actual rate in a particular Community, Comcast shall lower the actual rate in that Community and issue credits to local customers. No offsets shall be computed or claimed to reduce this refund amount. Rate changes and credits shall be issued within 60 days of Final Approval, as defined in pazagraph 4 of the "Conditions" section of this Settlement. Comcast shall not increase any existing equipment rates prior to its normally scheduled equipment rate adjustment in 2006. In addition, Comcast agrees that it will not increase equipment rates in 2006 in the settling communities for the purpose of offsetting the credits, refunds or rate reductions provided for in this agreement. 2006 Rate Review i. Comcast shall submit (at appropriate filing date) a 2006 Form 1205 reflecting the same methodological adjushnents described above for 2005. 2. Comcast shall include more extensive surveys and shall include contractor activity fimes in the Company's analysis, and shall make that data auailabie to the Communities upon request. 3. Comcast shall update its calculation of productive and non-productive hours to reflect contemporary circumstances. 4. Comcast shall refine its analysis to ensure the removal of unrelated rental facilities. 5. The Communities shall not dispute the inclusion of "bonuses," "commissions," and "training." Comcast may include bonuses, commissions, and training provided that such bonuses, commissions, and training shall be limited to personnel directly involved with regulated equipment and installations, and such bonuses, commissions and training shall be allocated based on the amount of time such personnel actually devotes to equipment and installation-related activities. To the extent that the ratio of the aggregate amount of the bonuses, commissions and training costs to total salaries for the sample systems for 2006 is OS- />7/ Michael Reazdon November 4, 2005 Page 4 in the same relative percentage as the ratio of the aggregate amount of the bonuses, commissions and traiuing costs to total salaries as reported for the sample systems for 2005 (and allowing for reasonable year-to year fluctuations), the Communiries will not challenge the relevancy of these costs in the Form 1205. The Communities shall permit Comcast to include "drop" costs in equipment and insYallafion rates for 2006, provided that the Company includes the labor hours associated with drop costs, along with the reported drop costs. Notwithstanding the foregoing, in light of ComcasYs inadvertent exclusion of vacation pay from its 2005 filing, the Company shall be enritled to include that cost category in its 2006 filing. Conditions 1. Comcast shall issue the 2004 and 2005 credits described above regardless of any finding of effective competition in any of the Communities subject to the Settlement. 2. The parties to the Settlement shall only be bound by the aforementioned framework for preparing and reviewing the 2005 and 2006 FCC Forxn 1205 rate submissions. Neither party is bound by any of the agreed-upon methodologies subsequent to the 2006 rate review, nor can the compromises be used as evidence against either party in any subsequent rate proceeding. Comcast and the Communities agree that neither party will attempt to justify past or future methodologies on grounds that such methodologies were agreed to by the parties in this Settlement. 3. Comcast and the Communities agree that the purpose of this Settlement is solely to resolve the dispute between them regarding ComcasYs FCC Form 1205 filing for 2004, and to establish a framework for the approval of ComcasYs 2005 Form 1205 and for the review of ComcasYs 2006 Form 1205 filing. The parties filrther agree that this Agreement does not constitute an admission of enor on the part of either party and shall not be deemed to be an admission of any such error by either party in any civil or administrative proceeding. 4. Because the Communities pursued a consolidated 2004 rate review, Comcast wishes to proceed on a consolidated basis in extending this offer. The offer is therefore contingent on 90% of the Communities (as measured by customer count) taking implementing actions by December 31, 2005 ("Fina1 Approval"). If more than 10% of the Communities (as measured by customer count) fail to adopt the resolution by that date, Comcast reserves its right to withdraw the offer, notwithstanding any interoening approval action in any particulaz community. If Comcast withdraws the offer, any intervening approval action by any particular community shall be null and void and the community shall retain all its rights with respect to ComcasYs rates. os �� �/ Michael Reardon November 4, 2005 Page 5 5. Comcast shall file with the Comsnunities written verification that the refunds required for 2004 have been issued, and that agreed-upon calculations for 2005, and any rate adjushnents and/or refunds for 2005, have been made based on this Agreement. S� c ei� e er . cc: Mr. Richard Treich Mr. Garth Ashpaugh Lisa Lynn Veith, Esq. Joseph Van Eaton, Esq.