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Min 11/16/1971 477 Wichita Falls, Texas Memorial Auditorium Building November 16, 1971 Items 1 & 2 The Board of Aldermen of the City of Wichita Falls, Texas, met in regular session on the above date in the Council Room of the Memorial Auditorium Building at 10:00 o'clock A.M. , with the following members present: Kenneth Hill Mayor Harry Campsey Harrison E. Taylor Larry Lambert X Aldermen Dick Darner X J. C. Boyd, Jr. Gerald Fox City Manager H. P. Hodge, Jr. City Attorney Wilma J. Thomas City Clerk Bill Drake Absent The invocation was given by Alderman Darner. Item 3 Moved by Alderman Boyd that minutes of the meeting held November 2, 1971 be approved with one correction - that in Item 6d, Page 474, his vote be changed to 'Nay". Motion seconded by Alderman Darner, and carried unanimously. Item 4a A proposed ordinance was presented repealing Section 24-21(b) of the Code of Ordinances. The City Manager stated that this would allow the policewomen to li take promotional examinations. i ORDINANCE NO. 2681 AN ORDINANCE AMENDING SECTION 24-21 OF THE CODE OF ORDINANCES OF THE CITY OF WICHITA FALLS , ELIMINATING SUB-SECTION (b) . Moved by Alderman Lambert that Ordinance No. 2681 be passed. Motion seconded by Alderman Campsey. Alderman Taylor inquired if it would be illegal to not permit them to take exams. City Attorney H. P. Hodge, Jr. , stated that he could not answer his question clearly, as there are two schools of thought on this subject. The motion was carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner, and Boyd Nays : None Item 5a A proposed resolution was presented authorizing proposals to property owners on Kell Freeway project. RESOLUTION NO. 1242 WHEREAS, it is necessary to acquire the property hereinafter described for construction of the listed projects in the 1967 Capital Improvements Program, and, a 478 Item 5a, Cont'd. WHEREAS, such property has been appraised by independent appraisers employed for this purpose by the Texas State Highway Department, and the amount of the state approved value, as determined from the appraisals, has been studied by the Board of Aldermen, and a copy is now in the possession of the Director of Public Works and/or Assistant City Manager. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF WICHITA FALLS, TEXAS, THAT: SECTION NO. 1 The projects and properties to be purchased by Warranty Deed are as follows : Kell Freeway - Project 52-071 Property (Warranty Deed) Lot 4, Block 17-A, Highland Addition Block 59, Highland Addition Combined total of values approved in this resolution ----- $8,700.00 SECTION NO. 2 The approved value of such properties are hereby approved and the City Manager is hereby authorized to purchase in the name of the Texas State Highway Department, by Warranty Deed such tracts of land as shown on the project right-of-way map. The authorized price to be paid for each tract is the state approved value as determined from appraisals made by the independent real estate appraisers employed by the Texas State Highway Department. SECTION NO. 3 In the event the City Manager is unable to purchase any such tract or tracts for such approved values, he is hereby authorized and directed to cause to be instituted condemnation proceedings to obtain such tracts in the name of the Texas State Highway-Department. Moved by Alderman Darner that Resolution No. 1242 be passed. Motion seconded by Alderman Taylor, and carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner, and Boyd Nays : None Item 5b A proposed resolution was presented authorizing the Mayor to execute an ease- ment from the City to the State for right-of-way on North Beverly project. RESOLUTION NO. 1243 WHEREAS, the City of Wichita Falls and the Texas Highway Department are co- operating in the construction of North Beverly Project No. 52-072 under the 1967 Capital Improvement Program of the City of Wichita Falls; and, WHEREAS, by contract the City and the Texas Highway Department agreed that they will share equally in the cost of the right-of-way for this project; and, WHEREAS, the parcel hereinafter described is owned by the Wichita County Water Improvement District No. 1 and which Water Improvement District and its assets were acquired and now owned by the City of Wichita Falls; and, WHEREAS, the granting of an easement for highway purposes across the here- inafter described parcel will be in compliance with the contract entered into between the City and the Texas Highway Department. , NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF WICHITA FALLS , TEXAS, THAT: The Mayor, Kenneth Hill, is hereby authorized and directed to execute an easement conveying unto the State of Texas the following tract or parcel of land situated in Wichita County, Texas ; 479 Item 5b, Cont'd. A 0.3183 acre tract of land situated in the David Welch Survey, Abstract 324, Wichita County, Texas, also being a part of a 9.06 acre tract described as No. 2 in deed from John Hirschi, et ux to Wichita County Water Improvement District No. 1 by deed dated August 11, 1923, recorded in Volume 210, Page 227, Deed Records of Wichita County, Texas. i Moved by Alderman Lambert that Resolution No. 1243 be passed. Motion seconded by Alderman Darner, and carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner and. Boyd Nays : None i Item 5c A proposed resolution was presented authorizing the City Manager to execute a cooperation agreement between the City and the State on Loop 11 (North Beverly / project) between Seymour Highway (U.S. 277) , and the Iowa Park Expressway (U.S. 287) . I RESOLUTION NO. 1244 WHEREAS, heretofore the Board of Aldermen of the City of Wichita Falls adopted Resolution No. 651 accepting the provisions of State Highway Commission Minute No. 58020 concerning the construction of certain improvements on Loop 11 from U.S. 277 to U.S. 287; and, WHEREAS, City is obligated to construct curb and gutter and storm sewer work, and City desires that the State construct such work, for which City will pay State the sum of $321,400.00. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF WICHITA FALLS, TEXAS , THAT: That certain agreement between the City of Wichita Falls and the State of Texas, acting through the State Highway Commission, a copy of which agreement is attached hereto, whereby the State agrees to construct such work for the City for the sum of $321,400.00, is hereby approved, and the City Manager is authorized to execute the same for the City. Moved by Alderman Boyd that Resolution No. 1244 be passed. Motion seconded by Alderman Lambert, and carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner, and Boyd, Nays: None Item 5d A proposed resolution was presented authorizing the City Manager to execute I� a utility adjustment agreement to General Telephone Company for railroad relocation project. RESOLUTION NO. 1245 WHEREAS, the City of Wichita Falls and the Texas State Highway Department are cooperating in the construction of the F.W.D.R.R. Relocation Project 52-087 under the 1967 Capital Improvements Program of the City of Wichita Falls; and, WHEREAS, the City of Wichita Falls , Texas and the Texas State Highway Department entered into a contractual Agreement dated January 31, 1968, wherein the State and the City will participate equally in the right-of-way and utility adjustments required for the F.W.D.R.R. Relocation Project; and, WHEREAS, the said proposed F.W.D.R.R. Relocation, Project 52-087 crosses the telephone lines owned by General Telephone Company; and, WHEREAS, adjustments will have to be made to the telephone lines to allow the i construction of the proposed F.W.D.R.R. Relocation Project; and, f 480 Item 5d, Cont'd. WHEREAS, the General Telephone Company has a prior easement for the telephone lines; and, WHEREAS, the General Telephone Company has proposed an agreement in which the City of Wichita Falls would reimburse General Telephone Company the actual cost of the adjustments to the telephone lines; and, WHEREAS, the Texas State Highway Department will reimburse the City in an amount equal to fifty percent (50%) of the actual cost of this utility adjust- ment as soon as the State approves the final billing as prepared by General Telephone Company. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF WICHITA FALLS , TEXAS, THAT: The certain letter of agreement between the City of Wichita Falls , and the General Telephone Company for the adjustment of the telephone lines is hereby approved, and the City Manager is authorized to execute it for the City of Wichita Falls. Moved by Alderman Taylor that Resolution No. 1245 be passed. Motion seconded by Alderman Boyd, and carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner, and Boyd Nays : None Item 5e 1 A proposed resolution was presented authorizing the City Manager to execute a utility adjustment agreement to Texas Electric Service Company on railroad relocation project. ` RESOLUTION NO. 1246 WHEREAS, the City of Wichita Falls and the Texas State Highway Department are cooperating in the construction of F.W.D.R.R. Relocation, Project 52-087, under the 1967 Capital Improvements Program of the City of Wichita Falls; and, WHEREAS, the City of Wichita Falls, Texas and the Texas State Highway Depart- ment entered into a contractual Agreement dated January 31, 1968, wherein the State and the City will participate equally in the right-of-way and utility adjustments required for the F.W.D.R.R. Relocation Project; and, WHEREAS, the said proposed F.W.D.R.R. Relocation, Project 52-087 crosses the 69 KV Lake Wichita-Pleasant Valley-Pleasant Valley-North Wichita double circuit 69 KV transmission lines owned by Texas Electric Service Company;and, WHEREAS, adjustments will have to be made to the transmission lines to allow the construction of the proposed F.W.D.R.R. Relocation Project; and, WHEREAS, Texas Electric Service Company has a prior easement for the trans- mission lines; and, WHEREAS, the Texas Electric Service Company has proposed an agreement in which the City of Wichita Falls would reimburse the Texas Electric Service Company for the actual cost of the adjustments to the transmission lines; and, WHEREAS, the Texas State Highway Department will reimburse the City in an amount equal to fity percent (50'/) of the actual cost of this utility adjustment as soon as the State approves the final billing as prepared by Texas Electric Sercice Company. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF WICHITA FALLS , TEXAS, THAT: The certain letter of agreement between the City of Wichita Falls, and the Texas Electric Service Company for the adjustment of the transmission lines is hereby approved, and the City Manager is authorized to execute it for the City of Wichita Falls. 481 Item 5e, Cont'd. Moved by Alderman Lambert that Resolution No. 1246 be passed. Motion seconded by Alderman Darner, and carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner, and Boyd Nays : None Item 6a Bids were considered for an annual supply of pre-mixed concrete and bulk cement. Moved by Alderman Darner that the low bid of City Concrete Company be accepted for the ready mix concrete, as follows : #2000 Mix - $13.75 per cubic yard #2500 Mix - $14.25 per cubic yard #3000 Mix - $14.75 per cubic yard #3500 Mix - $15.25 per cubic yard and that the low bid of H.C.C. , Inc. , be accepted for the bulk cement in the amount of $5.30 per barrel. Motion seconded by Alderman Campsey, and carried unanimously. Item 6b It was recommended that the bid for expansion of the I.B.M. 1800 traffic system for Brook Street TOPICS project be awarded to I.B.M. in a total amount of $35,931.97. This includes installation and transportation charges. This was a one source item because we are adding to our existing equipment. i Moved by Alderman Taylor that the I.B.M. bid be approved as recommended. Motion seconded by Alderman Boyd, and carried unanimously. Item 7 Moved by Alderman Taylor that minutes of the meeting of the Board of Electrical Examiners held November 9, 1971, be received. Motion seconded by Alderman Campsey, and carried unanimously. Item 8 Consideration was given to a CATV Ordinance, application forms, and evaluation criteria. City Manager Gerald Fox explained that several questions had been raised, and that he would like to go through these questions. The first question concerns the length of franchise term. The initial recommenda- tion from Checchi was for a ten-year term with no option. A five-year option was later recommended to be included in the ordinance. Applicants prefer a 15 or 20 year term. Dr. D. C. Burross stated that Top 0 Texas is also included in the letter from the applicants that went to the City Council. Keith Nelson appeared, stating that the applicants feel a 10-year term is unrealistic. They feel that the effective term of this operation would, in effect, be much less than ten years due to it taking some time to get started. It is estimated to be four years before it is fully operational. Financing would be a problem. Recoup of costs would be a disadvantage to the franchisee. He felt that this recommendation should be revised. Alderman Boyd explained that the present TV stations operate under a three-year contract, and have much more invested. Mr. Nelson stated that a CATV system does not become operational upon the permission 482 Item 8, Cont'd. of the Council. They still have to go to the FCC. He stated that local stations ' contracts are renewed after three years. Mr. Nelson mentions the depreciation schedules they have, and also the rate they are tied to. Dr. Burross stated that the basic difference is that the TV stations receive a permit from the federal government. As long as they provide the service, they continue to operate. If they have no complaints they get an automatic renewal of their franchise. The money market of CATV is a problem. A CATV franchisee does not have an assurance that he will be able to renew his option. Darrold Cannan indicated that there would be a sizeable initial investment in the proposed cable system. They do not have an automatic renewal and city's possible purchasing of this system would be a problem for them. In a ten year period it would be difficult to recoup their initial costs. Alderman Boyd asked if they had a choice of depreciation schedule. Mr. Cannan stated that it depended upon the kind of equipment. He further stated that the amoritization schedule for CATV would have to be at least ten years. Aldermen Lambert commented that a TV station has access to every home with a TV set. A cable system would have to sell their services to the people. He feels this might require more time, but is not sure that they need to give them more than ten years. Mr. Cannan read a paragraph from a report regarding length of franchise. It was indicated that a reasonable time limit would be required. Generally speaking, a franchise should not exceed 15 years, with a reasonable option period. Mr. Cannan stated that in the broad- cast business, their option to renew is built in if they have complied with what they said they would do. In this instance, the option is not built in. Alderman Darner stated that he felt this ten year period is rather short. He remarked that it has been assumed that it would have a high degree of profit- ability. He is not sure that it would be that profitable. Mr. Boseman, of Checchi and Company, recommended a ten-year franchise on the basis of an economic analysis , and also because this is a rapidly developing field. He feels they might not be able to project what will happen technologically in the next ten years. They feel that the City should look at it again in ten years. Mr. Boseman stated that their analysis was made in January, February, or March before the last FCC rules came out. Importation of more signals and additional channels makes this attractive. He felt there are more franchises for 15 to 20 years than less. Alderman Boyd stated that he felt we should leave it as the consultant has recommended. Alderman Campsey inquired if he knew of any CATV franchises that had been rejected after the initial period. Darrold Cannan stated that Tyler, Texas is facing this right now. Dr. Burross agreed that the Council should not be over solicitious, but neither should it be under solicitious. He feels the citizens are entitled to quality cable TV. He stated that it had never been their assumption that the Checchi report is final and complete, but applicants would have a chance to address them- selves to this. Twenty years is an average for franchises. The applicants question whether this would place a burden on them if the franchise is not more than ten years. Dr. Burross questioned whether they are trying to set limits to see who would apply or if we are trying to get the best service for the citizens of Wichita Falls. He feels that 10 years is too short a period. He feels the latest FCC rulings should be considered. If was his belief that 30 to 45 days would be sufficient time for the applicants to get their applications in. Alderman Taylor questioned what the undue burden would be for the applicants for ten years. Dr. Burross stated it would be a financial burden. Financial institutions would be very interested in this time limit. Alderman Darner remarked that it might be fine if they set 10 years and got no bids , but feels they run the danger of getting two or three bids when otherwise they might get eight or ten. He ex- plained that he is not talking strictly about the time limit, but of the whole thing. Dr. Burross questioned if they made the standards so rigid they might drive out the more responsible bidders. Alderman Boyd inquired of Dr. Burross if they followed the ten years as set out in the Checchi report, could their company not bid. Dr. Burross stated he did not mean that at all, but they would have to look at it. Business problems are a part of this operation, and should be considered. City Manager Gerald Fox presented the next question. It concerns the proposed franchise fee which is established as three percent of the gross receipts for less than $1,000,000, and five percent in excess of $1,000,000. The second five 483 Item 8, Cont'd. years of the franchise term would be five percent under $1,000,000, and seven percent in excess of $1,000,000. The minimum for the first five year period would be $15,000, and $30,000 for the second five.year period. He read a statement which advocated three percent for the entire time. Mr. Fox stated that the next question concerns the requirement in Section 4B, which would require the applicant to completely wire the 425 miles of streets in four years. It was suggested that 200 miles be required to be constructed in the first year. Alderman Darner inquired about the percentage of control of local ownership. Mr. Fox stated that the draft application form is 20 percent. He further stated that they questioned what majority ownership would limit the number of applicants. Alderman Lambert stated that the percentage of local ownership might be used as part of the evaluating criteria. Mr. Boseman explained that it is in the report already. Alderman Campsey and City Attorney H. P. Hodge, Jr. addressed themselves to the possibility of the council approving any change of percentage of local ownership. Alderman Taylor stated that it seemed it would be hard to prove the 20 percent local ownership. Mr. Boseman stated that he considered 20 percent sub- stantial. Moved by Alderman Darner that the franchise term be set at 14 years instead of 10 years, as contained in the Checchi report. Motion seconded by Alderman Taylor. A substitute motion was moved by Alderman Boyd that the 10-year tenure be left as suggested in the Checchi report. Alderman Lambert questioned whether Mr. Boyd 's motion was in order. Alderman Darner's motion to set the franchise term at 14 years was lost by the following vote: Ayes : Aldermen Taylor and Darner Nays : Aldermen Lambert, Campsey, and Boyd Alderman Boyd withdrew his motion. Moved by Alderman Lambert that the franchise term be set at 12 years instead of 14 years for the primary term. Motion seconded by Alderman Boyd, and carried unanimously. Moved by Alderman Lambert that the franchise fee be retained as is, and that the second term be seven years instead of five years. Motion seconded by Alderman Boyd, and carried unanimously. Moved by Alderman Darner that the requirement of wiring be changed from 100 miles in the first year and 100 miles in the second year to read 200 miles by the end of the second year. j; Motion seconded by Alderman Boyd, and carried unanimously. A Moved by Alderman Darner that the local ownership question remain as is in the Checchi report, and that footnote 4, page 138, be corrected to conform. Motion seconded by Alderman Campsey, and carried unanimously. Alderman Boyd stated that many of the items contained in the ordinance were not included in the application form and Chapter 2, Section E. He moved that these be made a part of the application form. Motion seconded by Alderman Lambert, and carried unanimously. Moved by Alderman Boyd that a glossary of terms of abbreviations be defined in the ordinance. 4 i i i' j 484 Item 8, Cont 'd. Motion seconded by Alderman Campsey, and carried unanimously. Alderman Boyd suggested that some provision be put into the franchise ordinance on what terms the franchise could be purchased at the end of the 12-year franchise period. H. P. Hodge, Jr. , read the section contained in the gas company franchise relating to this matter, stating it is also contained in the power company ordinance. The City Manager presented another determination of value for purchase. Moved by Alderman Boyd that the material read by Mr. Hodge be inserted in the ordinance. Motion seconded by Alderman Darner, and carried unanimously. Alderman Boyd remarked that we do not anticipate that all citizens of Wichita Falls will have access to cable TV after five years. Mr. Boseman stated that it is not provided for in the present ordinance; however, it has a procedure for expanding the system if a substantial number of citizens request it. ORDINANCE NO. 2682 AN ORDINANCE ESTABLISHING THE RIGHT AND PRIVILEGE OF THE GRANTEE OR GRANTEES HEREUNDER, OR THEIR SUCCESSORS AND ASSIGNS, TO CONSTRUCT, OPERATE, AND MAINTAIN A CABLE TELEVISION SYSTEM WITHIN THE CITY OF WICHITA FALLS; PROVIDING THAT THE FRANCHISE SHALL BE NONEXCLUSIVE; SETTING FORTH THE TERRITORIAL AREA INVOLVED AND THE TIME OF CONSTRUC- TION; ESTABLISHING LIABILITY AND INDEMNIFICATION; ESTABLISHING OPERATIONAL STANDARDS AND STANDARDS OF SERVICE; ESTABLISHING CONDITIONS ON STREET OCCUPANCY; ESTABLISHING RATES TO SUBSCRIBERS AND PAYMENT TO THE CITY; AND FOR PURPOSES. Moved by Alderman Lambert that Ordinance No. 2682 be adopted as changed today. Motion seconded by Alderman Darner, and carried by the following vote: Ayes : Aldermen Campsey, Taylor, Lambert, Darner, and Boyd Nays : None Moved by Alderman Lambert that when invitations to bid are made, that draft application form, Appendix B, together with a copy of the ordinance and Exhibit 4-1 of the Checchi report, and Chapter 2, Section E on recommended technical standards, be included in the invitations to bid. Motion seconded by Alderman Darner, and carried unanimously. Moved by Alderman Lambert that the full text of the CATV discussion at the special council meeting on June 22, 1971, be made a part of this meeting (attached) . Motion seconded by Alderman Boyd, and carried unanimously. Item 8b — — — — — — — — — Dr. James R. McKinney appeared as secretary of Hatch Equipment, Incorporated. He commented on the bids for equipment which were rejected. He stated they had not been contacted to inquire about their product. Perhaps their information was obtained from competitors. He presented a history of the Case Company and their machinery, along with the experience of Mr. Hatch. He feels the bid system as used was a farce. Alderman Lambert inquired if the power shift transmission re- versing at full throttle was part of the specifications. Dr. McKinney stated it would not reverse at full throttle. Alderman Lambert questioned their statement that their equipment met full specifications. He further stated that when speci- fications are set, and when a bidder does not meet those specifications, then it is sour grapes on the part of the unsuccessful bidder to try to say that their equipment met the specifications. He stated that if Dr. McKinney wanted to appear regarding the way we set the specifications, or whether we properly set them, then it is proper to do so. Joe Shaddock, Attorney, appeared representing Hatch Equipment Company. He made several comments regarding their bid, as well as the Caterpillar bid. He stated that some of the bid requirements eliminated some bidders. Alderman 485 Item 8b, Cont'd. Lambert asked what they desired the Council to do in so far as future actions are concerned of a similar nature. Dr. McKinney stated that the person writing the bids should not list specific things that other bidders cannot comply with. He suggested a latitude of ranges. Alderman Lambert asked if the needs of the City fall out of the realm of the manufacturers specifications, then does that mean that the City should write specifications to cover those others? He stated that the City is required to take bids even though they might know that only one manu- facturer in the world can supply it. He explained that their vote to purchase certain equipment was taken on the basis of the equipment needed to do a certain job. Dr. McKinney stated that he appeared to try to have the bids enlarged. Joe Shaddock felt that the Council should review bids, and if unreasonable specifica- tions are made they should knock them out. City Manager Gerald Fox stated that the Council did not arbitrarily recommend one equipment over another, but their recommendation was based on the equipment meeting specifications as opposed to those which did not meet specifications. City Attorney H. P. Hodge, Jr. , commented that on many items on which bids are taken, the initial cost is just one element of the bid to be considered. Other factors other than cost have to be taken into consideration. The law has placed on the Board of Aldermen the responsibility to look into this element. Anytime bids meet specifications they do not always have to pick the lowest price if they have a good and reasonable judgment in doing so. Alderman Boyd suggested appointment of a council committee to study the bidding system. Alderman Taylor explained that when anyone has an opportunity to appear before the Council, and they do not, then they have not taken advantage of the opportunity. In the case of Hatch Equipment Company, warranty, parallel ripper and full throttle specifications were not met. Alderman Lambert stated that they can do many things as a Council to study these matters. I The City Manager stated that several hundred bids are presented to the Council each year, with very few contests. He does not feel it is fair to pick out two to criticize the bidding process. He has not received a complaint himself. The heavy equipment bidding is a problem in many cities. He feels the time to make any complaint to the City is at the time the specifications are drawn. He stated that they would be happy to provide the Council with specifications at the time j bids are requested. Mr. Shaddock stated it was his understanding that complaints were made at the time of the bid opening. Ernest Lillard made several comments, stating that there are many different kinds of wheel loaders, and that he tried to take a cross section of these machines and take the good points of all of them. On these two bidders who said they did not meet specifications, they had other equipment which generally met the specifica- tions , and they did not bid on them. He again clarified that he did not know that Case had this machinery on the market for a year, as Mr. Hatch stated. He explained that when they write specifications, they talk to department heads and operators of this equipment on what type of equipment is needed to do the job they desire. When they make a recommendation, it is on honest appraisal that it is the best recommendation to do the job which they have to do. He stated that he would be glad to defend our specifications. Mayor Hill wished the best for Joe Watts, who had resigned as Director of Finance, in his new job. Moved by Alderman Lambert that the meeting be adjourned. I Motion seconded by Alderman Boyd, and carried unanimously. The Board of Aldermen adjourned at 1 :35 P.M. PASSED AND APPROVED this 72X1 day of O c d����.r4„v� 1971. ATTEST: yor City Clerk C 43-14-12 & C 43-14-13 US 3063(1) & US-USG 3063(2) Wichita County STATE OF TEXAS X COUNTY OF TRAVIS X THIS AGREEMENT, made this day of 1971 by and between the City of Wichita Falls, Texas, hereinafter called the "City", Party of the First Part, acting by and through its City Manager and the State of Texas, hereinafter called the "State", Party of the Second Part, acting by and through its State Highway Commission. WHEREAS, the City desires the construction of curb and gutter, storm sewer work and incidental items within the limits from U. S. Highway No. 82- 277 in Wichita Falls to present U. S. Highway No. 287 on Loop 11 and the State will, among other things, provide for the construction of this work within these limits and the City will contribute a fixed amount of Three Hundred Twenty One Thousand Four Hundred and No/100 Dollars ($321,400.00) , in pay- ment for their portion of this work, and WHEREAS, the City by the execution of this agreement agrees to the terms and conditions of State Highway Commission Minute No. 65469, as it applies to the City, a copy of which is attached hereto and marked "Exhibit A" and made a part of this agreement. NOW THEREFORE, it is understood that this proposed work will be con- structed by the State and the City will transmit to the State with the return of this agreement, executed by the City, a warrant made payable to the State Treasurer, Account of Trust Fund No. 927 in the amount of Three Hundred Twenty One Thousand Four Hundred and No/100 Dollars ($321,400.00) . It is further 1. understood that the State will construct only those items for the City as requested and it is further understood that the contribution of Three Hundred Twenty One Thousand Four Hundred and No/100 Dollars ($321,400.00) , by the City shall be a fixed amount for their share of the work. It is further understood that the City by the execution of this agreement agrees to the terms and con- ditions of State Highway Commission Minute No.65469, as it applies to the City, a copy of which is attached hereto and marked "Exhibit A" and made a part of this agreement. IN TESTIMONY WHEREOF, the parties hereto have caused these presents to be executed in duplicate on the day above stated. CITY OF WICHITA FALLS STATE OF TEXAS Party of the First Part STATE HIGHWAY COMMISSION By: Party of the Second Part City Manager Certified as being executed for the purpose and effect of activating and/or carrying out the orders, es- tablished policies, or work programs ATTEST: heretofore approved and authorized by the State Highway Commission: By:__ Asst. State Highway Engineer City Clerk under authority of Commission Minute 60394 Recommended for execution: Director, Finance 2. In WIC HITA COUNTY on LOOP 11 in the City of Wichita Falls, from U. S. Highways d 277, South to present U. S. Highway 287, a distance of approximately 3.0 miles, the construction of Grading, Structures and Surfacing as presently authorized is expected to exceed the original allotment of funds and the State Highway Engineer is directed to proceed with construction as planned at a revised estimated cost of $2,559,400, financing the additional cost of $448,400 in the 1973-1974 Consolidated Highway Program. The State Highway Engineer is also directed to accept the sum of $321,400 from the City of Wichita Falls as its share of the construc- tion cost. Minute No. 65469 November 4, 1971 COPY "EXHIBIT A" CABLE TV DISCUSSION SPECIAL CITY COUNCIL MEETING June 22, 1971, at 7:30 pm MAYOR HILL: We will convene this special meeting of the Board of Aldermen. We as a group and council say that we welcome you. We are hopeful that ! whatever decision we make will be what we think is in the best interest of the City of Wichita Falls. We have our format broken down into about three different sections: first, we are going to ask the representatives from Checchi and Company, our advisors in this, to make a brief summary of their report to the City Council. After they have completed their report, if you have questions, we will let you come to the podium and meet with the advisor and ask questions. Now understand we will be wanting everything recorded - everything that is said will be recorded on tape. After our Checchi report, then we will ask our City Manager if he will give us a study or evaluation of municipally owned cable system and when he gets through with his report, you will have the opportunity to ask him questions. Then when we get through with this section, this phase of the format, we will more or less throw it open for anyone who has additional questions. Remember, we are hoping that in the first two phases of this, questions that you may have in your mind will have already been answered. We are going to pass around a legal pad. Mr. Randy Hempling has a legal pad and everyone that wants to speak here tonight, would you please sign it - whether you want to speak for cable TV, against cable TV or whatever. If you will sign this, then we will call on you as it has been signed - in that order. Let me urge you to do this. Now, if we have a large group that wants to speak, we may have to limit the time. We' ll wait and see how we come out on this. There may not be as many that wish to speak as right now it looks like there may. I have a statement for us - a written statement - that I am going to read at this time and then we will move right into our discussion. "In December of 1970, after reviewing an Administrative Report on Cable Tele- vision, the City Council unanimously went on record as supporting the eventual award of a CATV franchise in Wichita Falls. At that time, the City Council instructed the City Manager to prepare for their review proposed technical specifications, franchise ordinance, applicant qualifications and evaluation criteria and the benefits and problems with municipal ownership of a CATV system. In order to prepare the above, the City Manager was authorized to employ a consulting firm to assist. In January of 1971, Checchi and Company of Washington, D. C. , was employed by the City Council in order to provide the above information, except the consideration of municipal ownership and operation of CATV. This latter item was removed from the consultant's study because the City had received information from the State Attorney General's office that municipal bonds, which would be necessary to finance the con- struction and initial operation of a municipally owned CATV system, could not be approved by their office as meeting either constitutional or statutory qualifications for such public issue of bonds. The draft report of the Checchi Study has been received by the City and initially reviewed by com- munications media, prospective applicants, the City Council and others." t , Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 2 We promised to give you an opportunity to talk, and we are just very happy to keep this promise. Now, if we may, we would like to call on the repre- sentative of Checchi and Company, Mr. William Boseman. Mr. Boseman will give us a brief summary of his report and then if you have questions, I'll recognize you and you' ll come up to the mike. MR. BOSEMAN: Thank you Mr. Mayor. Checchi and Company was employed by the City of Wichita Falls to help it especially in its evaluation of applicants for a CATV system in the City. In other words, our primary relationship with the City was to help them evaluate CATV applicants. We are sort of in an objective middle ground. To help the City in evaluating applications, we approached the problem in this way. Our first major objective was to formu- late a series of technical bench marks by which a good CATV system which would serve all the people and the interest of Wichita Falls would be com- pared with and evaluated against. In devising this sort of idea or proposed system, we have conducted a market study of the area to determine what we think the penetrations are likely to be. We made a financial analysis based upon this penetration, and we have suggested a franchise ordinance input for your consideration. We have helped to develop criteria by which to evaluate CATV franchise should you enact a CATV franchise ordinance. I understand my major purpose this evening is to comment on - to respond to comments on our draft report and before I do that I would just like to say a couple of points about the bench mark system that we have come up with - a system by which we hope to be able to evaluate CATV applicants for this City. We recommended at least a 20 channel system which would be capable of transmitting via cable 12 ordinary channels plus up to at least eight (8) midband channels. This would provide for the carriage - mandatory carriage of your local television stations plus the Lawton, Oklahoma, television station, which is a part of your television market. We have considered the necessity of providing a channel for cablecasting, that is, broadcasting done by the cable system itself. How- ever, when we initiated this study, proposed FCC rules indicated that this would be a requirement. A Federal Court subsequently held that QATV systems may not have to be required to cablecast, but now I understand that it has been appealed to the Supreme Court. We provided for consideration of import- ing distant signals. Of course this is one of the more attractive features of CATV and also one of the more controversial. We have considered channel allocations or uses for future Wichita Falls channels, either educational or UHF commercial, and we have provided consideration for a local channel, a civic channel whereby civic organizations in Wichita Falls could make use of this channel for municipal or civic purposes. Now, our draft ordinance which was circulated to the interests in the community contained a number of pro- visions. Some of these provisions were commented upon and my major purpose right now is to go over or reply to the comments on the draft ordinance. There was one comment or perhaps several on the subject of whether or not the subscribers are charged an installation fee and whether this revenue would be included in gross receipts upon which the franchise fee would be imposed. Our response to that is that this is essentially a capital expense part of the system and, if the CATV system is going to charge for the installation, this amount should be included in the gross receipts and therefore the annual franchise fee should 1 ` Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 3 be imposed. There was a question - Section 4(b) - concerning how much of the City of Wichita Falls could be wired up and at what rate. There are a number of ways of the rate of build of a CATV system in a franchise ordi- nance. We chose to suggest that at least 425 miles of cable be constructed over a four-year period as a minimum and 100 miles be constructed by the end of the first year; another 100 by the end of the second year; another 100 by the end of the third year and another 125 by the end of the fourth year. This is simply a way to more or less put some teeth into the ordinance to insure that the CATV operator does wire the City on the basis of the ordi- nance. There were two comments on this: one was that there might be a different way to design wiring up the City by percentage rate of build or some other criteria. We feel, though, that to require this 425 miles of cable to be wired up over a given period is a way by which completion can be objectively measured and certainly the CATV operator will go to those areas that are most densely populated first. We think it's a good way to evaluate .a CATV operator's construction. There was some concern that there may be a delay in the first year giving FCC approval and so on and that this would seriously hamper the first 100 miles that we say should be constructed by the end of the first year. Our comment is that you can al- ways put on more than one crew and increase the amount of effort that you wouldn't ordinarily put into stringing the cable. There was another comment on this section that the ordinance should require more rapid installation and we have suggested - we don't think that this should be required but that more rapid installation would be given consideration in evaluation if CATV appli- cants propose a more rapid installation. Section 6(b) has a comment on it. Section 6(b) - the comment was concerned with whether there should be only one corporate surety instead of two. We see nothing wrong with this requiring one corporate surety instead of two. This is a minor point and I think it's a valid point. There was a comment on Section 7 which has to do with the pro- hibition of pay television over the cable. The FCC hasn't made any decision on it, and we think from your point of view as a City that you should prohibit it until it is made at least a little more clear of what's in the mind of the FCC and so on. This ordinance has a provision in it for liberal amending of the ordinance upon application of the grantee when necessary to enable the grantee to take advantage of any developments in the field of transmission of television or radio signals which will afford it an opportunity more effectively, efficiently or economically to serve its customers. We feel that this provision for a liberal amending of the ordinance will stand the council in good stead if you prohibit it now and consider it later when it's perhaps a little more clear what the FCC does have in mind. The next sections are section 8 and section 9 which are technical sections. They have to do with the technical capabilities of the system, and I will attempt to answer and re- late our comments on these sections briefly. If there are any questions later on Mr. Grobowski or I will answer them in more detail. Section 8 has to do with color television. One comment we received - the thrust of it was that this standard is too difficult to be met and I think it's just a question of misinterpreting what the standard is. The standard has to do with the pre- servation of signal quality as it is received by the CATV system and the person or group who made the comment seemed to feel that this indicated something { Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 4 should be done to improve the signal beyond the headin, for example. This standard is to insure that the MTSE standards and quality are maintained or preserved as received and this is a fairly common technical standard. Like- wise, there is some consideration of the type of cameras that would be re- quired by the CATV system if it's going to colorcast or cablecast in color or if any of the other local originators are going to cablecast in color. The feeling was that we were requiring cameras that were much too expensive, $80,000 or $60,000 range. That is more or less the MTSE requirement. We also provide for MTSE type equipment which is a more liberal requirement and it is again a fairly typical requirement so we are not requiring the very best cameras that could be imagined. There was a comment on section 9(b) . We in' the draft ordinance suggested using in addition to the 12 standard channels a number, at least eight (8) midband channels, for other city uses. One of the comments was concerned with using superband channels which is another range in the look of magnetic spectrum. We feel that this is certainly a possibility that some day you may want to go this way. Now, again in view that the ordinance can be amended, we feel the performance of most of the work and most of the systems do make use of the midband rather than the superband channels. We recommend keeping the proposed ordinance section as it is written. Section 9(e) had to do with what should the City of Wichita Falls be considered. One comment recommended it should just be the City of Wichita Falls in its legal boundaries. I think we agree with that - that we suggest deleting the second sentence of that section 9(e) from the word "plus" in the last sentence. There is another technical standard provision that has to do with temperature range of equipment. We have suggested a wording that would liberalize to some extent this standard where the equipment is in temperature controlled housing. Section 9(g) has to do with the promulgation of the successful CATV operator in taking care of ghosting which shows up on CATV systems when there is a great deal of inter- ference. The comment was to a point that a lot of this is due to the CATV system, which is true. This is not all due to just interference that they may or may not have control .over. The suggestion was that we liberalize or eliminate this section, but we feel that, if it's true that in the case of Wichita Falls there could be this type of electronic interference, we feel it should be the responsibility of the CATV operator to find the difficulty of the problem. All we are suggesting is that the CATV operator find what- ever the difficulty is, to insure that the subscribers are receiving a good signal and just don't ignore the situation. It becomes the obligation of the CATV operator to find out what is causing the difficulty on the CATV system. Section 9(q) has to do with tolerance, the technical tolerance of the proposal. All I can say is that being a non-engineer, Mr. Grobowski and other CATV engineers feel that it's well within the equipment standards of the current equipment. Section 9(r)has to do with a standard of the cable as built as received by the CATV operator before it is installed. I am talking about coaxial cable. We have a standard that involves checking for certain deficiencies, and we again feel that this is a standard that adheres to the benefit of the City and the subscribers and the CATV system itself. This comment as it is in the ordinance should remain in the ordinance. There is section 9(b) which is another technical ordinance provision that has to do with frequency stability, and we feel that this was perhaps misinterpreted in Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 5 the comment that we would recommend that it stays in and if you have any further questions on that I would suggest that they be addressed to Mr. Grobowski. Section 9(u) has to do with installation of monitor boxes on the system. This would preclude CATV systems having to go into subscribers' homes who have the system to find out if it is operating efficiently. We put this in because it's a very fine provision. It has been used in San Diego, I believe, and the FCC is very strong on this particular type of requirement that monitor boxes be supplied at pertinent points so that the system can be tested without going into subscribers' houses. There are { several other sections now that I will address myself to. Sections 11, 12 and 13 all deal with practically the same things. Section 11 deals with ser- vice to subscribers, section 12 with service to schools. We suggested that the CATV system be required to provide an outlet at all the schools in the City, the elementary and secondary schools, the City Hall and Midwestern University. That it also provides the transmission facilities between a studio operated by the school system and the headin of the CATV system so that if the elementary and secondary schools wish to originate programs, they can do so. If they purchase their own equipment, of course, they will have the facility - the transmission facility to transmit signals to the headin and then out onto the system. We do not recommend that the CATV system be required to provide studio equipment, cameras and so on for the school or any other originating point except for the systems on cablecasting outlets. Section 13 has to do with service to the City and essentially we aresuggesting that a number of outlets be provided to the City on the system and that the City be provided with transmission facilities from a studio to the headin of the cable system and thereafter to be transmitted over the cable system. There was some concern that the draft ordinance really re- quired more than it does. There is a section of our draft report which is concerned with some other technical features that we feel would be an attractive feature of a CATV system. We are not including in the ordinance all items which could be required of all CATV operators, but rather would be evaluation criteria or considerations by which we and the City could evaluate CATV applications. We are, for example, requiring in the ordinance that there be transmission facilities from Sheppard Air Force Base which has prime studio origination equipment. We don't require it because it's not entirely within the province of the City to determine whether or not they are going to provide transmission facilities to the air base. It is also up to the Air Force of- ficials. So, although in the draft there will be system study, we suggest this as a thing for the City to consider as an evaluation criteria by which to evalu- ate CATV applications, but it's not required in the ordinance. There was also another comment in this regard about Channel 7 in Lawton being transmitted on- to the cable system on channel and transmitted on Channel 7 on the cable system as well as being transmitted on Channel 7 over the air. This is because at one point it was considered that the local Wichita Falls television stations would be broadcast on channel which means Channel 3 and Channel 6 on the cable system plus they would have two other channels available to them. The reason being that, if television stations 3 and 6 are broadcast on the same channels on the cable system as they transmit over the air, there will be interference and the subscribers will get ghosting and blanking bars perhaps on their screen and they won't receive a good signal on Channel 3 and Channel 6 on the Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 6 cable. So we were suggesting transposing those and putting them on other channels also and Lawton Channel 7 requested similar treatment. There is a question as whether or not you would want to consider Channel 7 plus another channel for Lawton or whether you want to eliminate the requirement for the local stations. This is a consideration I think is more or less up to you. Section 21 of our draft ordinance had to do with rates to sub- scribers. The comment had to do with whether or not the CATV system could increase the rates more or less by itself, proposing it to the City Council, and if there was no affirmative action on the part of the City Council, in- creased rates would become effective. We suggest that the City Council re- tain a positive influence over all rate increases. There was another sug- gestion concerning rates to subscribers. One of the CATV applicants or tentative applicants that has a lot of experience with CATV systems has suggested that there should be a provision for a late charge of about 10% to encourage subscribers to pay their monthly bill promptly, and we see no reason not to include this. We do feel that that extra charge should be included in gross annual receipts so that the City will receive its franchise in payment on that. Section 25 really has to do with transactions effecting the ownership of the facility, in other words, we built into the draft ordinance provisions a provision which would permit the City Council to pass upon all transactions of the CATV system. The comment was to effect this will pretty much dampen the financial considerations of the applicants when they go to build the system originally. Our belief is that the thrust of this is not that the City Council is going to look into where the franchisee gets its money to construct a system, but rather after the system is constructed and operating, the City should have some determination, some influence on what is done with the system because there is a provision in the draft ordinance that the City may wish to purchase a system at the end of the franchise term. We feel that this provision is valid in that it provides at least an insight to the City Council as to what is going on as far as encumbering the system with mortgages and other liens. Section 26(b) had to do with local control. We were asked by Mr. Fox initially to consider a requirement that there be 25% local ownership or control meaning persons or organizations who are citi- zens of Wichita Falls or organizations in Wichita Falls. One of the comments on this particular section suggested that you may want to decrease a 25% re- quirement to a 20% requirement because of some tax considerations which in- volve the ability of large corporations to consolidate the returns of their subsidiaries and they consequently get tax advantages by consolidating the returns of their subsidiaries. They can do this if they own up to 80% of the subsidiary, and we feel that this is a valid consideration and it will probably not have a great impact upon local ownership. We have also suggested that perhaps, and we only think perhaps, it may be possible to work out a 25% local control or local ownership requirement through some type of, a trust arrangement whereby a local trustee has the control of some of the equity which would mean local control even though not local ownership of 25%. Whether it's 20 or 25%, we feel that this probably provides efficient con- trol to the City. Section 28(b) is a section that provides that the City shall have the first right to negotiate a price with the CATV system to pur- chase the CATV system at the end of the franchise period. There was a com- ment on this that essentially it doesn't say much and it doesn't because at f i Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 7 the end of the franchise period, the CATV operator doesn't have a legal basis in which to operate and they may be more or less forced into selling to the City. But we think it should be in there because it indicates the City's strong concern in the first right to negotiate, and it is there in case there is any tendancy on the part of the CATV operator to negotiate with somebody else first. This is a little safety valve for the City. We think it's valid and should be retained. The gross receipts fee that we suggested was 2% on a gross income of $1,250,000.00 and 5% thereafter. Mr. Fox asked us to look into this in a more detailed sort of way. He asked us to look into the number of CATV systems which have begun operations in the last couple of years in cities with population between 50 and 250 thousand persons to see just what franchise fees they have been getting. We found 25 franchise fees in the documentation which is Television Facts, the 1970-71 edition. And for the record, I' ll read what we found as far as franchise fees. "One system had a zero foundation fee." I am working from small up to large. "One system had a 2% franchise fee; five had a 3% franchise fee; one had a 3% for five years and 4% for the next five years; two had a 4% franchise fee; six had a 5% franchise fee; one had a 5% on a sliding scale; one had a 5% on the first $200,000.00 and 10% on the next $300,000.00 and 15% thereafter; one had 5.5% on $100,000.00 and 6.5% thereafter; one had 6%; one had 8%; two had 10%; one had 12.1%; and one just had a flat $12,000.00 per year." Draft Ordinance Provision Section 31(b) , one of the comments we received was concerned with the jury procedures that we have outlined or suggested that in case of termination or cancellation of the franchise by the City, they felt that any fact finding by the City Council should not be conclusive. I think this is essentially a question of Texas law on the hearing requirements due to a grantee under the franchise, we would suggest that this provision could be modified to more accurately reflect Texas law if it does not reflect it accurately at the moment. Section 34(a) has to do with the term of the franchise. We have suggested a 10-year franchise term. Several of the comments have said that it's more general to have a 20-year term, and this is true. More of the average terms of franchises are around twenty years. However, we have purposely suggested a ten-year franchise for four reasons largely. One, is that if the CATV system proves to be highly profitable, it will be advantageous to the City to reconsider in detail all the provisions of the ordinance, particularly the franchise fee. We have made financial projections and these are at best projections and over a ten-year period no one can tell what might happen so we have suggested, just because the projections may prove not to be completely accurate, it would be good to have the ten-year franchise term instead of a fifteen or twenty-year as suggested. Another reason for sug- gesting a ten-year franchise term is that tele-communications is a revolution- ary industry, and I think we can expect very significant changes in ten years. A third reason is that a ten-year period will encourage a CATV operator to install the system as rapidly as possible. The thrust of comments was that if the system is only installed over three or four years that it will only give them four years of full operation. Well, that's true so we're sug- gesting a ten-year period. Hopefully, this will be some kind of encourage- ment to get the system operating rapidly. And the fourth reason is that we Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 8 feel a ten-year period is a reasonable time in which a profit oriented CATV operator would be able to operate viably, and that it would perhaps dis- courage less efficient operators or operators who have had some trouble with operating as efficiently as others. We just have a couple of other comments: one has to do with the attractive features of the importation of distant sig- nals. We have suggested the importation of distant signals from Dallas. Now there is two types of concerns about the importation of distant signals. One is that there would perhaps be some other localities, such as perhaps P Ardmore, Oklahoma, that would be more attractive to Wichita Falls subscribers. Based upon a programming analysis involving TV Guide, we feel that, perhaps from the point of view of the average subscriber in Wichita Falls, they would find more attractive than the programming of independent stations in Dallas and perhaps elsewhere around. This, of course, does not preclude the importation of distant signals from anywhere else. This is certainly a consideration of the CATV operator, not us. We were simply suggesting certain stations because it was needed to develop cost criteria. That leads us to a question on cost and expense projections in our report. Part of our report was to come up with pro-forma of financial statements which are in the draft report, and there was some question as to how we arrived at the cost and the expense items. Essentially our cost and expense are based upon industry cost and prices in operating experience. Items are generally valued conservatively, that means that the efficient profit oriented operator would be likely to be able to operate with greater revenues and less expenses than we have shown rather than vice versa. This conservative approach pro- vides that the system will, if anything, probably be more profitable than projected for all the parties concerned, including the cable operator and the City through its franchise fee payment. We were asked on the point of a non- profit corporation to be your CATV operator. There are about fifteen munici- pal owned systems in the country and maybe a couple non-profit systems. This is an area that hasn't been explored in much detail, and I think our feeling is that the essential criteria for insuring a non-profit corporation would be to get the internal revenue service to say that such a corporation as devised would indeed be considered as an exempt organization for IRS tax purposes. There are a number of exempt organizations permitted under the income tax laws. We found that a television antenna company that was essentially considered to be a civic league organization was provided an exemption because it benefited an entire area. However, we also found that the television relay corporation which isn't the same as a CATV system was not permitted to have an exemption under the IRS regulations. So, there- fore, I think the only way that the City would be assured that it could operate a non-profit corporation would be to pretty well devise all the structure and operating procedures and ownership that would go into it and present this to the IRS and hope that they would grant a tax exempt status. Otherwise, you would always run the risk of not being tax exempt. Now we have found that of the two municipally operated systems which claim to be also non-profit systems, one them essentially pays full taxes and the other one doesn't. The one final comment I would like to make is one that I'm sure that most of the people with interest in CATV are concerned with and this has to do with the importation of distant signals. The importation of Cable Tv Discussion - Special City Council Meeting June 22, 1971 - Page 9 distant signals means that the average CATV subscriber is going to receive signals from say Dallas and this will have some impact on the local stations as well as the local retailers and merchants. There is presently a proposed rule before the FCC called the Commercial Substitution Rule. It may or may not be enacted as a full-fledged rule, but it provides that the CATV systems would be required to delete the commercials of distant signals and substitute the commercials of the local stations. The Commission has tentatively de- cided that the benefited station or stations would pay the cost of commercial substitution, but it has asked for comments as to whether the CATV system itself should pay part or all of the cost. Now I'm not suggesting this is a panacea for the effect that CATV would have on this locality due to the importation of distant signals, but this was a concern of several parties and I wanted to bring that to your attention. Those are all the comments or responses to comments that I had, and I appreciate this opportunity to present this to you and the City Council. If there are any comments I'd be pleased to try to answer them. MAYOR HILL: Mr. Boseman, we appreciate you giving us this brief summary as you have, and I might ask any of the Councilmen at this time if they have any questions they wish to address. HARRISON TAYLOR: Mr. Boseman, just how much additional imported TV would we be allowed under current FCC rulings? MR. BOSEMAN: Well, under the current FCC rulings - under the interim rules that were enacted in the past year, there was a consideration that perhaps cities under the top hundred, which you are 123 or 143, something like that, cities with less than the top hundred television markets would be permitted to import four distant signals. Now, there has lately been comments from FCC personnel that in the cities of less than the top one hundred markets that this may be reduced to one. So I would say at the moment it's very up in the air just what a city like Wichita Falls could bring in and, of course, this is an important consideration. The supposedly definitive FCC rules on this and other matters should be forthcoming in August of this year. It's been stated that some definitive rules will be promulgated in August, but they've also said that there will be further rule making considerations so right now it would just be a guess as to what could be imported. TARRY LAMBERT: Mr. Boseman, I would like to ask you a question. You mentioned the fact - you indicated that possibly the FCC might make a ruling to delete outside-out-of-town commercials. Could we do this by our own ordinance? Or do you know? MR. BOSEMAN: I think that you probably could do this by your own ordinance as long as the FCC hasn't acted on it. You couldn't do anything, of course, contrary to the FCC because they can occupy the field that they wish. I would think you'd probably have a pretty good chance of doing that. HARRISON TAYLOR: Well, with reference to the same question, I believe I read Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 10 where it would be very difficult to delete the commercial part of foreign sales. MR. BOSEMAN: Technically difficult, yes. It would involve an additional cost, that's correct. It would involve cost by the CATV system because there would more or less have to be somebody there waiting to delete signals as they came in. It would involve a personnel cost. It would also involve the cost on the part of the local broadcasters because they would have to pro- vide commercials to fill these spaces. LARRY LAMBERT: Could they be filled with anything else besides commercials? MR. BOSEMAN: I suppose. LARRY LAMBERT: Is there any present regulation as far as the number of. other total signals besides the indication of television signals, such as FM? MR. BOSEMAN: No there isn't. We haven't suggested the importation of radio signals. This could be done but it would be an additional cost. Now, I think the FCC is considering this as a requirement. Presently there isn't. There is no prohibition from the importation of radio signals. It is a ser- vice provided by some CATV system operators. LARRY LAMBERT: Even though your report does not suggest that is what I will call minimum standards, it could be something proposed by a CATV applicant as one factor in evaluating that application. MR. BOSEMAN: It certainly could. LARRY LAMBERT: Now this could also be true with reference to other services that might be delivered through CATV but would not be required as minimum requirements. Is that correct? MR. BOSEMAN: Certainly. All we have provided the City is a draft. Our draft ordinance includes what we consider to be the minimum that the City would probably want to require from a CATV operator. LARRY LAMBERT: Likewise there is no legal limitation as far as the amount of a gross receipts tax, let's say, that the City can require as a condition to award a franchise. Is that correct? MR. BOSEMAN: That is correct. The FCC in the same rules that are now pro- posed since last July suggested comments on limiting of city franchise fee to 2%. I think they are no longer actively considering that. LARRY LAMBERT: Until such time as the FCC acts in this regard, then municipal governments would have to control that. Is that correct? MR. BOSEMAN: That is correct. Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 11 LARRY LAMBERT: Now I notice in your report you suggested 2% gross receipts tax. Is that because of what factors? MR. BOSEMAN: It was because of about three factors which we considered. One is that it seemed to be the standard in Texas. Texas is a pretty big area from our point of view and seemed to be more or less standard. I can give you the figures on that. I think we looked at about 83 Texas systems and most of them had 2% or less franchise fee. That was one reason. Based on our financial analysis we found that those projections indicate that this system may not be as profitable as are most CATV systems. This is probably because we are requiring some services that a lot of CATV systems don't pro- vide and Wichita Falls is a pretty spread out city and is not as efficient to wire as a more compact city. So for that reason, because the system from our projection didn't seem to be as profitable as a lot of them, we suggested 2%. The third reason was the FCC's active consideration of 2%. LARRY LAMBERT: That still is our prerogative so. far as making proposals for CATV. MR. BOSEMAN: That is your decision. J.C. BOYD: Mr. Mayor, in order to save a little time several people have asked me to ask questions for them. I have several here. First, Mr. Boseman, in your report - let me back up just a little bit. When this started, there seemed to be concepts of cable TV floating around. I'm not a technical man at all. I don't even know why the light comes on when you flip the switch. That 's how technical I am. But there seemed to be two general concepts: one was of a single wire running around - kind of a cheapy kind of a deal. It's that kind of a thing. Just a minimum kind of deal - moneymaking, a going jessie for the investor. Then there was another concept that you could have a more complete type of system. More service to the community which you just mentioned a moment ago, that wouldn't be as profitable but it would render considerably more service to the community. I was quite disappointed when I read your report and read this: "That the City should not require a 2-way system or make any reference to its subsequent adaptation. Since any good CATV system will accept the operating standards will be equally adaptable to the long period of experiment and development which would be necessary in any move for the 2-way wired city system." Well, that let me down, frankly. I had envisioned much more than is apparently available according to your report. But my hopes rose again when on June 15 the FCC report comes out with this, quoting Mr. Birch: He says, "Similarly we are contemplating re- quiring that there be built into the system a capacity for 2-way non-voice communication. This is now feasible at little additional cost and its avail- ability is essential for many of cable's expanded services." MR. BOSEMAN: Our feeling is that there has been a great deal of talk about the cost of a duplex or 2-way cable television system. Generally, any con- versation involving CATV involves the projected uses of it in the next several years which are mentioned and a lot of it is 2-way use. It is our judgment that this would be an extremely expensive thing to ask of a Wichita Falls CATV Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 12 system as we see it in spite of the comments of Mr . Birch. It is not an inexpensive thing to make a duplex a truly duplex complicated CATV system. It's very expensive, and, as we have shown or tried to show through our pro- jections, the system as it is suggested provides a number of services which are expensive. Now, we do feel that a well engineered system will be adaptable to 2-way, if it is required. Now, our own personal feeling is that it may not be required. Your comment stated that they actively consider it or something to that effect. There are a lot of problems with duplex systems that that haven't been completely ironed out yet, so we didn't feel that it would be legitimate to require a 2-way capability in a Wichita Falls system. The system could be adapted later. J.C. BOYD: Would it have to be taken out and completely replaced in order to get this 2-way capability? MR. BOSEMAN: There would have to be certain components replaced, yes. J.C. BOYD: What about the wire? The basic components? MR. BOSEMAN: The basic components would not have to be replaced. The cable wouldn't have to be. J.C. BOYD: The type of cable that you proposed would handle the 2-way system. MR. BOSEMAN: Yes. J.C. BOYD: Now, another question - have you ever heard of any kind of a lease-purchase arrangement for municipal cable television? MR. BOSEMAN: Yes. J.C. BOYD: I would appreciate any comments you have on it. MR. BOSEMAN: Well, essentially a lease-purchase arrangement would be where a private operator would start the system and the city would lease it or vice versa where the city owns it and somebody else leases it and operates it. This is another alternative in which you have a private operator on one hand and completely municipally owned system. . It would have conceivably some ad- vantages. We didn't look into this in detail but did look into it in relation to non-profit corporation. J.C. BOYD: Does it alleviate the necessity to issue bonds? Couldn't it be worked in a manner without the necessity of bond issues for the City? In other words, here we've got a franchise, and it's apparently a very valuable piece of merchandise. MR. BOSEMAN: Yes. J.C. BOYD: On a lease-purchase arrangement, can you visualize some financial institution that would be willing to put up the money, somebody else who would 1 Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 13 be willing to build it and operate the thing without the city itself actually having to put up bond money? MR. BOSEMAN: I know no specific organization that would do it. Theorectically, it's possible, yes. It is an alternative, let's say. J.C. BOYD: Now here is another point. You have mentioned that you recommended non-exclusive franchise. Now suppose that the city found that we had eight applicants financially and otherwise qualified to receive this franchise. Would you, at that point, advise granting two, four, eight franchises? What would you think about that? MR. BOSEMAN: I would advise granting one. J.C. BOYD: All right, then why do we call it non-exclusive? MR. BOSEMAN: Well, I think it leaves an opening in case there is something wrong with the operators that we have selected. GERALD FOX: I think also that the State Statutes would require us to not issue any franchise other than a non-exclusive franchise. J.C. BOYD: You would recommend, then, that we issue only one. Right? MR. BOSEMAN: Yes, that's right. J.C. BOYD: For what reason Mr. Boseman? MR. BOSE1vM: I think it's just more efficient to have one. The point of this expertise is to determine criteria and system, suggest a system by which to evaluate applicants. I think that the point is to come down to the one that can do it best, and I think it would be more efficient to have one system in a city of this size. Now in New York City they have five but that's 8 million people. Here you have about 100,000 and not projected to increase very rapidly. I think for this size city, one franchise would be more efficient. J.C. BOYD: In the last analysis we agreed that we will have one irrespect to terminology. MR. BOSEMAN: That is my suggestion, yes. GERALD FOX: I might remind the Council that Texas Electric Service Company franchise is a non-exclusive franchise; Southwestern Bell Telephone Company is a non-exclusive franchise; bone Star Gas Company is a non-exclusive franchise. J.C. BOYD: I understood that. That is the reason I wanted to be sure we under- stood the terminology, and we knew what we were talking about. Do you recom- mend to the Council any color capability for any locally produced programs? Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 14 MR. BOSEMAN: No, we recommended that the system be capable of transmitting it - not that the local studio be cablecasting or otherwise have cameras that are capable of colorcasting. J.C. BOYD: Am I correct in assuming that each home wanting to receive these midchannels that you mentioned earlier, the programs on those. Do those have to be fitted with some type of extra equipment, and if so, do you know about what the total cost of that is? MR. BOSEMAN: If a converter, which is essentially the little box that would fit on the television set, I think they run about $40-$60. J.C. BOYD: Is that the way we get from 12 to 20? MR. BOSEMAN: Yes. J.C. BOYD: That the 12 would come in on the ordinary set, then if we want to go to the 20, you put this unit on. MR. BOSEMAN: Yes, for the midband channels. J.C. BOYD: About what's the cost of that? MR. BOSEMAN: Well, generally the cost is around $40 - $50 - $60 for that. Typically, the CATV system picks up some of that cost and doesn't charge the CATV subscriber all of that. We are suggesting these midband channels, by the way, not for ordinary subscribers generally but for uses of schools or with the Fire Department and so on. LARRY LAMBERT: What's a midband channel? MR. BOSEMAN: It's simply a band in the electromagnetic spectrum that has a certain frequency arrangement. LARRY LAMBERT: It would be channels 2 thru 13 that you ordinarily would get. MR. BOSEMAN: No. All of these standards are ordinary channels. This is another band. LARRY LAMBERT: Would the 12 channels that you suggested in your report for ordinary use not involve this added expense? Is that correct? TM. BOSEMAN: That is correct. Most of the subscribers, the typical subscriber, would receive 12 channels and have all channel capability just by the ordinary hooking to his house. GERALD FOX: An you would not need a converter? MR. BOSEMAN: You would not need a converter. Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 15 LARRY LAMBERT: Who would need the converters then that you are talking about? MR. BOSEMAN: If the schools wish to originate programs they would originate programs and transmit it on the midband frequency to other schools and these special uses could make use of the system through this converter. The ordi- nary subscriber would get the ordinary 12 channels. Special uses like the school or Fire Department or the University or Sheppard Air Force Base could make use of the system too. But they would be using extra channels, not the 12 that are being used by the ordinary subscriber. ' LARRY LAMBERT: They wouldn't interfere with the channels the ordinary viewer will use? MR. BOSEMAN: No, they would not. LARRY LAMBERT: I see. Thank you. GERALD FOX: This would be more or less like a closed circuit TV system, in effect. You would use the converter for these special uses. J.C. BOYD: The ordinary user would not use it? You wouldn't sell to an ordi- nary user then, would you? MR. BOSEMAN: If he would want to purchase a converter and hook into this school system, say, to get arithmetic, if that was being taught, or something from Sheppard Air Force Base in the area of nurses training or something like that, they could do it if they wish to. There is no preclusion that anybody can be getting the full 20 channels. J.C. BOYD: Now, do you think that the having, if that went into effect, which it hasn' t, but if it went into effect, do you think that that would materially affect your estimate of the number of probable subscribers in Wichita Falls? Would it have some effect on subscribers, therefore on the value of the whole system? MR. BOSEMAN: It is my judgment, just as a potential CATV subscriber, that it would have. J.C. BOYD: If that goes in, it will make the system that much less valuable, in your opinion? MR. BOSEMAN: It is my personal opinion it would not be as attractive to me as a subscriber, and I think it would be reflected in the number of subscribers and the receipts. Further, I think the FCC is going to be faced with this. I think that as you say, it's just a proposal from last year when they were talking about four distant signals. This year, now, they are talking about only in- cluding one and what they end up with is practically up to anybody's guess. HARRISON TAYLOR: Would such ruling effect the existing cable TV systems? Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 16 MR. BOSEMAN: No, they will tend to be what's called grandfathered. HARRISON TAYLOR: So, if we adopted one now and the rules change in August, we would not be allowed to use the rule. MR. BOSEMAN: Well, that is a tactic. I think it is very dangerous to push something that is as complicated as a CATV system. To rush into it, based upon what you think may happen with the FCC. HARRISON TAYLOR: You think that we shouldn't do anything? MR. BOSEMAN: I think that what it all comes down to is what the CATV proposed applicants think. If they think that they can make a go at it on your re- strictions and FCC rules, I think that they would submit proposals. LARRY LAMBERT: I wanted to ask you another question sort of, that J. C. brought to my mind. The classes of TV stations; I guess you'd call it, that you talked about importing involve independent stations and educational TV stations. Is that correct? MR. BOSEMAN: Yes. LARRY LAMBERT: Those stations would not be network affiliated stations. Is that also correct? MR. BOSEMAN: Independent means they are not network affiliated. LARRY LAMBERT: Would this mean that these imported channels would be some- thing new rather than merely a duplication of what we've got now with off- air TV? MR. BOSEMAN: Yes, generally the programs on independent stations are reruns. In other words, they are not network syndicated programs presently running on the ABC, NBC and CBS networks. LARRY LAMBERT: So we would be talking about bringing in some things that would be new or additional rather than merely trying to duplicate or be a direct competition with the programming of the local TV stations. MR. BOSEMAN: Well, you would get the same programs but I would hesitate to say it wouldn't be competition. It would be another program. LARRY LAMBERT: Ok, then we wouldn't have two Gunsmokes at the same time or programs of that nature? MR. BOSEMAN: You would not have two Gunsmokes. J.C. BOYD: Just wanted to get your opinion. I'm taking advantage of you now, but I would like to ask kind of a long winded question. Based on your Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 17 knowledge of CATV regulations, the state of flux which you referred to in your report that these regulations are in, can you personally see any reason for this Council to immediately work up an ordinance and grant a franchise? In other words, are there any good reasons for us to act prior to the FCC finalizing rules currently being worked out and do you think that immediate action would be fair to the applicant? That's a long question and it may not even be a fair question. MR. BOSEMAN: I think it is a fair question because this regulatory situation exists. To answer your questions in a word - yes. I think that you should and for this reason. The regulatory situation with regard first to tele- vision in general then UHF and now CATV is always a state of flux. You will always seem to be waiting for the FCC. On December 13, 1968, they came out with some rules that pretty well put a freeze on CATV. Then they said that there would be something happening. Last July they came out with some new rules. Now they say in August something will be happening. I don't think you can evaluate exactly what's going to happen and if you just always wait for the FCC, I think you will always be waiting. LARRY LAMBERT: Are you saying you don't think there will ever be any final- ized rules? MR. BOSEMAN: I'm saying that I don't think you can predict that if you wait six months that you're going to get to the center of the rules and regulations because I think in six months then you're going to have to wait six more months for more rules. All I'm saying is that, unless you want to put it off in- definitely, I don't see any reason not to more or less go ahead now, leaving it up to the best judgment of the successful applicant to make their judgments as and whether they can make it or not. It all comes down to many decisions among several potential CATV operators that whether or not they can make a go of it. This is pretty much the best judgment when profits and losses are actually involved. J.C. BOYD: Has your organization or your subcontractor ever in the past or now, have you done or are doing any kind of work with any of the interested stockholders or any of the applicants before this group as far as you know? MR. BOSEMAN: No. GERALD FOX: This was, by the way, in interviewing all the applicants, the prospective consulting firms in December and January, this was one point that was specifically discussed with all the six or seven firms that we interviewed, and in fact, it resulted in a couple of firms not being con- sidered any further. Checchi and Company indicated no relationship with any of the prospective applicants at that time nor past relationships with these firms. MR. BOSEMAN: That is still true. MAYOR HILL: Mr. Boseman, I believe Mr. Darner has some questions for you. i Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 18 RICHARD DARNER: What are the apparent and/or proposed, if you will, rules and regulations on local programs by the CATV? GERALD FOX: I think that what, if I could paraphrase Mr. Darner, are there any restrictions on the type of programs that will be placed on cablecasting? For instance, the fairness doctrine and political office campaigns and things like that. MR. BOSEMAN: Those rules that apply to broadcasting will apply to cable- casting. RICHARD DARNER: And what about cablecasting for Midwestern use, Sheppard Air Force Base use or City use, I mean this type of thing? MR. BOSEMAN: Yes, that would be local origination. RICHARD DARNER: That would also be local, they would stay the same. MR. BOSEMAN: I don't think they would get involved because they would tend to be educational rather than political oriented. LARRY LAMBERT: Well, let me ask you a question then. Are there any - would there be any greater leeway or right on the part of a cablecaster or cable TV company that wanted to originate its own programs? To broadcast material, would they have greater right to do so or less restrictions than say Channel 3 or 6 would have? MR. BOSEMAN: I wouldn't think so at all. LARRY LAMBERT: For instance, suppose a cablecaster wanted to cable out some pornographic movies, could they do so? MR. BOSEMAN: I would think not. J.C. BOYD: Who would stop them? MR. BOSEMAN: I think the FCC would stop them under their proposed rules. MAYOR HILL: Gentlemen, do any members of the Council have any further questions? Mr. Boseman, we realize you have been on your feet for almost an hour and a half, but I promised some of these folks here that they could ask questions. It may be that there are no additional questions. Maybe we have asked them all, but I promised them that you would answer them at this time, if they had some. Anyone in the audience that has a question or questions that they would like to address to Mr. Boseman at this time, come to the podium, will you. I' ll recognize you sir. JAMES SHERMAN: My name is James Sherman and I represent the Wichita Falls Chapter of Texas Electronics Association. The monthly rate of $5.75 is not real clear to me. Does this mean sir, one television set, two television sets, three television sets in the home? Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 19 MR. BOSEMAN: You mean for the first television set in the home, if you hook another one it would be an additional $1.00 monthly. JAMES SHERMAN: Could some of the out-of-town commercials going to come in over CATV be replaced by local retail commercials? MR. BOSEMAN: Well, if the FCC proposed rules require that outside com- mercials be deleted,the answer is yes. If it is not prohibited then I think we could in the ordinance. LARRY LAMBERT: Let me insert, a question here with reference to that. Is it your judgment that our ordinance could, until the FCC acts, require the de- letion of outside commercials on a local basis? MR. BOSEMAN: Right. That was asked I think previously, and I think I pre- viously said, yes. LARRY LAMBERT: I thought so, but I wanted to make sure. JAMES SHERMAN: One more question. Would the existing Channels 3, 6, and 7 locally received in Wichita Falls, would the advertising advertised over those stations, would this be carried on cable television? MR. BOSEMAN: Yes, it would be broadcast exactly as it is broadcast over the air. JAMES SHERMAN: Mayor Hill, City Councilmen, thank you. MAYOR HILL: Mr. Sherman, thank you. Do we have anyone who wishes to come to the podium and address questions to Mr. Boseman, taking into consideration that he has been on his fee now for a good long while. Mr. Boseman, I think there are none. Thank you sir, we appreciate you. MAYOR HILL: The second phase of our meeting, we are going to ask Mr. Fox, our City Manager, if he will, to tell us what he found out relative to a municipally owned cable TV, the feasibility of it, the legality of it. Mr. Fox, if you will sir. When Mr. Fox has completed, then we will allow you, if you wish, to ask questions. GERALD FOX: I would call on Mr. Hodge first to brief the Council on the legal authority of a Texas city to own, construct or operate a CATV system and then I' ll have a few comments after. H.P. HODGE: This, unfortunately, is one of those difficult legal questions where you have no authority in point to give you an answer to the question. There is no constitutional provision, there is no statutory provision, there is no charter provision, no case precedence to answer the question. When there is a situation like that we have to try to make an educated guess based on what the statutes and the charter and the cases do say in related areas as to what a court might say if this particular situation arose. Now, I think Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 20 really there are about three inquiries we need to look at in determining the answer to this question. First is that whether the City of Wichita Falls has the legal power to own and operate a CATV system. Secondly, does the City of Wichita Falls have legal authority to spend tax money on the acquisition and operation of CATV systems? Third, does the City of Wichita Falls have authority to issue bonds to obtain funds for the purpose of acquiring or constructing a CATV system? Each one of these, of course, is a separate independent inquiry though the answer to all three items, I think, are important in attempting to arrive at some conclusion. First.,. with reference to the first question, does the City of Wichita Falls have legal power to own and operate a CATV system? Now, as I say there is no constitutional provision, statutory provision, or charter provision that says expressly either that we do or we do not, so we just have to try to figure generally what authority the City of Wichita Falls has. Of course, as a home rule city under Texas Constitution and Texas Law, the City of Wichita Falls has the powers which are granted to it in its charter insofar as those powers are not inconsistant with either the constitution or the statutes. Now the Supreme Court of Texas in the case of Davis vs. Taylor said that a municipal corporation such as Wichita Falls may exercise such powers and only such powers as are, one, especially granted to it in its charter, secondly, such implied powers as are incident to the powers granted to it in its charter, or thirdly, those that are essential and necessary to make effective the objects and purposes of the corporation. Now then, we should look to our charter and see what powers the charter grants to the City of Wichita Falls. Several are mentioned in the charter that I think bear on this question. Unfortunately, none of them answer the question but they bear on the question. The charter of Wichita Falls, in Section 7 which sets out and enumerates the powers that the City has, provides among other things that the City has power to acquire property for any municipal purpose; that it has the power to furnish all local public service of whatever nature; that it has the power to construct, own and operate local public utilities. I think at this point, we might rule out public utilities. The Attorney General of Texas has issued an opinion in which he concluded that a CATV system is not a public utility. I think this is, of course, just one lawyer's opinion, the Attorney General's, but I think it's a sound statement and if so, then we would not have authority to own and operate it as a public utility. So that would mean that the only authority we would have would be if it is a municipal purpose or if it is furnishing a public service. Incidentally, it also might throw a little light on this to see another Attorney General's opinion in which the question was raised as to whether or not the county had the authority to acquire and operate a translator system which, not being a technician, I'm not sure exactly what that amounts to, but it's similar to our portion of a CATV system. The Attorney General's opinion was that the county did not have such authority; that it had no authority to own and operate a translator; that it had no authority to issue bonds for the purpose of obtaining and operating such a system. They based this opinion on the fact that, of course, a county or commissioners court which is the administrative body of the county, has the power to carry on only those powers and authorities which are particularly granted to it by the consitution or by the statutes; Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 21 that there is no statutory or constitutional authority for a county to own and operate such a system as this and consequently, the Attorney General's opinion was that the county had no such authority. Now, of course, ours is a different situation. We, of course, operate under the powers granted in our charter, as we said a while ago, but that was the Attorney General's opinion with reference to a county's authority. Now the charter does not expressly grant us the authority to own and operate a CATV system. The third test that the Supreme Court gave was that we have the power to make effective the ob- jects and purposes of the city and I hardly think that the ownership and operation of a CATV system would be necessary to effectuate the objects and purposes of the city. So if we have the authority at all it would be one that would be implied from the charter. Now, of course, therein lies the difficulty and as I say, we can only make kind of an educated guess as to whether or not the ownership and operation of a CATV system would be the operation of a public service which our charter authorizes us to do. I find no definition in the law of just what a public service is. Now the state statutes do throw a little light in this regard. Article 1175 of the state statutes enumerates certain powers that a home rule charter can give to the city. Now this is not exclusive and does not proport to be, but it does point out authorities among others that a city may in its charter acquire. A home rule charter may authorize a city to own and operate systems of gas, electric lighting, telephone, street railways, sewerage plants, municipal railway terminals, wharfs, ferries or any other public service or public utility. Well, I would take it that anyone of those would be considered a public service because the Legislature says so. Now anything of a like nature to this, I would say, is a public service on account of what the Legislature has said here. But now it would appear to me that a CATV system is entirely a different kind of an animal in these things we mention here. As I say, that is not a legal opinion, that's simply my opinion. Now these are things that furnish services or supplies that are more of an essential nature to the people or they provide something that is, if not necessary, is very important to their safety or their health or something of this nature. Now I would look on an operation of a television station as being something that does not furnish a type of service that is essential to the health or safety or the welfare of the people. In my opinion, as I say, and this is not necessarily a legal opinion but based on what we have said before I have grave doubts that we would have the authority. LARRY LAMBERT: You are suggesting that it would take a court decision to really tell us? H.P. HODGE: That's right. LARRY LAMBERT: Or legislative act? H.P. HODGE: That's right. Either one would tell us. Otherwise we're having to guess and my guess is that a court would say that it was not. J.C. BOYD: How about an Attorney General's opinion, would that have any Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 22 weight as far as actions are concerned? H.P. HODGE: It would certainly, of course. I'd normally think that an Attorney General's opinion would carry a great deal of weight. An Attorney General's opinion would be helpful if we could get one but, of course, the problem is we have no authority to request one. The Attorney General has no authority to issue an opinion on the request of a city. Ultimately developed with some of the things that Mr. Boyd mentioned, if it's going to be the wired city concept where it's going to read the meters, it's going to take polls and it's going to do all these things a system like that would seem to me to come closer to being a public service than the system that Mr. Boseman has described here. So I would personally have grave doubts that the courts would say that spending tax money on a CATV system was constitutional because I wouldn't think it would be considered a public purpose. Now with regard to the third inquiry, that is, could the City of Wichita Falls issue bonds in. order to raise the money to buy or construct or operate a system, I had discussed this matter with our bond attorney just to get his idea. He has a lot more know-how on what you can issue bonds for than I have, and he told me several things. First, he said if you want to issue revenue bonds you would have to have a statute passed to authorize it. Of course, there is no statutory authority for this and for revenue bonds you would have to have a statute passed to authorize it. So as of right now that's ruled out. Secondly, if we were considering tax bonds, here again we looked to our charter which grants us authority to issue bonds, and he said that in his opinion we could not. We could issue tax bonds only if CATV is a public purpose. Now this takes us back to what we were talking about a while ago. , and in his opinion, he thought it would probably take statutory enactment to declare that it's a public purpose. Of course he has had experience with other things such as issuing bonds for our building parking facilities and things of this nature. That was one thing he mentioned that they tussled over a long time but finally they got some statutory authority saying that this is a public purpose and then, of course, you had clear say. In addition to this, and even more important, he has discussed this matter briefly with someone in the bond section of the Attorney General's department and, of course, as you know, before any bonds can be sold they have to be approved by the Attorney General. He was told by them that they had this same doubt about it being a public purpose and that before they would approve any such bonds that they would want some statutory authority declaring that it was a public purpose. So I think we can answer definitely on the third inquiry that we couldn't expect to have any bonds issued to finance the system unless there was some statutory authority either to issue revenue bonds for the purpose or declaring that CATV is a public purpose. So as I say, we just have to make an educated guess about it, and my guess is that the City of Wichita Falls in a case if one should come up would not have the authority to own and operate a system; secondly that we wouldn't have authority to use taxes for the system; and third, we wouldn' t have authority to issue bonds for it. GERALD FOX: To the best of our knowledge there are approximately a dozen cities throughout the country out of 2,400 CATV systems who do own and operate Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 23 their CATV systems. I queried about a dozen of these cities and received responses from only four. The City of Greenville, North Carolina, with 30,000 population awarded a franchise to their Utilities Commission which operates their electric, water and sewer utilities. In 1968, after a feasibility study by a consultant which indicated the system would not be economically feasible at that time, they have not proceeded with instal- lation. Palo Alto, California, 56,000 population, where an engineering feasibility study was completed which provided as an alternative municipal operation. The City Council has not yet taken action on the implementation of the system. Jackson, Minnesota, with 6,000 population. This system has been in operation since 1957 has annual gross annual revenues of some $29,000 and operating expenditures of nearly $29,000. There was special legislation required from the legislature in order for this city in Minnesota to operate its system. Opp, Alabama, 6,000 population. Its system has been in operation since 1968. Has about 900 customers. Revenues approximately $50,000. Their operating expenditures are about $30,000. In both the latter two cities, the bills are collected through their utilities system. Subscriber rates are in the vicinity of $4.00 or $4.75. The other cities reportedly with municipally owned CATV systems but not responding to our query were San Bruno, California, 36,000 population; Frankfort, Kentucky, 22,000 population; Crystal Falls, Michigan, 2,000 population; Norway, Michigan, 3,000 population; Pleasant View, West Virginia, 5,000 population; Pitcairn, Pennsylvania, about 6,000 population; and Sumas, Washington, 5,000 population. LARRY LAMBERT: Is there any quick way we can get a decision on this Mr. Hodge? H.P. HODGE: Maybe we could undertake the construction of one and have some- body sue us. LARRY LAMBERT: That's still pretty prolonged. H.P. HODGE: That was found out from experience. That could go on for a couple of years. The only way to know for sure, of course, would be a court test. As I say, I know of no way we could get an Attorney General's opinion. I was told by a local citizen that he was going to ask one of ours. We dis- cussed this idea of getting an Attorney General's opinion, and as I explained to him, the Attorney General by law is prohibited from giving us a legal opinion and that only State people could have the authority to ask for legal opinions. MAYOR HILL: He was, in effect, then saying that his opinion of the county would apply in our case. H.P. HODGE: No I wouldn't say that Mayor. He didn't say that. I gathered that he was telling them that it was not a proper kind of an inquiry for the Attorney General to arrive at an opinion on. Regardless of who asked it, it would still not be a question involving the State interest. Of course, we need these things a lot of times where we don't know for sure and sometimes we think its the proper thing to do, so we just stick our neck out and take i Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 24 a calculated risk. I guess we can always do that, depends on whether you want to play it safe or whether you want to take a calculated risk. And, of course, this council in the past has gone both routes. MAYOR HILL: Mr. Fox, I have indicated to this group that we will allow them to ask you or Mr. Hodge questions, if you don't mind. I noticed Mr. Whan standing up a few moments ago. Mr. Whan, we recognize you now sir, if you have a question. MR. WHAN: I have one bit of information I thought ought to be brought out by him and evidently he doesn't have it. Do you see any difference between cable TV as a public service and a radio station? Dallas owns WRR. Now there are many cities who own radio and television stations over the country, but this is the only one I happen to know about in Texas. I thought maybe it might, change your opinion. H.P. HODGE: I didn't know that. I think they would be very similar, of course. Of course, one difference is that Dallas operates under a different charter than the charter we operate under. Now, if the charter of the City of Wichita Falls gave us authority to operate a CATV system, then I think my opinion might very well be different. Of course, we don't know what authority the city charter gives that city. MR. WHAN: Do you know when their charter was put into effect, because radio hasn't been around as long as Dallas and evidently, its been in the charter LARRY LAMBERT: Mr. Whan, let me say something here. It may be that Dallas is doing what Mr. Hodge said that this Council did once in a while, take a chance. GERALD FOX: This particular question was asked our bond counsel because, of course, we knew that Dallas owned WRR and has owned WRR for many, many years. Whether the ownership of that station preceded their charter, I would remind Mr. Whan that city charters are not necessarily adopted at the time the city was originally incorporated, but that they are modified and changed and can be modified by a vote of the electorate. I don't personally know whether this is in Dallas' charter or not, but it doesn't necessarily follow that be- cause it has been there a long time, that their charter is the same charter that was adopted when they were originally incorporated. Our bond counsel indicated that he had no knowledge of how this station was originally financed but that apparently the revenues from the station are at this time paying for the operation of the station, and that is the only additional information we have. MARY M. TAXIN: My name is Mary M. Taxin, 56 Beaumont. I was just wondering, isn't the education system the City's responsibility? GERALD FOX: Not in Texas. It is the independent school system's responsi- bility or the institutions of higher education. It is not a city government Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 25 responsibility as such. J.C. JENNINGS, JR.: Mr. Fox, am I correct in hearing that of the cities you requested information from regarding cable TV the largest city was 56,000 population. GERALD FOX: That is correct. J.C. JENNINGS, JR.: Of those reporting, the average size was 6,000? GERALD FOX: . Of those we have information on, some 12 cities, one is 56,000, two are in the 30,000's; one in the 20,000's and the rest below 10,000. J.C. JENNINGS, JR. : I question the validity of the cities that are not the size of Wichita Falls. Would it not be more advantageous to this discussion to try to find cities in our population range? GERALD FOX: Mr. Jennings, to the best of our ability, we have tried to find out, first the cities that do own cable TV and those are the 12 cities that I just mentioned to you, and there are none in our population range. DALE COOPER: I am Dale Cooper. I live at 4109 Northwest Freeway. Mr. Fox, as you well know, you are quite a historian in financial circles. Operations of this nature have been known to fall flat on their face. I did say face. For example, have you, sir, or any member of your staff gone into the past profit and loss statements on the operations, of municipal operations of comparable ventures of this nature? Secondly, have you gone into projected maintenance of equipment? For example, first year vs. fifth year maintenance and replacement. A third point, sir, is have you gone into the profit, the ratio of profit to investment? Now my fourth point how much is it going to cost the taxpayer? That word taxes is getting me real jumpy. With your per- mission, Mr. Mayor, I will return to my seat, but would you be kind enough to comment on those factors, sir. I would appreciate it. GERALD FOX: Mr. Cooper, I can answer your comments in one sentence. We have done no financial analysis on a city owned system because of the fact we feel that at this time it is not legal for the city to own, operate or maintain a CATV system. MAYOR HILL: Is there anyone else that has a question they would like to ask Mr. Fox or Mr . Hodge? If not, we will go on to the third phase of our hear- ing that will give each one an opportunity to comment, to make any statements that you like. Let me ask you to do this. There is really no point in re- peating time after time after time the same statement. If you find out that someone has pre-empted your talk or your speech, will you kindly pass by. If someone has said for you what you were intending to say, we would appreciate it if you would just pass by because actually there is no point in saying the same thing two or three or four times. Now, we have 21 people here on this list that have asked to address the council or have indicated that they would like to. I will ask that each of you be as brief in this as you can. Be just i Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 26 as direct and to the point as you can and I' ll again come back and tell you the same thing I told you at the beginning of this meeting, that this Council is interested in doing what is the best thing for the City of Wichita Falls. We want to re-affirm this to you. At this time I am going to recognize Mr. Warren Silver. WARREN SILVER: I am Warren Silver, General Manager of KFDX TV 3 in Wichita Falls. The Clay Broadcasting Corporation of Texas assumed control of KFDX TV, Channel 3, on April 1, 1971. On that day many of you were sent a letter signed by Mr. Lyle Clay, President of our Corporation, telling you of our opposition to Cable TV in Wichita Falls, and we asked for the opportunity to express our views on the subject. We thank you for this opportunity. You did not hear from TV 3 back in the fall of 1970 or January of 1971 when you were discussing cable TV because two of the principal owners of our facility at that time are applicants for the cable TV franchise. KFDX TV 3 is opposed to cable TV for three main reasons: (1) cable TV means pay TV; (2) there is no restriction on cable television as there is on free TV; (3) confusion reins on all levels. In the first place, the visual goal of cable TV enthusiasts is pay TV and don't forget it. Although Checchi and Company recommends no pay TV in your franchise, there is no way to keep the franchisee and city councils of the future from making amendments clearing the way for pay TV. To further the point, every applicant probably will want you to re- move that phrase from the franchise. This should be your clue that pay TV is the ultimate goal. In the second place, there is no restriction on cable TV as there is on free TV. The code of ethics used by licensed broadcasters and networks and demanded by the FCC pose regulations on what can or cannot be shown on TV facilities. At the present time no one can or will restrict what can be shown on cable TV. My third point of opposition is confusion. Confusion reins on all levels where cable TV is concerned. FCC Chairman Dean Birch, speaking last week to the United States Senate Committee on Communications, said and I quote, "This is an interim report offering a series of possible decisions." And he added, "subject to refinement." He concluded his remarks with, "Clearly there must be a partnership here with the Federal Government specifying national policies, and where appropriate, laying down guidelines to be applied by the local entity be it a state or municipal agency." The FCC has not made up its mind on guidelines. I am familiar with their changing, but there are two areas of specific importance that this council had better get interpretation on. One is the importation of distant signals and two, is the deletion of commercials. Congress has not made up its mind on guidelines. The State of New York, last week, passed a law imposing an immediate one-year freeze on awarding cable TV franchises anywhere in the State. The City of Denver, Colorado, is waiting for clear guidelines to be sure. KFDX TV commends the City Council in proceeding as you have. You have spent some money seeking knowledge and advice on a sub- ject you knew very little about. It is money well spent. You now can hold onto that information to be used sometime in the future. We recommend an indefinite postponement, awaiting specific guidelines from the FCC and the Federal Government. Gentlemen, KFDX TV is a business in this City that em- ploys more than 40 taxpaying citizens. Because of the three reasons I have mentioned, and many others with which you are familiar, we see cable TV as Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 27 a very threat to our existence. Just like the oil man who gets upset when the oil depletion allowance gets tampered with, we at TV 3 are vitally con- cerned with cable TV. From the viewer's standpoint as well as our own, we urge serious consideration by each of you on the issues I have submitted in making your decision about cable TV in our City. Thank you very much. KEITH NELSON: Mr. Mayor, Councilmen, Mr. Hodge, I wanted to address myself to a couple of items only. First, I feel that the majority of the citizens in Wichita Falls do now want cable television. That they want it amongst other things for the educational television facility which would be coming to us from Dallas. Now, I do not know whether or not that is considered the importation of a foreign signal which would be prevented in the event they came out with a limitation of one. Maybe Mr. Hodge can tell me. This is one of the crying needs that we have here. Secondly, by installing cable TV and facilitating the transmission of it, we would probably set up our own educational television within the city school system as well as the Midwestern educational facility. Quite a bit of which they already have. These two items are general. The principal item that's not general is the recommendation of the Council, to the Council from the Checchi Report which was discussed this evening, on a limitation to 25 percent local ownership. While I per- sonally am not involved in the financing of these things at the present time, I do know that this does put a kink in your financing not only as far as the parties who would be financing it but also as to stronger corporations who might be interested in applying who have the financial stability and ability to run a cable TV in this City. FRANK ALLEN: Mr. Mayor, members of the Council, my name is Frank Allen and I represent the Teleprompter Corporation, one of the applicants for the franchise here in Wichita Falls. I will start off first of all by making a few comments, if I may, which I did not feel that I had the opportunity to do regarding Mr. Boseman's report, not his report tonight but the original report as was sent to me. Very briefly, number one, the bond as indicated in Section 6(d) which calls for a $10,000 bond. We think this is completely unsatisfactory for the protection of the City. I'm not trying to wave a flag or anything like that, but a system costing upwards of $2 million, which is what this system will cost, should have at least a $50-$100,000 bond, and we certainly would not hesitate to supply this size bond to the City. I think this is for your protection. The second problem we have is as Mr. Nelson has just indicated in that we need at least an 80% ownership in this system in order to consolidate for tax purposes. There are very heavy losses in a CATV system in the early years of operation. We must be in a position to take advantage of these losses. The other section which we have a problem with, I'm not sure whether any of the other applicants have, Section 16(a) which states that we will not indulge in the sale or service of television re- ceivers nor will we permit any of our stockholders to do this. Now we are a public company listed on the American Exchange and we have no control over who goes down and buys some stock in our company. We certainly have no interest in selling or servicing television receivers, but we cannot comply with the restriction on the ownership of stock. Any of your local service managers could own stock in our company. Other than that I think the Checchi Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 28 and Company did a very good job on your report and ordinance. The other comment which I will make briefly is directed to the second part of the report pertaining to the city ownership of a CATV system. Again, admittedly, we are not printing money as Mr. Boyd has indicated. Our company last year did earn a $1.93 a share. This amounted to roughly a 40 to 1 profit ratio so we are not exactly printing money. If anyone thinks that we are getting rich, again you can buy some of our stock and you' ll get rich too. This brings me to the private enterprise phase of this thing and I do get a little upset when I hear cities start talking about getting into private enterprise and this is what you gentlemen are discussing. I would like to point out to you that I was surprised when I arrived here this afternoon and saw the paper which stated that there are certain organizations and individuals who think that the City Government should own and operate a cable system for the area. I'm not aware of who these organizations are or who the individuals are. They obviously are not private enterprise business people but I would like to express an opinion and my opinion is that our American democracy is based on two principles. Free enterprise and free press. Now this proposal would indicate that you intend to under-cut these two principles. One thing is certain so long as a business is tied in with government it can't be a free enterprise. A communications business tied in with the government is a horrendous double transgression of the free market principle that has given the good life to so many Americans and the residents of Wichita Falls. This proposal would use up the basic American idea that private enterprise is the most judicious efficient way to conduct business. Wichita Falls owes its present prosperity to competitive private enterprises such as your Levi Strauss Company, your Johnson and Johnson Company, Sprague Electric, and many others of which I am not even aware. Not only does this proposal use up the right of the private sector to con- duct business, but also use up an even basic American freedom of a free un- censored communications system. Since colonial days, the glory of our country has been its free press. Now expended to the other media, radio, television and now cable. Wichita Falls would be wide open to nationwide censor with the totalitarian tactic of taking over the free enterprise of going into the communications business. The government agency which has the power to select and edit what the public will see would certainly be suspect to the free enterprise system. I will now pass on to Mr. Silver's comments. First of all, I did not comment on your ordinance which restricts pay TV. The broad- cast industry and the theatre industry has been fighting cable TV ever since they first realized that we had something that the people wanted. One of your applicants here who was in the same position as Mr. Silver is in now, I am sure gave you probably much the same speech back in 1966 or 1967. We certainly have no views, no interests in pay TV at this time and we have no plans for pay TV in the future. We're in the community television business. We hope in the near future to be able to distribute many, many things, not just bring television to people. The other comment that Mr. Silver made was regarding no restrictions. With regard to that I would like to say that if you had awarded us a franchise back five or six years ago, you would now be getting upward of 15, maybe even 20, channels of television. We've been restricted by FCC because they had no idea what impact that we might have on Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 29 the broadcast industry. They still are no sure even though there has been many reports such as the Rand Report which was pretty much negative regard- ing any impact on major market television. He also states that there is confusion. I'm sure that back in 1939, 41, 42, there was a lot of confusion. I first saw a television picture in 1939. I think it was at the World's Fair and since then I've seen a lot of confusion. In fact there is so much confusion on broadcast TV today that I'm not even sure that we're doing a service. I don't know why some of these people even watch some of the things that they do on television. This, I merely point out, that we're an industry that is trying to serve the public. We certainly cannot succeed unless we give them what they want. They will not pay for it, and, if they. don't pay for it, it's obvious that we cannot succeed. I would like to see you proceed with this and we stand -ready, willing and able to build a cable system that could be the finest technically feasible today. Not only will it be built that way, it will be kept that way for the entire period of time that we operate the system. Thank you. MACK LESTER: Thank you, Mr. Mayor. I am glad to learn we still have opinion for a free enterprise system. I know that Teleprompter, which is owned jointly by Howard Hughes and Mr. Cook - I'm sure that they have the interest of the people in Wichita Falls at heart. First of all, before my voice gives way, I gather from the information that the City Manager's office has given to- night that they are putting aside the fact that there may be some values in city ownership. It certainly is hard for me to understand when we surveyed the same market and I received a very favorable reply on city ownership, that Mr. Fox, who didn't get as quite as many responses as I did, was a negative one. I would like to read a statement to you which I think best expresses my feeling. First of all, I would like to go on record once again as not being opposed to cable television for Wichita Falls. I fully under- stand why some of the broadcasters and lots of the merchants are opposed and for this same reason, we should be, is the reason that we are not. I re- sponded to this government body after receiving portions of Checchi reports which the City Manager was kind enough to send to all broadcasters upon my request. There were two areas of prime concern to me. One, the proposed compensation to the City should the council decide to award this valuable franchise to some private interest; and secondly, if the franchise is so valuable to attract giant corporations, multi-million dollar interests should the City of Wichita Falls make an in-depth study regarding the feasibility of city ownership. Based on information supplied in the primary Checchi Report, it was estimated that this public utility could produce several hundred thousand dollars of net revenue to the City each year. This could be used for city improvements or given to United Fund, to YMCA, Boys Club, and other charitable organizations. After this investment has paid for itself, the subscription rate could be reduced about half what a commercial enterprise would charge saving the citizens of Wichita Falls 400 to 500 thousand dollars. This was outlined in one of the reports I got back from the cities owning the cable system. It was interesting to note that none of the respondents would vote for granting of a franchise to a commercial interest if the decision had been made over in their city. Six of the seven would vote for municipal ownership although one of these would ask for a Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 30 non-profit board to operate the system for the city. The seventh would vote for a non-profit ownership and operation. In view of the fact that these were relatively small cities, I sent letters to two large cities that were considering ownership. At the present time the City of Denver is giving serious consideration to city ownership with several of the city councilmen looking very favorable for city ownership. Also Tucson, Arizona, had requested an in-depth study to weigh all the values for city ownership as well as franchise to private enterprise. It is now my understanding that Shreveport, Louisiana, is also considering the city ownership at this time. In checking some of the figures paid or to be paid to individual cities comparable to Wichita Falls, these fees range from a franchise fee of $100,000.00 with 7 to 15% graduated scale of the gross receipts over 20 year period to as little as 2% of gross receipts at Abilene. Well, Abilene only has two services. They only have two TV stations. They need cable or they need some other service. Also, I found that Port Arthur is 7%, Lawton 5%, Galveston 5%, Midland 4%, and you can go on down the line. In closing I would like to say this. Even though the information I have received to date looks very favorable as to city owned operation, it would not be sufficient in my judgment for me to make a decision for city ownership. I feel a more in-depth study should be made, and until such time that the FCC or congress decides the ground rules for cable television, it would appear to me to be unfair and unwise to grant a franchise to a private company or even to consider city ownership at this time. MAURICE MONSON: Mayor Hill and City Councilmen and others present, I'm Maurice Monson, 2412 Merrimac, a downtown businessman and President of the Downtown Merchants Association and I speak and represent them. We, the Down- town Merchants Association stated early in May that at the present time we are opposed to cable television coming in until all information can and is obtained concerning this system. We would ask that the City Council study the pros and cons of cable TV and more especially wait and see how the Federal Communications Commission plans to regulate these cable systems. At the pre- sent time, there is a hearing in Washington concerning cable TV. As of June 15, which was last week, Dean Birch, who is Chairman of the FCC, made this statement at a Senate hearing. This is a quote. "We are determined to de- vise a formula that will not undermine the existing broadcasting system." We think this is important. He goes on to say, "We are aware that we have neither the experience nor the hard data to justify wholesale revamping of the communications market. What we seek therefore are sound and realistic first steps to open up cable TV or to obtain experience thereby and then to proceed in a measured and balanced way." Now we think a better decision could be made after we have had the FCC regulations. We here in Wichita Falls enjoy a sound business economy served by three network stations which contribute greatly to our businesses. At the present time we also have maximum employment. In fact, this morning our unemployment figure was stated to be at 3.1% which is a very fine figure. Let's be sure we have all the facts and know the best route to go and not jeopardise our fortunate situation. We feel that any benefits that would be derived from cable TV might be more Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 31 than offset by the losses we as a city might sustain. Thank you. MRS. KATHY FOSTER: Your honor, councilmen, I'm Mrs. Kathy Foster. I'm a housewife. I've lived here at 517 Parklane Drive for four years, and I'm for cable TV. I've been here once before to address the Council. I started not to come tonight because this cable TV, I have been looking into it from towns all over west Texas, and I was told by so many people, you can' t bug city hall. There's two or three people in this town that have the money and they're going to have the say, so we people just might as well make up our minds to it. But the fighting Irish in me wasn't going to accept that and that 's why I'm up here tonight anyway. I don't know if statements count today. First of all, I would like to say in regard to Mr. Silver's comments about paid TV. Every month I pay for God given water and I am not paying for the water, I'm paying for the given right to go over there and turn on the spigot and get it instead of having to pump it out in the back yard. I feel that about the pay TV. I do not mind, and most people I've talked to do not mind, paying for good solid entertainment for their children in edu- cation as well as programs for themselves and their husbands. Another thing, my home is originally Philadelphia and I have kinfolk in New York, and I got thirty channels like they do I wouldn't want cable TV either. They don't need it. But this information here that I have gathered is talking about cable TV. I haven't heard of anybody that's lost a dime on it. Breckenridge has had cable TV since 1955 and that's a little town and it hasn't hurt one businessman in Breckenridge. Now as far as the business here, most of the cable TV we will get comes from Dallas and most of the housewives like myself, can't you just see us hop in the car and going to Dallas to do our shopping? Cable TV in Abilene buys an ad in the Abilene Reporter News every week. They also bought a TV-type ad in other words at TV Guide, about their cable programs in the newspapers. They wanted commercials and ads on three radio stations, also on local TV stations which is KTXS. This means lots more revenue for Abilene. The cooperation between cable TV and the newspapers, TV men is a tremendous relationship. It is the second largest in Texas and is still growing and it has not hurt the merchants in the seven years it has been there. Ninety- five out of 99 of the merchants are on cable television and most of the business men have two of the cable connections. Not any 5% of the TV personnel are on cable television. If we get cable television here in Wichita Falls it will not only mean job openings, it will mean taxes for the City, the Council and our school and any of this information that I have given here tonight can be obtained from the Abilene Reporter News and any of the radio or TV stations in the City of Abilene, Texas. Thank you. CLARENCE MUEHLBERGER: I'm C.W. Muehlberger, 1644 Hursh, Downtown Merchant. I think most of the important points have been covered tonight and I know that each one of you have given a lot of individual study to cable television. But until some things are said why they do not become common knowledge. And it is kind of a little unusual in the way that sometimes we end up in these positions. At the time this matter was discussed in December, why people following cable television for some time watched it with a good deal of interest and thought surely since there had been a study some four years preceding by the Chamber of Commerce in regard to cable television, surely that that study would have been recognized as some authoritative opposition to cable tele- vision. Of course at that point it caught us off guard and this is why I Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 32 think that we're just kind of like a guy that maybe is on his way to Dallas and gets halfway there and looks at the road map and finds out he may or may not be on exactly the right course. But at this point I think that all of us are really concerned because there are some unknowns that have not been considered. Now it's a little bit trite when a merchant stands before a group and mentions the economy of your town, because you think well his selfish interests or as the young lady that preceded us mentioned about the few that are wealthy. Well, I happen not to be wealthy, I just happen to be interested in the economy in our town and happen to know a little bit about the retail business, and happen to know about the importance of tele- vision for Wichita Falls. Now of the three medias that you have in Wichita Falls that serve you, your newspaper, your radio, and your television, tele- vision is the only media that does serve the entire trade territory. The newspaper stops at the Red River. Radio is competitive from the standpoint that Seymour has a station, Bryan has a station and they have in many cases local radios throughout the area that gives a little more competition. So if we are a trade territory town as we like to think that we are, then surely we need a media to get out into that trade territory. Now because of that, well, I think that most of us are better able to hold retail sales in our town. Now this may not be significant to you who use to think, well this is one of those things that just happens. But you know that our down- town Wichita Falls is in probably better shape than any size town in the United States. And I'll go on record as saying and comparing with you and go on a trip and make it with you and let you compare towns. Now this just doesn't happen. It's a lot of hard work in day to day planning that does it and you need the vehicles in which to be able to cover the ground. One of the vehicles happens to be television. We think it's important and the reason we're concerned is because the first step is not the important step, it's the step five or ten years from now that's going to hurt. When you either hurt the independent television station to the point that he can not be effective then you begin to hurt your town economically. As a recipient of one percent of the gross sales why it can be a factor to you as a city. This year, a million and a half dollars is expected, something like that. Effect this by 10%, it's a $150,000 a year. Yet if you' ll check with most of the merchants downtown you' ll find that it in many stores they'll say 45% in some stores they' ll say 35% of our business comes from outside of Wichita Falls. Now this is important. It isn't a figure that's just pulled out of the sky. It's an actual figure that you can compare with any of your major stores that you want. So television to us is an important media and it needs to be guarded as such. As far as opening up to free enterprise, why don't be misled that it's already a controlled industry. So accept it as such. We do. When you let one more franchise you haven' t made it a free enterprise, you just let one individual have a franchise. It is a free business and lie has a right to speak. But with the other statements, I would like for you to consider, at least the importance and significance to us. Before you make your final decision, at least let's enter all of the facts that need to be aired generally so we accept them as generally accepted knowledge and fact. WILLIAM HOBBS: This will be very short. I know everybody is getting tired. Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 33 In just a minute I' ll pass out a little book that explains the basic CATV controversy, Free TV for all, Pay TV for some. This pretty well outlines most of the things said here tonight. Also I just received the latest FCC proposed rule making dated June 15 and I'll pass these out because I don't think all of have time to read them tonight. The following quote from the Supreme Court of the United States is from the case U.S. vs. Southwestern Cable Company, 1968. "Although CATV may in some circumstances make possible the realization of some of the commission's most important goals, it's importation of distant signals into the service areas of local stations may also destroy or seriously degrade the service offered by a television broad- caster and thus ultimately deprive the public of the various benefits of a system of local broadcasting stations." I'm going to pass these out. If the commission releases these recommendations in the form of rule making, and we get its authorized protection, free television will not be in such great danger in the small market. We hope this City Council will delay granting a franchise until these rules are firm. Since they should be issued in six months. DARROID CANNAN, JR. : Thank you Mayor Hill. Again, I will try to make this as brief as possible. It is getting late, but there are some points that I would like to clarify regarding the FCC rules and regulations at this point. Mr. Boyd, you in particular have raised the question, regarding the uncertainty of the FCC regulations and you have indicated a desire to possibly wait and see what course the final rules will take before granting a franchise here in Wichita Falls. I believe the important thing to keep in mind is that as a result of the most important and significant decision that Mr. Hodge has referred to and the decision of the United States Supreme Court on June 10, 1968, in United States vs. Southwestern Cable, the FCC's jurisdictional authority to regulate and control CATV in all forms was for the first time clearly established. Since that time, through their normal processing, the FCC has been continually revising and improving these CATV rules and regulations. This is a never ending process. Business in recent years have been numerous, there are no such things as final rules. The important thing here is that the FCC has the authority to regulate CATV and has done so and will continue to do so. Keep it in mind always, the answer to both the television broadcaster and the cablecaster and regardless of any change in CATV rules, the system operator will have to abide by these rules no matter what is put in the franchise ordinance. I think that there has been some confusion tonight, at least there has been in my mind, hearing other people refer to exactly where the rules stand at this point. In December of 1968, the FCC issued rules which they are now using as interim pro- cedures. These rules in effect would allow the importation of one independent and one educational station in Wichita Falls and that it is the way it stands today. In 1970, they issued proposed rules in which they considered, as Mr. Boseman brought out, the importation of four signals. This has not been acted on. But again on June 15, when Chairman Birch made his report to the Pastore Committee, he again came up with a proposed rule making for markets the size of Wichita Falls which would allow importation of one independent and one educational. So regardless of where we are going to go unless there is a drastic change in their thinking, this is the way it's going to be. CATV 1 Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 34 systems which go on the air today will import one independent and one edu- cational. I would be derelict if I did not admit that we were hoping for a more lenient interpretation in Chairman Birch's report but this is what he came out with. I think it is significant to note that in 1967 when the question of CATV was considered by the City Council there was no major city in the State of Texas that had operating CATV systems with the exception of Tyler, Texas. Today there are systems in operation or franchises granted in Austin, Beaumont, Port Arthur, Galveston, Waco, Temple, Lubbock, Amarillo, Midland, Odessa, E1 Paso, Texarkana, San Angelo, Corpus Christi, Abilene, Big Spring, Pampa, Plainview and San Antonio and numerous other smaller markets. Only Dallas, Fort Worth, Houston and Wichita Falls are excluded from this list and Dallas, Fort Worth and Houston are in the top 100 markets where the FCC up until now has, for all practical purposes, frozen the de- velopment of CATV. San Antonio is in the top 100 markets. Their city council chose to go ahead and award a franchise. Mention has been made about pay TV. Before July 1, 1970, pay TV was indeed a fear of all involved in free tele- vision broadcasting, but on that date adopted and effective immediately were regulations regarding pay TV. These are basically the same rules that regu- late pay television. In general, these rules are: (1) no feature films should be telecast which has been released in the United States more than two years prior to the date of proposed cablecasting. Otherwise no old movies that television can air can be cablecast for pay. No sporting events can be cablecast for fee that has been on television on a regular basis during the last two years preceding their proposed telecast. I believe this has been now extended to 5 years or proposed to extend to 5 years. No series type programs can be cablecast for fee and no commercial allowed during the cablecasting of the program. The commercial UHF station allocated to Wichita Falls could be made available for pay TV uses. This is not the same regu- lations that apply to our TV. Certainly no action by the Council would pro- hibit them from operating. There are a few other facts that I feel the City Council should be made aware of it they are not already. First, KSWO TV in Lawton owns 100 percent of the CATV system that operates in that city. The owners of KAUZ TV, who also owns KSDA in Amarillo, own 25 percent of the CATV system that is now under construction in Amarillo, as well as 100 per- cent of the CATV system in Plainview, Texas, where they pay a 2% city fee. They also own the franchise to build the system in Corsicana, Texas. I do not know how far along that is. In addition, in December of 1968, they joined with us, the then owners of Channel 3, in a joint venture to form a company called Consolidated Communications Corporation which received its charter on December 16, 1968. This was for the purpose of applying for the CATV fran- chise here in Wichita Falls. It was our determination then, that after the Supreme Court ruling of June 1968 and the FCC proposed rule making of that year with the changes in CATV rules and regulations, that CATV would most certainly be coming to Wichita Falls in the near future as it has to many other cities around the State since many of the earlier questions and con- cerns had been answered and satisfied by these developments and regulations. Later the FCC adopted rules that prohibited cross ownership of TV and CATV in the same market requiring divesting by those already existing within three years, therefore making it impossible for the TV stations to have any owner- ship in a local CATV. One other point, and since Mr. Silver mentioned it, Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 35 so there will be no misunderstanding, I think it is a point to make clear. Mr. Lyle Clay, the purchaser of Channel 3, continued forward with negoti- ations to buy that TV station with full knowledge that the city government had already put in motion the processes necessary to award a CATV franchise here. He was fully advised that if things proceeded as originally dis- cussed, the franchise could very likely be let before the closing of the sale of the TV station. Furthermore, he understood that I would actively participate in seeking this franchise. As a matter of interest this point was specifically covered in the final sales contract in which the non- competing section excluded as competing my active participation in both the seeking of the franchise and the management of the company should our company be the successful applicant. And just as important, there is a CATV system in operation in Bloomington, N.C. where the Clay Broadcasting Company owns another TV station. If it has been so damaging in Bloomington, it hardly seems logical that Mr. Clay would be willing to buy into another market where CATV is likely to exist. WILLIAM SPEARS: Mr. Mayor and City Councilmen, I am Bill Spears and I live at 1631 Christine. My main concern at this point is basically, I guess you would say, deals with the financial welfare of Wichita Falls. I can discuss the financial welfare of the City and I do think that it is certainly rather circular reasoning or logic. First of all, the City should consider the funds that the City might obtain from the franchise gross receipts. It has already been brought out that a 10% change in the sales tax revenues of the City would amount to $150,000, and that, I'm quite sure, is considerably greater than any franchise fee from a CATV franchise. Secondly, I would like to address the lady that spoke a little earlier about the housewife that would not jump in a car and go to Dallas or Fort Worth to do their buying. Wichita Falls is a very peculiar market in my business. We have experience not only in this market but in other markets in retail furniture. Certainly big cash items for which people shop are very competitive. I think the whole crux of the CATV issue in Wichita Falls is our geographic proximity to the Dallas and Fort Worth area. Now I would venture to say, and I think it would be a very liberal or rather not liberal but a very conservative estimate on my part, that at least a third of the clothes worn by people in this room are purchased outside the City of Wichita Falls. I would also say that at least a third of the furniture that you live with in your home and a lot of the other items, either hard or soft goods, are purchased outside the city. Certainly this is true in the middle and upper middle income group. This is basically the crux of the issue that cable TV would primarily be giving an engraved invitation to people to shop in these areas. Now because the thought is brought up, well we' ll block out the commercials, still even with CATV there is a tremendous watering down of the existing television audience because they add probably twice as many stations or channels rather to watch and this would certainly affect the competitive viability by our local merchants being able to be competitive. Another thing that I would like to mention is that certainly in a city of the size of Wichita Falls, we have just gone through a census in which we had a decrease in our population and I think Mr. Fox would agree that the sales tax is certainly the greatest Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 36 potential growth that we have in city revenue. In my own business I don't have to pull a figure out of the air, I happen to know in 1970 that 38% of the business our business was done outside the City of Wichita Falls. Now these are the people who live outside the city that are contributing to the revenues of our Ckty. Another point I would like to make and parti- cularly address this to the Mayor, in regard to some of the comments he made after the last meeting of this nature in regards to the protective role which the city council might take as far as adopting any kind of resolution. I would remind the Mayor that our federal statutes, the Sherman Act, the Clayton Act, the Federal Communication Commission Act, and I could name off a dozen more on the state level, are full of protecting preventive type statutes. I don't think that the statement that we hear is really fair in this particular incident because we are not preventing another type of situation. I believe the statement was used that this would be like pro- tecting the movie houses and radio stations when TV came in. Finally, I' ll come up with this that I think that as far as city ownership, I think that this has basically been a compromise most people have grabbed in an effort to lessen the effect of CATV on Wichita Falls financially. I would remind the city council, and I think that Mr. Fox would agree with this and I think any accountant worth his weight or any good to a city manager would agree, that a city can only provide those services that are inelastic in demand. Now I mean by that, those products or those services for which the price does not effect the demand, things like police protection, fire protection, water, sewer, trash collection, things of that nature. I think that this would be a very dangerous course for the city to take as far as entering into an area that is undoubtedly, if we are going to have it, best served by a private enterprise. DR. CLIFFORD BURROSS: Thank you Mr. Mayor and Councilmen. Basically, I had intended when I came here tonight to discuss some of the provisions that the Checchi Report proposed. I think Mr. Boseman did a beautiful job in his analysis of those as well as the report being a very excellent report itself. However, I believe that discussion of those particular items should be delayed or at this time discarded since it seems to be that the question basically before us again, as it has been in the past, is shall Wichita Falls have cable television. Therefore, I would like to make some comments basically referenced to those that have been made here tonight. You know there is one thing, I would like to make an observation from sitting at the back of the room. One of the things that has been pointed out about cable television is that possibly it does give the citizens some protection against the networks. It does give him an alternative that might give him a voice. You know along with the free- dom of press goes responsibility, and I don't want to be emotional about this because we hear so much about it, but I did make the observation that the elaborate preparations that are made by the news media for this meeting, especially Channel 3, were used basically to cover the report of its own Executive Vice President and also one man who was who was speaking in opposition to cable television. Now I think the freedom of the press carries with it the responsibility of reporting to the people also those who might have something Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 37 else to say. Another remark that I would like to make is the discussion of free TV. You know in my life and I think in the life of most of you here, you've found that there is very little that's free. Free TV is no different. You are now paying for every television program we see on tele- vision. We pay for it in the products which we purchase and which are ad- vertised on that media. These media don't give anything benevolent to their advertisers or viewers, they do it because it's a profit. I have no opposition to them because they are doing this for a profit but let's put it where it justly belongs. There is no such thing as free TV. Now along with that I would like to comment a moment on the gross receipt tax. The city council has the power to give a franchise and set the fee or gross receipt tax. But let us remember who is going to pay that gross receipt tax. It's the same taxpayer that you are hoping to protect by your action. He pays it because whoever gets the franchise also must pay for his cost of operation, among which would be the gross receipt tax. So it's another method of taxation. Along with that the question has come up if there is going to be profit made why doesn't the city own and make the profit. You know the city has the power of taxation and does. As the figures that were in this report project on what the 2% gross receipt tax would bring toward that which ad valorem tax would bring, would be equivalent to a 13.6 cent tax rate in this city. If you went to the 3%, which the City Manager back in the May 17 meeting did project as an alternate, that would be 19.6 cents of tax rate. Now those figures are based upon the reports plus what I say is a $25,000 receipt for 1-cent tax rate. I don't think it would be too far from being right. I would like to say something here that has been brought out before in different media. One of the things that we have, and we are proud of it, in Wichita Falls and that's our relationship to Sheppard Field. Our relationship with Midwestern University. Let us not forget that all of these people have various tours of duty or various contracts and do live in our city for the most part for specified periods of time. Hopefully, longer if they like our city and hopefully some of them choosing to reside in our city fo-r-ever. These people are keenly aware from moving across the country of those advantages that educational television have brought them and their families, particularly their children. Let us not be the city that denies this educational advantage to our city and in light of the fact one of the speakers mentioned something like let's look down 5 to 10 years from now. Let's don't look down 5 to 10 years by our children having been denied the benefits of educational television that long. Yes, I am one of the applicants and one of the groups that is applying for a franchise here. Only within recent months has that been true. Prior to that I sat where you do and at the time was an advocate of cable television. Not that I have any interest but as one that I thought the city should have. Whether my group that I am with would be successful should the city of Wichita Falls grant a cable television franchise is not the prime importance to me. I think that the 'City of Wichita Falls needs cable television because of the edu- cational advantages it can give the citizens and particularly its young people . This is what I am pleading for. Now one of the remarks that was made by one of the speakers said that he was quite sure that all of the applicants had made application to remove that portion of the report or the ordinance con- Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 38 cerning pay TV. First, the group that I am with and I think that those with whom I have had conversation from other groups as to general discussion of cable television, we certainly have not even noted or in fact noticed that particular provision because it does not interest us one way or the other. That provision can be kept with the contract or with the ordinance. A re- mark was made well what difference does it make if you leave it in there, future councils are not bound. No they are not bound and thank goodness they are not. When I sat in that council seat I didn't think that maybe the other councils could do as good a job as I am. I'm becoming very well educated to find out they do a better job probably than the ones that I sat upon. I have confidence in the people and the electorate of this city that knows who they put up in these positions as council representatives that they will guard the interest of our citizens in this matter to the best of their ability. You cannot ask more than that from any man. Now the other remark. There has been some remarks that you cannot regulate those things that would be put on the air. I personally think that the group that I am associated with and those of other groups who I am familiar with have the same high calibre individuals with the same moral standards that I hope we have and I am sure that we have in our present commercial television enter- prise and I think ultimately you are bound by that. You are bound by the people with whom you are dealing with. You are left with the integrity of the individual with whom you are dealing and I think possibly that is an ultimate answer to these things. I do think the same integrity ,that we have enjoyed in the past with commercial television would carry on with cable operations. Your non-exclusive contract or non-exclusive franchise gives you protection if its not there. Also I noted that, and I hate to get into personalities, but I would like to say that Mr. Spears used as an example outside advertising as being bad. I've traded with his store for years and one of the prime tricks that they have shown me is using the Dallas newspapers and show me what the price of the furniture that they had compared to Weirs furniture store in Dallas; how much lower they are than locally. Needless to say, my house is basically furnished with furniture from Spears. Now the other continent that I would like to make here is this. I will accept the premise of city ownership; I will accept this at the same time as the commercial TV enterprise and the radio stations are willing to turn over their business to the city. I think it has a very definite position. Now I don't think you want those turned over to the city. I don't think it's a proper function of cities. And yet I know cities are getting into businesses which previously were not considered proper functions. The one point that was made by a previous speaker about separation of government from its news media, I certainly think is a chilling though that we should keep and remind ourselves that we must always have that type of separation. JAY O'NEAL: Mr. Mayor and members of the Council, I am Jay O'Neal, Vice Presi- dent of a company which is based in Austin, Texas, and we are an applicant here in Wichita Falls with Mr. Elmer Parish. I have appeared back in a pre- vious hearing, made some notes of some questions that were asked and I didn't feel either in that meeting or since then have been answered. One, I think Mr. Lambert, you asked about the deletion of commercials. Could you in your a Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 39 ordinance call for that. The regulations since the FCC has taken juris- diction over cable that we cannot delete anything. We show only what we receive. So here, regardless of how you got your distant signal either by common carrier microwave or your own microwave, you can only show it as you receive it. When the FCC changes their rules then you can change the rules here. The gross receipts limit has been talked about considerably and Mr. Hodge, I think there has been very recent tests as to the validity of gross receipts tax in the State of Ohio. The court ruled them illegal. There is various ideas on 2-way which is used for, and I think before you gentlemen decide what you are going to do about a franchise award, there will be a great deal of knowledge about that particular subject. The con- verter that was mentioned, I think in New York City they had to use con- verters. They sell there for about $35.00 each. The number of channels in the system, I think you asked the question whether or not the number of channels would have any effect on how valuable the system was to a financial enterprise. Well it has a definite effect. If you are allowed now by the present rules to have three, one and one that would give you certain things to sell. If you could have three local stations and three independents from either here or elsewhere, it's a lot better investment. You're going to do better quicker and if you do have the three and one that is proposed now, that means that you as a cable operator are going to have to get out and do some real hard work to get other programs on that system by local origination, local sporting events, city councils, whatever that interest the people enought to come in and pay you $5.75 a month. It looks as though, according to the present rules, that it will probably be three local stations - one independent and one educational. That may be tested in court. The next point I have is on the non-exclusive situation. There are cities where there are two cable systems in operation. The City of Austin happened to be one of them. Now there is only one system. Normally what happens is one system buys the other one out. From a practical stand- point it doesn' t work to have two cables running behind your house so that the home owner has a choice of one cable system or another. They are both regulated as to what we can carry on those systems so it's not a question of my company being able to give you a whole lot more television than the other guy. He can do as much as I can and normally what happens is that I cut a customer off my system because he is late with his account, he goes over to the other system and is with him awhile, then he's back and forth. Independent programming - you were questioning as to what that amounted to. In Dallas there are two independent stations presently on the air - Channel 11 and Channel 39 - they are beamed on now what is called West Texas Micro- wave System with systems in Abilene, Midland, Odessa, Lubbock, Amarillo and many, many more. They program basically movies, syndicated shows that are no longer being shown on broadcast television, Nashville, Tennesee shows - I know on Friday night they have movies all night for people who like to watch movies until 2 o'clock in the morning. It's programming that is not being carried on network television. And with the FCC rules you would not be allowed to bring in to Wichita Falls any signal that would duplicate the same day the programming you have in this market. You would not be allowed to show Bonanza on the cable system when the local broadcaster was showing Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 40 it. The local origination rules - members of the National Cable Television Association, just as members of National Association of Broadcasters, sub- scribe to the Code of Ethics in local origination and that requires that you have identification of your system; that you do not get involved in pornographic movies or any other thing; that we subscribe to equal time for either parties to present their case. In local origination there are two ways of doing it - one is that the system do it and the other way is whereby any citizen of Wichita Falls or any outside group that are willing to meet the criteria could come in to the studio to lease a channel. The cable company in this instance will be no more than a common carrier. He would establish and publish a rate of $100 an hour, $SO an hour, $10 an hour, whatever he wants, furnish a studio with equipment for those to come and present their viewpoints. And that would probably be a part of the new rules. As a matter of fact, in the comments Chairman Birch made the other day, he suggested that for every broadcast channel you receive, you would also make available channels for local origination. So if you were carrying seven broadcast signals you would have to provide seven channels for local origination. A copyright agreement was arrived at last week between National Cable Association and the copyright owners. The broadcast magazine, a media of television stations, reported basically the large broadcasters were happy with it, the small market broadcasters were not. But there has been an agree- ment reached that goes back to both parties for ratifications by their various associations. A translator was mentioned, I think by Mr. Hodge, as to what a translator was. It is a system of receiving signals from another location and rebroadcasting it. Such that signals from Dallas, let's say Channel 11, could be picked up in Henrietta or Nocona and rebroadcast so that it could be received in the City of Wichita Falls. There are numerous translators around the country and in Texas and New Mexico that are either operated as non-profit routes where citizens form a non-profit translator group and operate them or they are operated by some broadcast station to extend their coverage area. But they are rebroadcast facilities. I have been an operator of cable television systems in Texas for five years and past President of the Texas Association of Cable TV people, and I would be happy to answer any questions that anybody has that weren't answered today. I have operated in Texas, and I know the situation in Texas with regard to cable TV. J.C. BOYD: Mr. O'Neal, if you would be kind enough, I am still getting awfully confused about this 2-way deal. I guess that's on the positive side of the thing. Is there anybody doing it in Texas? Could we get more information? Do you think it's valuable for a city to have it? JAY O'NEAL: I think it's valuable to have the capabilities. We are building a system right now in the City of Burnett, Texas, a small community of about 9,000. That system is being installed with a cable amplifier. It has the capability at a later date of installing additional modules for 2-way audio communications which would mean that you send television signals out to the home that the home could respond to various holdings or other items from meter reading and various things such as that, and we proposed to do that at a later date. Today, it would not be economical to do it. Now there is a v Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 41 system in California. MAYOR HILL: Is that in your contract with them or in your franchise that you will do that? Your just saying that is what you can do? j MR. JAY O'NEAL: Yes sir. At this time it is not economically feasible. There are several experimental systems around the country. Cascade has 2-way equipment; there is a system in Vancouver, Canada, I think about 675 miles, they have 150,000 subscribers and it is a 2-way system. So there is information available, yes sir. It's a matter of whether or not the need is there for it, but I think you ought to engineer your system so that you can do it at a later date when the need arises. DR. FOREST WHAN: Thank you Mayor Hill. I know why you left me till last. My name, of course, is Whan. I am with KWFT; on the board of directors, and we don't know whether we are for cable television or not. For the simple reason that we don't know what the rules are going to be. This has been passed off lightly by your consultant, and he said, oh, well the FCC is al- ways changing stuff so this is nothing new and you won't get anywhere. I worked as a consultant of the FCC twice for extended periods of time and I know their operation. This is not a normal situation. They do have interim rules now and they have announced that in August they are going to set up rules that ultimately may be changed when they are finaled, but this is not the normal confusion that these people have been talking about. The material I have, and I' ll read it so it won't take as long, is actually new to any- thing that has been said tonight, with one exception. One man, and I don't know who he was, made the statement that he was sure that the majority of the people of Wichita Falls favored this council granting a franchise for cable TV. On April 22, 1971, 12 different surveys were made in Wichita Falls under FCC regulations. Each of the six radio station owners, Channel 3 was exempted because they had done the same thing last summer when the station was purchased, each of the six other station owners then was required in its application for license renewal to make two separate surveys to determine the problems and important issues and the areas of conflict in the City of Wichita Falls. One survey in each case from each station was the question for community leaders. The second survey by each station was to be a random sampling of the general public. Both groups were to be asked by each station to name all the important problems facing the City, his neighborhood or his ethnic group. Broadcasters were urged to continue questioning until all such problems were named and were warned by the FCC that all reported problems must be listed in the exhibit and attached to the application. I have studied these 12 reports. I found that a total of 180 interviews were held with "community leaders in Wichita Falls" and 343 interviews were held with randomly selected members of the general public, including representative samples of different age groups, ethnic groups and other groupings. Out of those 180 interviews with "community leaders", which included those with our Mayor, City Manager, five or six city councilmen, a total of 120 different "problems" were named by one or more of those questioned. Of interest to this city council might be the fact that, of all these people questioned, only one Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 42 mentioned cable television or any aspect of broadcast TV reception as a problem in Wichita Falls. Now that one person was a member of this city council. In 11 of the 12 surveys, cable television or any aspect of broad- casting television was not named at all and in the one in which it was named, and it happened to be for our particular station, it was number 56 down the line in problems named. It would seem from these studies that neither the community leaders nor the general public are aware of a great and urgent need for cable television in Wichita Falls at this time. In the light of these studies, I ask that someone kindly explain to me the urgency on the part of the city council to grant a franchise for CATV just before the regulations are finalized so you know what you are doing. I have copies of this with all of the questions listed, and I will leave them with the Mayor so that he can pass them around. JACK BRITTON: I am Jack Britton from KAUZ TV, 1233 Glendora, and I appear before you tonight not as a representative of KAUZ but as a citizen. Some of my remarks have already been touched on but there is some I would like to bring to your attention. I studied this question because I have been in this business for 25 years and have studied the question of cable tele- vision for quite some time. To me, I speak now personally again, I must reiterate this, I do not speak for the station. The question on Sesame Street or 2-way communications or educational TV or any political channels or channels from Sheppard Air Force Base, most of the TV people, media people know this, it gets down to one hard long range fact. And that is pay TV. Not pay TV as the young lady who was here a few moments ago talked about it; not for $5.95 a month. I'm talking about when they're telling you to put four quarters inside of a TV box and see the world series. The Teleprompter Representative mentioned that his organization was not interested in pay TV yet Mr. Jack Kent Cook's organization promoted the Clay-Fraizer fight in which a $5 million dollar guarantee was given to the fighters and, I believe, I may be in error by a couple of million dolars, but $27 million dollars was brought in as a gross. All right sir, I will go on, it doesn't have anything to do with cable TV. The next two emphasis I want to give you I do not have at my fingertips all of the information, but I'm sure I can get it. As I understand it from periodicals up to two years ago the New York Rangers and New York Knickerbockers basketball and hockey teams were seen on three TV stations by 14 million people in New York City. I believe on Long Island there are two CATV systems with about 30,000 subscribers each and they are constantly buying something new to show their audiences. If memory serves me correctly, these CATV's went to the Knickerbockers and the Rangers and they bought the right to those games to put on a CATV system. Again, I believe I'm right when I say that free TV as we know it will become pay TV as with the Rangers or the Nicks or the college games that have been shown to 30,000 homes rather than 14 million people. The ex-president of NBC went to California, set up his equipment, negotiated with the Los Angeles Rams and Los Angeles Dodgers, San Francisco Giants and San Francisco 49'ers and the people of California who were oblivious to pay TV and not $5.95 a month, suddenly woke up one day to the fact that they were almost in the process of paying for what they had been seeing free, namely the Rams, 1 Cable TV Discussion - Special City Council Meeting June 22, 1971 - Page 43 the Dodgers, the Giants and the 49'ers. They had a special referendum in the State of California; the vote was against it; he took down his equip- ment, I think he went bankrupt, I'm not sure on that point, but the Supreme Court, in all fairness, I must say, later overturned this mandate of the people. I have only one other incident to give you to show you what really gets down the road. Two or three years ago, the world series was seven games, gentlemen. I think NBC paid a million dollars for the right to the world series and for the rights to the All Star game. NBC rightfully sold most of the advertising on the basis that they would cover 56 million tele- vision homes per game. 350 million people's sets turned on to the series. If these cable people see this potential they could very easily get together with present equipment, which I have been given to understand by engineers is available, and they could go to the world series people, the baseball people and say how much is NBC going to give you? How much do they want? A million dollars, we will give $50 million. Because with the equipment they have available, they can put in the side of the television box to un- scramble the picture and sound on your system. This is a cable system. You put four quarters in, your picture unscrambles, your sound is unscrambled and you watch the ballgame. I believe my facts are correct, and I know that the proponents of CATV at the moment say that pay TV is not what they are after. Don't let them kid you, Mayor, because that's the pot of gold at the end of .the rainbow and if I was on the other end of the stick, boy would I be fighting for a CATV system. Project it on just a little bit further. I spoke of sports, while I have to take the Gunsmoke or Bonanza or Mod Squad or Sesame Street, so when you get right down to it Gentlemen, I think you've got a great burden on your shoulders to learn all that you can about the up- coming things of CATV. You might talk about the educational aspects, talk about Sesame. Street, but when you get right down to it, everybody's in it for the hard buck. MAYOR HILL: This concludes the number of people that we have listed here that wanted to address the council. Do we have anyone else? We' ll just extend this little party. Ladies and Gentlemen, I appreciate your being here, appreciate your patience, appreciate your participation. Frankly, I don't know what the council wants to do with this tonight. The Mayor would entertain a motion of some sort. BILL DRAKE: I make a motion we adjourn. MAYOR HILL: I have a motion to adjourn, do I have a second. LARRY LAMBERT: Second the motion. MAYOR HILL: All in favor of this motion, say I - Motion carried. We are adjourned.