HomeMy WebLinkAboutRES 3867CITY OF RENTON,WASHINGTON
RESOLUTION NO.3867
A RESOLUTION OF THE CITY OF RENTON,WASHINGTON,
REGARDING THE BASIC PROGRAMMING SERVICE RATE SET
FORTH IN THE FEDERAL COMMUNICATIONS COMMISSION FORM
1240 FILED ON OR ABOUT APRIL 1,2006,AND THE NETWORK
UPGRADE ADD-ON CALCULATED IN THE FEDERAL
COMMUNICATIONS COMMISSION FORM 1235 FILED ON OR
ABOUT MARCH 1,1999.
WHEREAS,the City of Renton,Washington (hereinafter the "City")is a municipal
corporation organized pursuant to Washington law;and
WHEREAS,Section 623 of the Cable Communications Policy Act of 1984,47 U.S.c.
§543,as amended,and applicable rules authorize local franchising authorities,such as the City,to
regulate rates for basic service programming and the amount of any network upgrade add-on
allocated to basic service subscribers;and
WHEREAS,the City is certified as a rate regulation authority pursuant to rules of the
Federal Communications Commission (hereinafter "FCC");and
WHEREAS,Comcast of Washington IV,Inc.(hereinafter "Comcast")filed with the City
a preliminary FCC Form 1235 with the City on or about March 1,1999,purporting to set forth
and justifY a $1.16 network upgrade add-on to recover the costs of a network upgrade for the
City that was completed in June 1999 (the "Preliminary FCC Form 1235");and
WHEREAS,the $1.16 network upgrade add-on is based on projected cost data;and
WHEREAS,Comcast has not filed a final FCC Form 1235 with the City that includes
actual network upgrade cost data;and
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RESOLUTION NO.3867
WHEREAS,Comcast could attempt to add the $1.16 network upgrade add-on to the
basic service rate each month through the year 2014;and
WHEREAS,Comcast filed with the City an FCC Fonn 1240 on or about April 1,2006,
purporting to set forth and justify the rate it could charge to subscribers in the City for basic
service programming (hereinafter the "2006 FCC Form 1240");and
WHEREAS,the City retained Front Range Consulting,Inc.("FRC")to review the 2006
FCC Form 1240 and Warren O'Hearn to review the Preliminary FCC Fonn 1235 and any final
FCC Form 1235.Front Range Consulting,Inc.and Warren O'Hearn are collectively referred to
in this Resolution as the "Consultants;"and
WHEREAS,based on its review of the 2006 FCC Fonn 1240,FRC prepared a final
report concerning the 2006 FCC Fonn 1240,which report contains various findings,conclusions
and recommendations,and submitted that final report to the City in October 2006 (hereinafter the
"FRC Report"),which report is attached hereto;and
WHEREAS,the FRC Report recommends that the Business &Occupational tax be
excluded from the basic service rate beginning with the FCC Fonn 1240 to be filed on or about
April 1,2007;and
WHEREAS,the FRC Report further recommends that,beginning with the April 1,2007,
FCC Fonn 1240 (the "2007 FCC Fonn 1240"),Comcast be required to include its actual total
payment of FCC regulatory fees on line 708 of Worksheet 7 and the actual recoveries from
subscribers on Worksheet 8;and
WHEREAS,Comcast and the Consultants have discussed the 2006 FCC Form 1240 and
the Preliminary FCC Form 1235 and have reached a proposed settlement of outstanding issues;
and
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RESOLUTION NO.3867
WHEREAS,the terms of the proposed settlement offered by Comcast are set forth in a
January 23,2007,letter from Comcast to the City,and a proposed Settlement Agreement (the
"Settlement Agreement"),both of which are attached hereto (collectively,the "Settlement
Documents");and
WHEREAS,the Consultants recommend that the City approve the Settlement
Agreement;and
WHEREAS,the City believes it is in the public interest to avoid the delay,uncertainty
and costs associated with the continued review of the 2006 FCC Form 1240 and the Preliminary
FCC Form 1235,and any subsequent litigation before the FCC;
NOW,THEREFORE,THE CITY COUNCIL OF THE CITY OF RENTON,
WASlllNGTON,DOES RESOLVB AS FOLLOWS:
SECTION I.The above findings are true and correct in all respects.
SECTION ll.The City hereby adopts the Settlement Documents,and approves
the settlement terms contained therein.The Settlement Documents and the FRC Report
addressing the 2006 FCC Form 1240 are incorporated into this Resolution by reference.The City
reserves all of its rights and remedies with respect to issues,rates and calculations not expressly
addressed in the Settlement Documents.
SECTIONm.Comcast's maximum permitted rate for basic programming service
is hereby set at $14.3566,exclusive of franchise fees and FCC regulatory fees,upon the expiration
of the applicable review period.Comcast shall maintain a basic programming service rate of
$12.48,exclusive of franchise fees and FCC regulatory fees,through and including July 1,2007.
In the FCC Form 1240 to be filed with the City on or about April 1,2007,Comcast shall utilize a
rate of $13.4066 on Module A,Line AI.FCC regulatory fees will be included in the 2007 FCC
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RESOLUTION NO.3867
Form 1240,and in all future FCC Forms 1240 filed with the City,as specified in the Settlement
Documents,and the Business and Occupational Tax shall be excluded from the 2007 FCC Form
1240,and all future FCC Forms 1240 filed with the City,as provided in the Settlement
Documents.
SECTION IV.The City and Comcast shall treat the Preliminary FCC Form 1235
as the "final"FCC Form 1235 for purposes of complying with FCC rules and precedent.In
accordance with the Settlement Documents,Comcast shall at no time charge the network upgrade
add-on calculated in the Preliminary FCC Fonn 1235.
SECTIONV.The rates set herein will govern Comcasi's basic programming
service rate until Corneast lawfully implements a further rate change pursuant to applicable law.
SECTION VI.Comcast may charge basic programming rates less than $12.48,
exclusive of franchise fees and FCC regulatory fees,as long as such rates are consistent with
applicable law and are applied in a uniform and nondiscriminatory way,pursuant to applicable
federal,state,and local laws and regulations.
SECTION VII.Comcast shall not charge any rate higher than $12.48,exclusive of
franchise fees and FCC regulatory fees,unless such rate is first filed with and approved by the
City,in accordance with applicable law and regulations,including but not limited to the notice
requirements imposed by 47 C.F.R.§76.1603,or as otherwise expressly permitted under
applicable law and regulations.
SECTIONVill.
C.F.R.§76.936(a).
This Resolution constitutes the written decision required by 47
4
SECTION IX.
RESOLUTION NO.3867
This Resolution shall be released to the public and to Comcast,and
a public notice shall be published stating that this Resolution has been issued and is available for
review,pursuant to 47 C.F.R.§76.936(b).
SECTIONX.The City's staff and elected and appointed officials are authorized
to take all actions necessary or desired to approve and execute the Settlement Agreement.
PASSED BY THE CITY COUNCIL this 26 t h day of MA RC H
APPROVED BY THE MAYOR this 26 t h day of r~ARC H
,2007.
,2007.
or=2w~Lawrence J.Warren,City Attorney
RES.1249:3/6/07:ma
5
RESOLUTION NO.3867
Final Report
To
The City of Renton,Washington
Regarding the
FCC Forms 1240 filed by
Corneast of Washington mIne.
On orAbout
April 1,2006
Front Range Consulting,Inc.("PRC")is pleased to provide the City of Renton,Washington
(the "City"),this finaIreportregarding the FCC Form 1240 rate filing made by Comcast of
Washington IV,Inc.("Comcast")on or about April 1,2006 ("1240 Filing").
The Form 1240 is filed annually and is used to calculate the maximum permitted rate for
basic cable service.Under the rate regulations promulgated by the Federal Communications
Commission ("FCC"),the City may review Comcast's Form 1240 to determine whether the
calculated maximum permitted rate comports with FCC rules,decisions and orders.Ifthe
City wishes to take any action concerning Comcast's 2006 Form 1240 it must do so prior to
March 31,2007.
L Report Synopsis
FRC has reviewed the 1240 Filing.As detailed below,the City has several options with
regards to this filing.Those options are:
1.The City could accept the 1240 Filing as submitted by Comcast,without making any
RESOLUTION NO.3867
Front Range Consulting,Inc.
changes;
2.The City could accept the 1240 Filing with a requirement for Comcast to modify its
next FCC Form 1240 filing with respect to the treatment of the FCC regulatory fee
and the exclusion of the Business and Occupational ("B&O")tax from the Basic
Service Rate;or
3.The City could proceed with the Phase II investigation of the current Form 1240
filing and prepare a revised FCC Form 1240 correcting the FCC Regulatory Fee
treatment and excluding the B&O tax from the Basic Service Maximum Permitted
Rate ("MPR,,).1
FRC believes that~U()fthe§e options are consistent with the FCC ruleslJ]jtcoIlsidering the
least disruptive customer approach,FRC recommends that the City consider adopting Option
2.Before having the City adopt a rate order based on Option 2,FRC recommends that the
City authorize FRC and Bradley &Guzzetta to open informal settlement discussions with
Comcast to see if a settlement could be reached on Option 2 without having the City issue a
rate order.Option 2 would benefit consumers by requiring Comcast,instead of the City,to
make the necessary adjustments for the B&O tax and the FCC Regulatory in its next Form
1240 filing.
ll.Scope of Report
FRC was retained by the City to perform a review of the 1240 Filing by Comcast and to
report to the City any adjustments which could be made to this filings.FRC was requested to
prepare this report based on material filed with the City and other publicly available
information.2 FRC prepared one data request (dated September 15,2006)and Comeast
responded to that request on September 29,2006.In addition,FRC had a conference call
with Ms.Robbin Pepper and Mr.Jim Waechter of Comcast prior to the submission of the
data request to discuss the treatment of the business and operations ("B&O")tax in the filing.
ID.Summary of Form 1240 Filing
Comcast filed the 1240 Filing on or about Aprill,2006 as required by the FCC rules.
Comcast's 1240 Filing contains a proposed maximum permitted basic service rate of $14.36,
which is a $0.96 (7.16%)increase over last year's filed maximum permitted basic service
rate of $13.40.The $14.36 maximum permitted rate suggested by the 1240 Filing includes
1 To the extent the City adopts Option 3,the City would alsobe entitled to lower the inflation factor to the most
current inflation rate released by the FCC.Currently,tlris would be 3.12%compared to tlle 3.31%included in
the 1240 Filing.
2 This review was limited to an analysis oftlJ,e 1240Filing.The Form 1205 submitted by Comcast will be
reviewed as part of the ongoing national ryview project.The Form 1235 is also being reviewed and will the
subject of a separate report.The City shoqIdalso preseIVe its rights to modify the Form 1240 depending on the
outcome of the Form 1235 review,as the results of that review may affect the rates shown on Worksheet 8 of
the Form 1240.
October 25,2006 P~e2 of6
RESOLUTION NO.3867
Front Range Consulting,Inc.
the recovery of the B&O tax on the Basic Service rate.For example,in the July to
November 2005 period covered by the prior Form 1240 filing,Comcast was only charging a
Basic Service rate of $12.48 but added theB&O tax of $0.83 to the subscriber's bill resulting
in a total bill for Basic Service of $13 .31.The resulting $13 .31 is just below the filed MPR
in last year's filing of $13.40
IV.Issues Identified
FRC investigated three areas with respect to the 1240 Filing:
e Identification of Franchise-Related costs;
\I Treatment of the FCC Regulatory fee in the Form 1240;and
•Treatment of the B&O tax in the Form 1240.
From these investigations,FRC has concluded:
e Comcast has incorrectly treated the FCC Regulatory fee outside of the Form
1240,which is contrary to the Form instructions and a recent FCC Order;and
•Comcast has improperly included the B&O tax in the Form 1240.
In both cases,FRC believes that these improper treatments have resulted in Comcast over-
recovering its costs associated with the regulated Basic Service tier.
IV(a)Franchise-Related Costs
FRC was initially concerned that Comcast had failed to include franchise-related costs in its
Form.1240 and was including these costs in the "base rate."This treatment would be
contrary to the FCC Form instructions for handling franchise-related costs.Com cast was
asked to provide the franchise-related costs for the City of Renton at three intervals:(1)
August 1994;(2)each month of the true-up period (the current true-up period is December
2004 to November 2005)and (3)each month ofthe projected period (the.current projected
period in July 2006 to June 2007).Com cast,in its September 29,2006,respond to FRC's
data request,refused to provide the amount of the franchise-related costs as of August 1994
by suggesting that"August 1994 is outside the scope of the current Form 1240 ..."FRC
disagrees that the amount of the franchise-related costs as of August 1994 is irrelevant.To
the extent Comcast was incurring franchise-related costs pursuant to the City's franchise,the
amount is embedded in the basic service rate and must be separately identified on the rate
filings submitted by Comcast since 1994 in order to prevent the FCC's forms and basic
service rate regulation process from increasing the amount of embedded franchise-related
costs by the inflation factor used on the "base rate."FRC has not been able to determine
based on the Comcast response and the current franchise agreement if there are any
franchise-related costs that Corncast is entitled to recover.In any event,FRC has concluded
that Comcast is not including any such costs in the 1240 Filing.Consequently,no
adjustment to the Form.1240 Filing appears to be necessary with respect to franchise-related
costs.FRC would like to remind the City during the ongoing franchise re-negotiations,that
if Comcast is required to provide any new franchise requirements that only those costs in
October 25,2006 Page 3 of6
RESOLUTION NO.3867
Front Range Consulting,Inc.
excess of the costs currently being incurred by Comcast can be included in a subsequent rate
filing.Comcast should be directed to provide the original FCC 1200 where such franchise-
related costs were supposed to be identified.
IV(b)FCC Regulatory Fee
The 1240 Filing does not include the FCC regulatory fee on line 708 of Worksheet 7 for the
true-up and projected periods,as required by the Form 1240 instructions.3 This omission is
inconsistent with a recent FCC decision which addressed the proper treatment of FCC
regulatory fees when a cable operator files a Form 1240 and utilizes the annual rate
adjustment methodology.See In the Matter ofCom cast ofMinnesota,Inc.:Order Setting
Basic Service and Equipment Rates (Arden Hills,et al.),Order,20 FCC Rcd 20157 (Rei.
Dec.21,2005)In the Corneast ofMirmesota decision,the FCC concluded that it was not
appropriate for a cable operator to exclude the FCC regulatory fee from the Form 1240 and
then to recover these costs as a separate bilI itemization,as Com cast is doing in the City.As
importantly,the FCC specifically determined that the FCC regulatory should be included on
line 708 of Worksheet 7 of the Form 1240.4
With respect to the FCC regulatory fee issue,FRC asked Com cast in data request 2 b):
Concerning Line 708 of the Projected Period,please explain why Comcast has not
included any amounts for the project FCC regulatory fee consistent with the FCC's
determination in Comeast ofMinnesota,Inc.:Order Setting Basic Service and
Equipment Rates,20 FCC Rcd 20157 (Rei.Dec.21,2005).
Comcast responded:
The FCC regulatory fees change year over year to an amount not always evenly divided
by 12 months.This creates an unnecessary amount of confusion from an operational
and subscriber standpoint,especially when you consider the net effect ofleaving the fees
in the form or removing them from the form has no impact on the net Maximum
Permitted Rate.Therefore,Com cast has not included any amounts online 708 of the
Projected Period.
FRC disa.grees with Comcast's response arid treatment of the FCC regulatory fee.First,the
FCC has made clear (in a ease dealing with a Comcast entity,no less)that FCC regulatory fees
must be included in the Form 1240.Comeast's 1240 Filing therefore plainly violates Corncast
ofMinnesota Order.Such a violation may constitute a breach of the City's franchise.FRC also
disagrees with Comcast's assertion that this treatment ofthe FCC regulatory fee has "no
impact"on the basic service rate.Com cast currently pays the regulatory fee based on the
number of subscribers as of December of each year in September of the next year.It does not
pay based on the number of subscribers each month.Looking at the situation in the City,
Comcast has suggested that the number of subscribers for December 2004 was 16,475.That
number grows to approximately 17,000 by December 2005 and is projected to be 18,077 for
3 The instruction for line 708 clearly and explicitly directs a cable opemtor to "[elmer the total Commission
regulatOl)'fee for the period"on line 708.
4 See Corneast ofMinnesota,20 FCC Red.at 20165 ..66.
October 25,2006 Page 4 of6
RESOLUTION NO.3867
Front Range Consulting,Inc.
December 2006.As shown on the hypothetical example attached to this Report,Comcast will
be over-recovering its costs associated with the FCC regulatory fee.The hypothetical example
assumes that the $0.72 per year amount for the FCC regulatory fee remains the same for
illustrative purposes.Based on the assumed 0.5%assumed growth in subscribers,for the period
from September to August in a hypothetical year,Comcast is over-recovering the cost by a total
of $148.47 for the rate period.While the amount is fairly small in comparison to the overall
revenues received by Comcast,the over-recovery will be eliminated ifComcast adheres to the
FCC instructions and the Comeast ofMinnesota Order.FRC recommends that Comcast be
required to include the actual payment made each September to the federal government for the
FCC regulatory fee on line 708 of Worksheet 7 of FCC Form 1240 and to include the amount if
separately itemized on subscriber's bilI as part of the rates shown on Worksheet 8 ofthe Form
1240.Doing so will elimina.te aily potential over-or Under-recovery onhe FCC regula.tory fee.
IV (c)Inclusion ofB&O Tax
According to Comcast,the MPR for basic service determined by the 1240 Filing includes the
recovery of the Washington State B&O tax.Comcast determines the B&O tax included in
the MPR and removes that amount from the MPR in order to detennine the amount for the
Basic Service rate exclusive of the B&O tax.For example,last year's MPR was $13.31
which when divided by the B&O tax rate of 6.66%(1.06667)yields a basic rate without the
B&O tax of $12.48.5 The B&O tax is shown as a separate line item on the subscriber's bill
under the Fees and Taxes section of the bilL PRe does not believe that the B&O tax should
be embedded in the MPR determined by the Fonn 1240.Inclusion of the B&O tax in the
Form 1240 (with no separate identification on worksheet 7)allows the "base rate"which
includes the embedded B&O tax to be increased by the inflation factor in the Form 1240.In
this way,Comcast is increasing the inflation adjustment as inflation is applied to the
embedded B&O tax.This is incorrect and must be corrected or else Comcast will be over-
recovering its costs during the rate period (because it will be over-recovering the tax amount,
which has been increased by the inflation factor used by Com cast).More importantly,FRC
does not believe that the B&O tax should have ever been included in the Form 1240 .
According to Com cast,this B&O tax was included in the Fonn 1200 filed by Viacom in
August 1994 and Comcast and its predecessors have maintaimed that original treatment.
Irrespective of the initial treatment of the B&O tax in the Form 1200,Comcast must be
required to eliminate this 8&0 tax from the current Form 1240 in order to prevent the Form
from including inflation on the B&O tax .The correct way to reverse this inclusion would
be for Comcast to re-do each of the Forms 1200,1210 and 1240 from 1994 to the present.
According to Comcast,they do not have these historical forms in which to make the
necessary corrections.Moreover,Com cast claims that they have not been fully recovering
the increases in the B&O tax but FRC cannot verify that "claim"without a complete review
of all of the intervening rate fonns which Comcast apparently does not have.
FRC recommends that,at a minimum,Comcast be required to remove the B&O tax amount
embedded in the current proposed maximum permitted basic service rate by removing that
5 The Rate Card therefore shows the $12.48 and a B&O tax is applied at the 6.667%rate ($0.83)resulting in a
combiued rate of$13.31 that is equal to the MPR
October 25,2006 Page 5 of6
RESOLUTION NO.3867
Front Range Consulting,Inc.
amount from the beginning"A 1"rate used on the next Form 1240 submitted to the City on or
about April 2007.6 In this way any over or under recoveries of past B&O taxes will be
eliminated and going forward,the Form 1240 will not include as part of the "base rate"the
B&Otax.
V.Conclusion
FRC recommends,as identified in Section I above,that the City issue a rate order addressing
the 1240 Filingunless a settlement can be achieved with Comcast essentially following
Option 2.The Order should follow the Option 2 recommendation which requires Comcast to
revise the methodology that it uses with regards to the treatment of the FCC regulatory fee
and also requires Comcast to exclude the B&O tax from the Basic Service MPR.These
modifications should be required in Comcast'snext annual rate filingmadewith the City on
or about April 1,2007.
6 PRe recommends that this be done by multiplying the current B&O tax rate times the :tv1PR shown in the
current 1240 Form of$14.36.
October 25,2006 Page 6 of6
@omcast~
RESOLUTION NO.3867
Corneasl Gable
1500 Market Streat
Philadelphia,PA 19102
Peter H.Feinberg
Associate General Counsel
215.320.7934 Tel
215.320.3572 Fax
FOR SETTLEMENT PURPOSES ONLY
INADMISSIBLE AS EVIDENCE
January 23,2007
VIA OVERNIGHT MAIL
Marty Wine
Renton City Hall-7th Floor
1055 South Grady Way
Renton,WA 98055
Re:Resolution of Com cast's FCC Form 1235 and 2006 FCC Form 1240 Rates for City
of Renton,WA
Dear Ms.Wine:
I am writing on behalf of Comcast Cable Communications,LLC,and its affiliate
Corncast of Washington IV,Inc.(collectively,"Comcast"or the "Company")to propose the
resolution ofissues identified during a review of Com cast's FCC Form 1235 and FCC Form
1240 for 2006 for the City of Renton,WA (the "City"),by City's consultant Front Range
Consulting,Inc.(the "Consultant").Comcast believes that the following proposal as set forth
herein,which reflects recent discussions between Comcast and City's Consultant,would
minimize the substantial administrative burdens,costs,uncertainty,and delay otherwise
associated with the rate review process.
TERMS OF AGREEMENT RE 2006 RATE REVIEW:
FCC Form 1235
1.The "pre-approval"version FCC Form 1235 filed March 1,1999 and its calculated $1.16
network upgrade add-on shall be considered the "Final"version FCC Form 1235 for
purposes of complying with FCC rules and the instructions for FCC Form 1235,and the
Company agrees that it is barred from filing any additional FCC Forms 1235 addressing
costs incurred with respect to the network upgrade identified in the March 1,1999,FCC
Form 1235.The settlement agreement shall state that the upgrade costs for the Renton
system have been fully recovered for the applicable period represented in the form,and
that Corncast shall at no time charge the network upgrade add-on set forth in the March 1,
RESOLUTION NO.3867
Marty Wine
January 23,2007
Page 2
1999,FCC Fonn 1235.The agreement shall release the Company from any future refund
liability arising out of the March 1,1999 filing ofthe FCC Fonn 1235 for Renton.
FCC Form 1240
2.City approves by default the FCC Form 1240 filed on April 1,2006,which derived a
maximum permitted rate of $14.3566,which includes the Business &Occupational
("B&O")taxes but excludes the FCC Regulatory Fees and FCC Form 1235 add-on
amount.The settlement agreement shall release Comcast from any refund liability
attributable to its treatment of the B&O tax in prior rate filings and in the April 1,2006,
FCeForm 1240.The City reserves all ofits rights with respect to the April!,2006,
FCC Form 1240,except those rights that are explicitly waived in the settlement
agreement.
3.Comcast shall maintain its current.Basic Service Rate of$12.48 until at least July 1,
2007.
4.The Company agrees to modify the 2007 FCC Form 1240,to be filed with City on or
about April 1,2007,as follows:
a.Module A,Line AI,Current Maximum Permitted Rate will be reduced to
$13.4066.
b.Worksheet 7,External Costs for the True-up and Project Period,Line 708,
Commission Regulatory Fees for Peri9d,will be completed with the FCC
Commission I{.egulatory Fees appropriate for each period·in the 2007 FCC Form
1240,and all subsequent FCC Forms 1240 shall reflect,subject to applicable FCC
regulations then in effect,the actual total FCC Regulatory Fee payment made by
Comcast for the applicable true up period and Comcast's projection of the total
FCC Regulatory Fee payment in the applicable projected period.
c.Worksheet 8,True-Up Rate Charged,Lines 801-812,will include the current
basic service rate and FCC Regulatory Fees.The B&O tax amount of $0.95
included in the April 1,2006,FCC Form 1240 will be excluded from the April 1,
2007,FCC Form 1240.B&O taxes will be excluded from all future FCC Forms
1240 filed with the City.
5.The City reserves all of its rights and remedies with respect to the April 1,2007,FCC
Form 1240,except those rights that are explicitly waived in the settlement agreement.
RESOLUTION NO.3867
Marty Wine
January 23,2007
Page 3
Franchise Fee Audit Document Request
6.The Company shan agree pursuant toaseparate side letter that,upon City execution of
the settlement agreement,it will provide to the Consultant by close-of-business on
January 26,.2007,or no later than two business days after City execution of the
settlement agreement,in the event City execution occurs after January 26,2007,the gross
monthly amount of the advertising revenues (advertising revenue plus advertising sales
commissions)for the audit period where Comcast Corporation and/or the Company is
affiliated with an advertising agency that receives commissions,such as National Cable
Communications (NCe)and the applicable regional advertising entity,and the net
amount (advertising revenue)where Comcast Corporation and/or the Company does not
have such an affiliated interest.The provision of this information to City's Consultant
shall be without prejudice to the Company's right to dispute any audit findings,or the
requirement of Corneast to pay franchise fess based on the provision of such information
provided to the Consultant.
7.The foregoing terms are subject to the approval of City.
cc:Mr.Richard Treich
Michael Bradley,Esq.
Stephen Guzzetta,Esq.
RESOLUTION NO.3867
SETTLEMENT AGREEMENT
This Settlement Agreement is entered into this _day of ,2007,
between the City of Renton,Washington ("City"),Comcast Cable Communications,LLC
and Comcast of Washington IV,Inc.(collectively,"Comcast"or the "Company").The
City and Comcast are collectively referred to herein as the "Parties."
Recitals
WHEREAS,the City is certified as a rate regulation authority pursuant to rules of
the Federal Communications Commission (hereinafter "FCC");and
WHEREAS,Comcast filed with the City a "pre-approval"FCC Form 1235 with
the City on or about March 1,1999,purporting to set forth and justify a $1.16 network
upgrade add-on to recover the costs of a network upgrade for the City that was completed
in June 1999 (the "Preliminary FCC Form 1235");and
WHEREAS,the $1.16 network upgrade add-on is based on projected cost data;
and
WHEREAS,Comcast has not filed a final FCC Form 1235 with the City that
includes actual network upgrade cost data;and
WHEREAS,Comcast could attempt to add the $1.16 network upgrade add-on to
the basic service rate each month through the year 2014;and
WHEREAS,Comcast filed with the City an FCC Form 1240 on or about April 1,
2006,purporting to set forth and justify the rate it could charge to subscribers in the City
for basic service programming (hereinafter the "2006 FCC Form 1240");and
WHEREAS,the City retained rate analysts to review the Preliminary FCC Form
1235 and the 2006 FCC Form 1240;and
WHEREAS,the rate analysts identified certain disputed issues concerning the
Preliminary FCC Form 1235 and the 2006 FCC Form 1240;and
WHEREAS,Comcast has proposed to settle the outstanding issues identified by
the rate analysts,as set forth in a January 23,2007,letter from Comcast to the City;and
WHEREAS,the City believes it is in the public interest to avoid the delay,
uncertainty and costs associated with the continued review of the 2006 FCC Form 1240
and the Preliminary FCC Form 1235,and any subsequent litigation before the FCC.
NOW,THEREFORE,in consideration of premises,promises,undertakings and
mutual covenants ofthe Parties and other good and sufficient consideration,the receipt
RESOLUTION NO.3867
and sufficiency ofwhich are hereby acknowledged,the Parties hereby agree to the terms
below:
Agreement
FCC Form 1235
1.The Preliminary FCC Form 1235 and its calculated $1.16 network upgrade add-
on shall be considered the "Final"FCC Form 1235 for purposes of complying
with FCC rules and the instructions for FCC Form 1235,and the Company agrees
that it is barred from filing any additional FCC Forms 1235 addressing costs
incurred with respect to the network upgrade identified in the Preliminary FCC
Form 1235.Comcast represents and agrees that the upgrade costs for the Renton,
Washington cable system have been fully recovered for the applicable period
represented in the Preliminary FCC Form 1235.Comcast also agrees that it shall
at no time charge the network upgrade add-on set forth in the Preliminary FCC
Form 1235.The City hereby releases Comcast from any and all future refund
liability arising out of the Preliminary FCC Form 1235.
FCC Form 1240
2.The City approves by default the 2006 FCC Form 1240 that derived a maximum
permitted rate of$14.3566,which rate includes the Business &Occupational
("B&O")taxes but excludes the FCC Regulatory Fees and Preliminary FCC Form
1235 add-on amount.The City hereby releases Comcast from any and all refund
liability attributable to its treatment of the B&O tax in prior rate filings and in the
2006 FCC Form 1240.
3.Comcast shall maintain its current Basic Service Rate of$12.48,exclusive of
franchise fees and the FCC Regulatory Fees,until at least July 1,2007.Comcast
may charge basic programming rates less than $12.48,exclusive of franchise fees
and FCC Regulatory Fees,as long as such rates are consistent with applicable law
and are applied in a uniform and nondiscriminatory way,pursuant to applicable
federal,state,and local laws and regulations.
4.The Company agrees to modify the FCC Form 1240 to be filed with City on or
about April 1,2007 (the "2007 FCC Form 1240")as follows:
a.Module A,Line AI,Current Maximum Permitted Rate shall be reduced to
$13.4066.
b.Worksheet 7,External Costs for the True-up and Projected Period,Line
708,Commission Regulatory Fees for Period,shall be completed with the
FCC Regulatory Fees appropriate for each period in the 2007 FCC Form
1240,and all subsequent FCC Forms 1240 shall reflect,subject to
applicable FCC regulations then in effect,the actual total FCC Regulatory
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RESOLUTION NO.3867
Fee payment made by Corncast for the applicable true up period and
Comcast's projection ofthe total FCC Regulatory Fee payment in the
applicable projected period.
c.Worksheet 8,True-Up Rate Charged,Lines 801-812,shaH include the
current basic service rate and FCC Regulatory Fees.The B&O tax
amount of $0.95 included in the 2006 FCC Form 1240 shall be excluded
from the 2007 FCC Form 1240.B&O taxes shall be excluded from aU
future FCC Forms 1240 filed with the City.
5.The City reserves aU of its rights and remedies with respect to the 2007 FCC
Form 1240,except those rights that are explicitly waived in this Settlement
Agreement.
Franchise Fee Audit Document Request
6.The Company shall agree pursuant to a separate side letter that,upon City
execution of this Settlement Agreement,it shall provide to Front Range
Consulting,Inc.,no later than two business days after the date of said execution,
the gross monthly amount of the advertising revenues (advertising revenue plus
advertising sales commissions)for the audit period where Corncast Corporation
and/or the Company is affiliated with an advertising agency that receives
commissions,such as National Cable Communications (NCC)and the applicable
regional advertising entity,and the net amount (advertising revenue)where
Comcast Corporation and/or the Company does not have such an affiliated
interest.The provision of this information to Front Range Consulting,Inc.shall
be without prejudice to the Company's right to dispute any audit findings,or the
requirement of Comcast to pay franchise fees based on the provision of such
information provided to Front Range Consulting,Inc.The City,however,
reserves aU of its rights and remedies with respect to Comcast's compliance with
franchise provisions and applicable laws and decisions pertaining to the payment
of franchise fees.
General Terms and Conditions
7.Neither Comcast nor any of its affiliates or subsidiaries will take any action to
challenge any provision of this Settlement Agreement as contrary to or
unenforceable under applicable laws or regulations,nor will they participate with
any other person in any such challenge.
8.The Parties agree that this Settlement Agreement does not constitute an admission
of error 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.
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RESOLUTION NO.3867
9.This Settlement Agreement shaH be binding upon and shaH inure to the benefit of
the Parties hereto,and their successors in interest,assigns,personal
representatives and heirs.
10.This Settlement Agreement is freely and voluntarily entered into by the Parties,
without any duress or coercion,and after each party has consulted with its
counseL Each party hereto has carefuHy and completely read aU of the terms
and provisions of this Settlement Agreement.
11.This Settlement Agreement shaH be governed by and construed in accordance
with the laws of the State of Washington.
12.The Parties further agree that this Settlement Agreement may be executed in
multiple counterparts.
COMCAST CABLE COMMUNICATIONS,LLC
By:-----------------
Its:-----------------
COMCAST OF WASHINGTON IV,INC.
By:_
Its:-----------------
CITY OF RENTON,WASHINGTON
By:----------------
Its:----------------
Attest:---------------
4