New York City would have the right to terminate its franchise agreements with Time Warner Cable and Cablevision Systems if broadband-delivered video starts to significantly erode cable TV revenue over the next 10 years, under a new pact.
The provision -- believed to be the first of its kind -- "helps protect City franchise revenue by enabling the City to renegotiate if there is substantial shift in content delivery from cable to ‘new' and/or emerging technologies," New York's Department of Information Technology & Telecommunications said in a fact sheet on the agreements, which were announced on Sept. 14.
City officials will have the option to terminate the agreements if franchise fees decline 22.5% or more compared with the "peak year." Otherwise, the franchise terms will run until July 2020, which is the same length as the agreement reached with Verizon Communications for FiOS TV in 2008.
The agreements cap franchise fees at 5% of cable TV service revenue, the maximum allowed by federal law.
In another new provision under the renewals, Time Warner Cable and Cablevision would invest about $10 million to install Wi-Fi access in 32 public parks in all five boroughs (with specific parks yet to be determined). The Wi-Fi buildouts are to be substantially completed within two years of franchise approval and to be maintained by companies through 2020.
The MSOs' customers would have access to the Wi-Fi hotspots for no extra charge, as they do in a few parks and public areas already. For non-subscribers, Wi-Fi would be free to anyone in up to three monthly sessions of 10 minutes each, with TWC and Cablevision allowed to charge 99 cents per day for access thereafter. That pricing is fixed for three years, with moderate increases possible starting in the fourth year.
In addition, the cable companies will be required to extend subscribers a credit equal to a full month's bill if a service technician fails to show up at the appointed time. Subscribers are entitled to online appointment confirmation and "multi-device/phone" confirmation when a tech is en route, and TWC and Cablevision will be required to connect customers to live representatives within 30 seconds of navigating a phone menu. The customer-protection provisions in the agreements are intended match those in the contract Verizon is operating under.
"We've made good progress during these negotiations but we still have some work to do," Time Warner Cable said in a statement. "We expect those discussions to wrap up soon and look forward to continuing to serve New Yorkers for the next decade."
Cablevision, for its part, said: "In the nation's most competitive market, Cablevision is honored to deliver peerless video and voice, the nation's fastest broadband service and extensive access to free Wi-Fi and we look forward to providing service in The Bronx and Brooklyn for many years to come."
The franchise agreements still require approval by the city's Franchise and Concession Review Committee and the New York State Public Service Commission. In addition, TWC and Cablevision must negotiate separate funding deals with community access channels in each borough. The city's previous agreements with Time Warner Cable and Cablevision expired in 2008.
Some city politicians criticized the Wi-Fi provision of the franchise renewals as providing only a total of 30 minutes of free access per month. "There should be totally free wireless in the parks... This sounds like a joke," City Councilwoman Gale Brewer, a Democrat from Manhattan, told the Daily News.
Regarding the Wi-Fi buildouts and other provisions, Time Warner Cable said, "We're still working on those details and look forward to resolving the remaining issues. We appreciate the NYC negotiating team continuing to work with us going forward as we work through the remaining issues."
Other highlights of the franchise renewals:
* Public, educational and government (PEG) commitments include a requirement to carry five additional community access channels (for nine total) by 2012.
* For educational/governmental channels, the operators will pay a proportional share of more than $9 million in annual installments plus approximately $2 million of "in-kind" services to be determined in collaboration with NYC Media; TWC and Cablevision would be required to carry three additional channels (eight total) by 2012, and one HD channel in 2011 plus 25 hours of video-on-demand.
* Time Warner Cable will establish four community broadband access centers per year (for a total of 40), in collaboration with nonprofits, while Cablevision is working with the Department of Education to provide broadband services and/or school media centers.
* TWC is to install 20 miles of fiber per year in underserved commercial/industrial areas over the franchise term and will build out connectivity to the Brooklyn Navy Yard. In addition, the MSOs will commit to spend a combined $1.8 million per year to bring fiber to commercial buildings of the city's choice.
* The operators will pay more than $20 million upon franchise approval to help finance the upgrade of the CityNet network to be capable of handling high-capacity voice and data applications.
Additional information on the new franchise agreements is available here.
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