Title
Cox Cable Television License Renewal (Ordinance S-44140)
Description
Request to authorize the City Manager, or his designee, to enter into a license, and any related agreements, with Cox Communications Arizona, LLC, (Cox Communications) to allow them to continue to engage in the business of operating a cable television system in the City of Phoenix.
Report
Summary
The authority to grant franchises, issue cable licenses, and police or regulate cable television operations within City of Phoenix boundaries is granted to the City by Federal and State law, and City Code Chapter 5. Cox Communications has held a cable television license in the City of Phoenix since 1994, allowing them to maintain their cable television system and utilize the streets and public rights-of-way to do so. The current license began in 2006 and will expire on Dec. 31, 2017. City staff has been negotiating a new license with Cox Communications for over a year.
The current license included a five percent fee for the first year in 2006, and a 4.7 percent fee each year thereafter. The license also included a minimum revenue amount based on the $9.7 million collected in 2006, while the fee was five percent. This meant that in the remaining years of the contract, the City was able to collect an amount higher than the 4.7 percent, if the 4.7 percent rate did not achieve the minimum revenue amount.
After the current license term began, state law changes were enacted that will apply to the new license. The new state laws place a cap of five percent on the license fee and prohibit any provision that results in fee revenue to the City exceeding five percent. So for the new license, the continuation of a minimum revenue amount is not allowed. Along with the statutory five percent cap, the inability to include the minimum revenue provision going forward will likely result in decreased revenue for the City even with the rate at the maximum cap due to the reduction of cable television subscribers. This revenue is General Fund, with a small portion set aside specifically for education access. The last full year payment for education access was $178,687 in fiscal year 2016-17, which has an annual adjustment for inflation. Staff recommends the flat five percent fee for the duration of the new license, which also matches the other cable television license holders in the City of Phoenix.
The proposed license includes continuation of government and educational access channels in standard definition, as well as the option to provide high definition (HD) channels for their programming as well.
Contract Term
The term of the license is 10 years, with the option of an additional five years.
Financial Impact
The license fee revenue from Cox Communications varies based on their cable television revenue, but is initially anticipated to be approximately $10 million per year to the General Fund and education access funds. The total amount will likely decrease over the life of the license, if the market for traditional cable television continues to decline.
Concurrence/Previous Council Action
This item was recommended for approval at the Oct. 10, 2017 Transportation and Infrastructure Subcommittee meeting by a vote of 4-0.
Public Outreach
Staff advertised in The Arizona Republic the availability for the public to review the draft license. The draft license was posted on the City's website as well as at the City Clerk Department's public counter. Included on this agenda was a public hearing on issuance of the Cox Communications Arizona, LLC Cable Television License.
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Information Technology Services Department.