City Administration recommends approval of the proposed ordinance granting TDS Metrocom, LLC, a nonexclusive cable system franchise.

TDS Metrocom, LLC (TDS), is a Madison, Wisconsin based broadband services provider which has made application to the City for a nonexclusive cable system franchise with intent to invest $60 million dollars to lay hundreds of miles of fiber optic cable to form a brand-new network throughout the City.  TDS is part of TDS Telecommunications Corp., the nation’s seventh largest wireline communications company offering broadband, video, and digital voice services to over 900 communities in 34 states. TDS is currently constructing a new network in Coeur D’Alene, Idaho, and Spokane, Washington. Billings’ residents would be its first Montana customers.
 
TDS offers to build an all-fiber cable service offering a minimum of 120 channels.  TDS would compete with Charter/Spectrum, the City’s only nonexclusive cable franchise provider. Pursuant to Charter/Spectrum’s franchise, set forth in Article 7-900, BMCC, the City has provided Charter/Spectrum notice of tonight’s public hearing to consider the grant of a cable system to TDS.

It is the policy of the City to promote competition in the provision of cable services. However, there is a presumption that a cable franchise that would result in redlining (failure to serve certain areas, especially on economic or racial grounds), or otherwise give the applicant an unfair competitive advantage, shall not be franchised. See §7-1619 (d), BMCC.

Under the federal Communications Act, a cable system must obtain a franchise from a local government granting it permission to use the public right of way to provide area cable services.  Should City Council approve granting applicant TDS a non-exclusive cable system franchise, the federal Communications Act allows the City to receive payment of up to a maximum five percent (5%) of the gross revenues from its Billings operations on cable services. This is called a “franchise fee”.  Only cable operators are required to have franchises to provide cable services; no other multichannel video programming distributor (MVPD) is required to obtain a franchise to offer video programming except those whose programming is distributed over a cable system.

This negotiated and proposed non-exclusive cable system franchise with applicant TDS provides for a 10-year franchise (with extension provision up to 15 years), payment of the maximum 5% of gross revenues from its Billings operations (franchise fee), initial coverage area to a minimum of 70% of the City within four years of the start of construction and further build out terms to 95%, and provision of two Public, Educational, and Governmental (PEG) channels.  Should City Council approve and grant a cable system franchise to applicant TDS franchise, the company intends to begin construction late spring or early summer this year.

When evaluating whether to grant applicant TDS an initial cable franchise, the City shall consider:
1) The completeness of TDS responses to questions regarding its application (See attached).
2) Whether TDS has the financial, technical, and legal qualifications to hold a cable franchise;
3) Whether TDS satisfies minimum requirements established by the City to meet the community’s future cable-related needs and interests, taking into account the cost of meeting such needs and interests;
4) Whether TDS is able and willing to provide adequate public, educational, and governmental use capacity, facilities, or financial support;
5) Whether granting the franchise will result in redlining, discrimination in the provision of services, or grant TDS an unfair competitive advantage;
6) Whether the schedule for building out is reasonable; and
7) Whether approving the franchise would eliminate or reduce competition in the delivery of cable service.
See § 7-1617, BMCC.

If the City finds that it is in the public interest to issue a cable franchise to applicant TDS, considering the factors described above, the City shall tender applicant TDS a cable franchise, and applicant TDS shall be entitled to exercise the franchise rights provided therein upon its acceptance of the terms and conditions of such franchise.  
If the City denies a cable franchise to applicant TDS, the City shall issue a written decision explaining its denial.
See §7-1619 (b) and (f), BMCC.
TDS may then seek appeal to the court.


 

City Council may:

• Approve; or,
• Not Approve

City would receive an annual 5% (maximum allowed under federal law) of the gross revenues of TDS Metrocom, LLC, from its Billings cable system operations; this is called a franchise fee.
City would receive $0.25 (and up to $0.85) per cable subscriber for PEG capital support for Community Seven, the City's PEG access provider.

If the City finds that it is in the public interest to issue an initial nonexclusive cable system franchise to applicant TDS considering the factors described above, the City shall tender applicant TDS a cable franchise, and applicant TDS shall be entitled to exercise the franchise rights provided therein upon its acceptance of the terms and conditions of such franchise.  

If the City denies a cable franchise to applicant TDS, the City shall issue a written decision explaining its denial.