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06-09-14-R
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06-09-14-R
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Executive Summary <br />FRC’s Review of Comcast’s Formal Renewal Proposal <br />© Front Range Consulting, Inc.Page 6 <br />Analog Spectrum <br />The current franchise agreement with Comcast allows the NSCC to use/program eight (8) <br />analog channels on the basic tier.11 When Comcast converted all of the analog channels to a <br />digital format last year, Comcast was able to re-capture a significant amount of bandwidth on <br />the system. According to the 2014 FCC Form 1240 filed with the NSCC, the Basic service tier <br />contains thirty-two (32) channels. If you assume conservatively that six (6) digital channels can <br />be place in the space of one analog channel, Comcast was able to recapture approximately <br />twenty-six (26) analog channels with this digital conversion. This allows Comcast to reprogram <br />these re-captured twenty-six channels and with an assumed six digital channels for each analog <br />channel re-captured, Comcast would be able to add one hundred and fifty-six (156) new digital <br />services. The programming value of those new channels is quite significant. Additionally, <br />Comcast might be able to use this re-captured analog spectrum to provide faster internet <br />speeds by bonding channels together and/or offer new services like home security services. <br />Additionally and more importantly, the re-captured analog spectrum assigned to the eight (8) <br />PEG channels has potentially violated the current franchise agreements in the franchise area. <br />Assuming a reasonable valuation technique, FRC has estimated that the value of these lost <br />analog PEG channels has a value to Comcast of approximately $1,250,000 annually. Comcast in <br />its proposal has not considered the lost value of these re-captured analog PEG channels. <br />Without this consideration, Comcast will be unfairly able to enrich its profits from the current <br />system by not compensating the NSCC for this franchise violation. <br />Operating Reserves <br />Comcast has proposed that the NSCC/NSAC use some of its current reserves to offset capital <br />and operating costs on a going forward basis. The E-Consulting Group Report (ECG)12 <br />completely mischaracterizes the reserves held by the NSCC and NSAC. ECG improperly lumps <br />the NSCC and NSAC’s reserves together. The NSCC’s reserves are generated solely by operating <br />reserves funded by the franchise fees provided by the member cities, not any reserves <br />generated from PEG funding and therefore should not be used to fund NSAC needs. From the <br />$2.1 million discussed in the ECG Report, over $400,000 pertains to the NSCC, leaving a balance <br />of over $1.7 million for the NSAC.13 Again improperly suggesting, ECG would have the NSAC use <br />these reserves to fund future capital purchases without recognizing that approximately <br />$100,000 of that so called NSAC reserve in the NSAC’s checking account used to pay it monthly <br />bills which should not be depleted under any reasonable theory. Also included in the so called <br />reserves is a required deposit that the NSAC must maintain in the bank as part of its lease letter <br />11 The current franchise agreements actually call for 12 channels but the NSCC has returned 4 of those channels <br />back to Comcast already. <br />12 Exhibit 2 to the Proposal. <br />13 Included in this $1.7 million reserve amount is over $400,000 of deferred revenues which cannot be considered <br />a “reserve.”
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