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Min 06/22/1971 410 Wichita Falls, Texas Memorial Auditorium Building June 22, 1971 Items 1 & 2 The Board of Aldermen of the City of Wichita Falls, Texas, met in called session on the above date in the Council Room of the Memorial Auditorium Building at 7 :30 o'clock P.M. , with the following members present: Kenneth Hill Mayor Harry Campsey X Harrison E. Taylor Larry Lambert X Aldermen Dick Darner X J. C. Boyd, Jr. X Bill Drake Gerald Fox City Manager H. P. Hodge, Jr. City Attorney Wilma J. Thomas City Clerk i i The invocation was given by Alderman Boyd. Mayor Hill made some opening remarks concerning the purpose of this meeting. William Boseman, who is associated with Checchi and Company, responded to comments which they had received regarding the draft ordinarc e and other factors. Section 1(e) - If subscribers are charged an installation fee, they recommended that this revenue to the CATV system be subject to the franchise fee. Section 4(b) - It is their belief that the proposed schedule of wiring is reasonable. If necessary, the number of crews can be increased for stringing cable. Section 6(d) - one corporate, or two individual sureties, could be required. Section 7 - They recommended that the CATV operator be prohibited from carry- ing pay television signals until the FCC has made further definitions between CATV and pay television. Section 18 permits liberal amending of the ordinance, if necessary. Section 8 - The ordinance requires that color signals shall be distributed in the same quality as they are received. This would prevent a cable operator from procuring faulty equipment. This also applies to local color origination. Section 9(b) - The use of mid-band or super-band channels is controversial. Mid-band channels are receiving the greatest attention at this time, but this does not preclude the super-band from being used later should it be desirable to do so. The ordinance could be amended. Section 9(e) - The proposed system should be considered as only that serving the City of Wichita Falls for purposes of the ordinance. Section 9(g) - This section relates to the temperature range of the system and certain associated equipment for a 24-hour per day continuous operation. Section 9(p) - This section pertains to ghosting and blanking bars. If no technical conditions are imposed by the ordinance, many of these instances could be unfairly attributed to local television station. Without the ordinance pro- vision, it is possible that the cable operator might not pursue its investigation as to the cause of the trouble. Section 9(g) - The tolerance is presently well within equipment standards, and the current trend is toward tightening tolerances beyond that shown. Section 9(r) - This would protect the cable operator as well as the City be- cause the operator must procure high quality cable. If the standard is relaxed 411 it could encourage use of cable already rejected by other systems. However, if a CATV operator could prove to the City, based upon written responses from suppliers of cable, that this standard could not be met, the ordinance could be amended. Section 9(t) - The purpose of this ordinance provision is to govern channels as composed by the CATV system head-end, and not off-the-air frequency stability. Section 9(u) - The monitor box concept is strongly supported by the FCC, and is not being contested by the cable industry. It should be an ordinance re- quirement. Sections 11, 12, 13 - These requirements are based on what they believe would be desirable in a CATV system for Wichita Falls. In order to prevent inter- ference for Lawton Channel 7, a second channel could be provided to Channel 7, or to provide only only one channel different from the off-the-air channel for both of Wichita Falls ' television stations and for Lawton. Section 21 - Rate increases should be made only by action of the Council. A late payment charge of ten percent could be added, and if so, it should be included within the definition of "gross annual receipts". Section 25(a) - This contains a provision which would permit the City Council to pass upon all transactions of the CATV system. Section 25(b) - This had to do with local control. He suggested that the 25 percent local ownership or control be reduced to 20 percent due to tax considera- tions. Section 28(f) - It provides that the city shall have the first right to nego- tiate the purchase of the CATV system at the end of the franchise period. Section 30 - Franchise fees in cities between 50,000 and 250,000 range from zero percent to $12,000 per year. Section 34(a) - This section has to do with the term of the franchise. A 10- year term was suggested because if the system proves profitable it will be to the advantage of the City to consider all projections. Tele-communications is a revolu- tionary industry. A ten-year period would encourage a company to install the system as soon as possible. A ten-year period is a reasonable time for an operator to operate viably and effeci.ently. He discussed the importation of distant signals. It was his opinion that independent programing would be more attractive from Dallas than anywhere else. Cost and expense projections in this report are based upon industry costs and items of operating expense. He feels a good operator would be able to operate at more revenue and less expenses than they have projected. In regards to a non-profit corporation being treated as an exempt agency for income tax purposes, the internal revenue should make that ruling. He also explained that importation of distant signals means that subscribers would receive signals from Dallas , and that it would have some impact on the citizens and merchants. In the FCC proposal , one requirement of importation of distant signals would be to not have commercials from the distant signals, but substitute local commercials instead. Following a question from Alderman Taylor, he stated that it is -indefinite how many signals a city of this size could import. He stated that two percent gross receipts tax was recommended because it is standard in Texas. Also, that they found that the system may not be as profitable because of the city's being spread out. The third reason was that the FCC is studying this projection. Alderman Boyd stated that there seemed to be two concepts going around. One is a moneymaking deal for the investor, and the other is one that would provide more service to the community. He also made reference to a two-way system which was not recommended by the report. Mr. Boseman stated that it is very expensive to bring a duplex system to Wichita Falls, but that he does feel that a well engineered system will be adaptable to T-way, if required; however, it may not be required. He commented on a lease-purchase arrangement for the system. The contractor would build the system, and the city would lease it. Another alternative would be a private oper- ator, and a municipal owned system. He recommended a non-exclusive franchise, explaining that it leaves an opening in case something is wrong with the operator. He recommended that only one franchise be issued. He also recommended that the system be capable of color transmitting. Each home would have to be equipped with a converter at a cost from $40.00 to $60.00. Mid band channels are suggested for uses of schools, fire departments, etc. The ordinary subscriber would not need the converter and would get the ordinary 12 channels. Independent stations would not be network oriented. Alderman Boyd inquired if there are any good reasons 412 to go into the system before the FCC makes a ruling. Mr. Boseman replied yes, be- cause he feels they will always be waiting on the FCC for a definite answer. Follow- ing a question from Alderman Boyd, Mr. Boseman stated that his company has no personal or business relations with any of the prospective applicants. City Manager Gerald Fox stated that this was one point specifically discussed in the interviews with various consulting firms, which resulted in a couple of firms not being considered any further. Alderman Darner asked if there were any restrictions that can be placed on cablecasting for Midwestern, Sheppard A.F.B. , or city use. Mr. Boseman replied yes, that would be local orgination. Gene Sherman appeared as a representative of Wichita Falls Chapter of Texas i Electronics Association. He inquired if the monthly rate of $5.75 applied to one or more than one set in the home. Mr. Boseman stated that the rate is for the first set - any additional ones would cost an extra $1.00 monthly. Mr. Sherman also inquired if out-of-town commercials could be replaced by local commercials. Mr. j Boseman replied that if the proposed FCC rules require that outside commercials be deleted, then the answer would be yes. He explained that until the FCC acts, our ordinance could require the deletion of outside commercials on a local basis. It was also explained by Mr. Boseman that the advertising carried on the present Channels 3, 6 and 7 would also be carried on cable television. City Manager Gerald Fox called on H. P. Hodge, Jr. to brief the council on the legal authority for a city to own, construct, or operate a CATV system. Mr. Hodge explained that this is a difficult question because there is no constitutional pro- vision, statutory provision, charter provision, or no case precedence to answer the question. In order to attempt to make a determination, three questions need to be answered. (1) Does the City of Wichita Falls have the legal power to own and operate a CATV system? (2) Does the City of Wichita Falls have legal authority to spend tax money on the acquisition and operation of a CATV system? (3) Does the City of Wichita Falls have authority to issue bonds to obtain funds for the purpose of acquir- ing or constructing a CATV system? There is no provision that says expressly that we do or do not. As a home rule city, the city has powers granted to it in its charter, as long as they do not come in conflict with state laws. He explained that in his opinion the city could not own and operate a system nor issue bonds or levy taxes for the porpose of acquiring or constructing a CATV system. City Manager Gerald Fox mentioned some cities and their operations and experiences with municipally owned systems. Based upon Mr. Hodge's analysis of legal authority, and information received from the few cities who answered otr inquiry, this is about all the information we have on municipally owned systems. City Attorney H. P. Hodge, Jr. , stated that the Attorney General is prohibited by law from giving a city a legal opinion. Mr. Whan asked the City Attorney if he saw any difference in operating cable TV as a public service and a radio station. He stated that Dallas owns WRR. Mr. Hodge stated that he felt if the charter of the City of Wichita Falls gave us authority to operate a CATV system, then his opinion might be different, but it does not give us this authority. We don't know what authority the city charter of Dallas gives them. Mary M. Taxin, 66 Beaumont, inquired if providing an educational system is the responsibility of the city. The City Manager stated it is not - it is the school system's responsibility. She also asked if the telephone system is comparable to CATV. Mr. Hodge stated that it is not. J. C. Jennings , Jr. , questioned the validity of cities that are not the size of Wichita Falls, asking if it would not be more advantageous to try to find cities of our size. Mr. Fox stated that he had just mentioned the 12 cities that own cable TV, and there are none in our population range. Bill Cooper, 4109 Northwest Freeway, inquired if any of the staff had gone into the financial cost and projected maintenance, and the ratio of profit to investment. He also asked how much it would cost the taxpayer. The City Manager stated that they have done no financial analysis because it is not legal for the city to own a system. Warren Silver, General Manager of KFDX TV 3, stated that Channel 3 is opposed to cable TV for 3 reasons: (1) It means pay TV; (2) there is no restriction on cable TV as there is on free TV; (3) confusion reigns on all levels. He stated that the Council did not hear from Channel 3 in the fall of 1970 or in January 1971 because two of the principal owners of TV 3 at that time are applicants for the cable TV franchise. He recommended an indifinite postponement awaiting specific guidelines 413 from the FCC and the federal government. Keith Nelson appeared, stating that he feels that the majority of citizens of Wichita Falls desire cable TV, for among other things , the education facilities it will offer. By installing it, we could perhaps set up our own educational system in the city schools and Midwestern University. Frank Allen appeared as a representative of Teleprompter Corporation. He felt that the $10,000 bond requirement mentioned in Checchi's original report is completely unsatisfactory to the city's protection. He also stated that they need at least an 80 percent ownership for the system. He further stated that his company cannot comply with the restriction on stock ownership, as they have no con- trol over who buys their stock. In commenting on city ownership, he stated that the city would be getting into private enterprise. He stated that they have no interest in pay TV. They are an industry trying to serve the public, and the public will not pay for it. They stand ready to build an excellent technical system. Mack Lester went on record as not being opposed to cable TV for Wichita Falls. He stated that he understood why some of the broadcasters and merchants are opposed. Two areas of concern are the proposed compensation to the City, and secondly if the franchise is so valuable, should not the City of Wichita Falls make an in- depth study regarding city ownership. The system could produce several thousand dollars per month for the city. He commented on inquiries he had received regard- ing cable TV. He felt that a more in-depth study should be made, and stated that it appears to him to be unfair and unwise to grant a franchise to a private company or to consider city ownership until the FCC decides the ground rules for cable television. Maurice Monson, 2412 Merrimac, appeared as a downtown businessman and presi- dent of the Downtown Merchants Association. He stated that the downtown merchants are opposed to cable TV until more information is received from the FCC on regula- tion of these systems. The three network stations here contribute greatly to their businesses. Mrs. Kathy Foster, 5107 Parklane Drive, stated that she did not mind paying for good entertainment for her family. She stated that she has never heard of any- one losing any money on cable TV. She mentioned cable TV in Abilene, stating that it has not hurt any of the businesses in Abilene. She stated that if we get cable TV here in Wichita Falls it will mean job openings for our citizens and taxes for the City. Clarence Muehlberger, 1644 Hursh, appeared as a downtown merchant. He stated that the downtown merchants felt that previous reports on cable TV would be recognized, and they did not appear in prior hearings. He feels the downtown area is in better shape than most towns of this size. Television is an important media to the merchants here. Thirty-five to forty-five percent of the business with downtown merchants, comes from outside Wichita Falls. Bill Hobbs read a statement regarding importation of distant signals, stating that they could destroy or seriously degrade the service offered by a television broadcaster, and ultimately deprive the public of the various benefits of a system of local broadcasting stations. He desired that the Council delay granting a franchise until rules of the FCC are firm. Darrold Cannan, Jr. stated that he believed the most important thing to keep in mind is that in the case mentioned by Mr. Hodge, the FCC's authority to regulate and control CATV in all forms was clearly established for the first time. There is no such thing as final rules. The FCC will continue to regulate CATV. As it stands today, they would allow the importation of one independent and one educational station in Wichita Falls. In 1967 when the Council considered CATV there was no major city in Texas, except Tyler, who had a CATV system. Since that time there are numerous major and smaller cities in Texas with operating systems or franchises granted. He mentioned certain events that cannot be cablecast except under certain conditions. He stated that the owners of KAUZ TV had joined with the owners of Channel 3 in 1968 to form a company called Consolidated Communications Incorporated to apply for a franchise here in Wichita Falls. Later the FCC adopted rules pro- hibiting cross ownership of TV and CATV in the same market. He also stated that Mr. Lyle Clay, the purchaser of Channel 3, was aware of the processes already put in motion by the Council to award a franchise. Bill Spears, 1631 Christine, commented on our geographic location to Dallas and Fort Worth. He felt that cable TV would encourage shopping :in other towns. t _ 414 He stated that in his business (furniture) 38 percent came from people outside the city. He stated that a city can only provide those services for which the price does not affect the demand. He feels that if we are going to have cable TV that it is best served by private enterprise. Dr. Clifford Burross observed that freedom of the press also carries responsibility, and that the elaborate preparations made by Channel 3 for this meeting were used basically to cover the report of its own executive vice president and one man who was opposed to cable TV. He felt that they have the responsibility of reporting to the people also those who might have something else to say. He stated that there is no such thing as free TV. He commented on the gross receipt tax, stating that it is the taxpayer who will pay it. A two percent gross receipts tax, plus ad- valorem tax, would be equivalent to a 13.6 percent tax rate. He noted that people from Sheppard Air Force Base and Midwestern University see the advantages of educa- tional television to their families. Whether their group is successful in obtaining the franchise is not the most important thing. The important thing is having it. He stated that he is confident that the council will guard the best interests of its citizens. Regarding regulation of programs put on the air, you are dealing with individuals on this basis. Jay O'Neal appeared as Vice President of Comco, Inc. , an applicant for a franchise here with Elmer Parish. He inquired if the Council could delete commercials by ord- inance, stating that since the FCC has taken jurisdiction over cable they cannot delete anything, but show only what they receive. Regarding gross receipts limit, the court has recently ruled them illegal in Ohio. Guidelines would be set by the fed- eral government, and Councils can work within those guidelines. He explained that it does not work to have two cablesnznning behind your house because both are reg- ulated as to what they can carry. He explained that with the FCC rules a cable- caster cannot show anything on the cable at the same time local broadcasters are showing it. Forrest Whan appeared from KWFT, stating that they did not know whether they are for cable TV or not, since they do not know what the rules will be. He stated that in April of 1971, 12 different surveys were made in Wichita Falls under FCC regulations. 180 interviews were held with community leaders, and 343 interviews with the general public. Only one of these persons mentioned cable TV as a problem, and that was a member of the City Council. Apparently there is not an urgent need for cable TV here at this time. He requested that someone tell him what the urgency is of awarding a cable franchise before the FCC rules are finalized. Jack Britton appeared, not as a representative of KAUZ TV, but as a citizen. He is concerned with eventual pay TV; not with the initial fee, but paying to see a particular program. He mentioned some instances where CATV purchased the right to show certain sporting events on the cable, and those who were not connected to it were not able to view it. He stated that he feels the Council has a great burden on their shoulders to learn all they can about the upcoming things of CATV. Moved by Alderman Taylor that the meeting be adjourned. Motion seconded by Alderman Lambert, and carried unanimously. The Board of Aldermen adjourned at 11:10 P.M. PASSED AND APPROVED this day of � r_t ;-z_�. 1971. or AP ATTEST: City Clerk