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HomeMy WebLinkAbout2005-10-27 AFN Options Committee Minutes10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon Learn about the City's plan to construct and move the water treatment plant -Clean drinking water is an essential right Agendas and Minutes City of Ashland V AFN Options Committee (vieWAll) AFN Options Committee Agenda Thursday, October 27, 2005 Minutes View Agenda AFN Options Committee Meetin, October 27, 2005, 7:30am Siskiyou room, CDES Building, 51 Winburn Way CALL TO ORDER Michael Donovan called the AFN Options Committee meeting to order at 7:33 am on October 271 2005 in the Siskiyou Room of the CDES Building, 51 Winburn Way Ashland, Oregon. ROLL CALL Committee members Barth, Collins, Donovan, Mace, Mackin, and Shultz were present. Councilor Russ Silbiger was present. STAFF PRESENT: GINO GRIMALDI, CITY ADMINISTRATOR LEE TUNEBERG, ADMINISTRATIVE SERVICES AND FINANCE DIRECTOR RICHARD HOLBO, TELECOMMUNICATIONS ENGINEER C I N DY HANKS, PROJECT MANAGER https://old.ashland.or.us/Agendas.asp?AMID=2396&Display=Minutes 1/8 10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon BRYN MORRISON, ADMINISTRATIVE ASSISTANT REVIEW COMMITTEE MINUTES Approval of minutes dated October 24, 2005 Rick Barth, Committee member amended page 2 paragraph 2, that they had not yet identified success comps. On page 2, paragraph 3, amended to none of the options are risk free. Mr. Barth would like the record to include: The straight forward technology projection for television indicates that it will change from a fixed menu fixed schedule technology (think channel 5 at7 o'clock) to a technology where you can watch whatever you want, whenever you want, however you want (think visiting Yahoo, selecting a movie, and playing it on a computer or HDTV). This television delivery shift, particularly combined with the advent of HDTV, will drive the need for local distribution bandwidth beyond the reach of satellite and terrestrial RF distribution technology. This will leave only hard wired local distribution technologies with their natural monopoly characteristics. There is no guarantee that the straight forward projection will actually occur. It is theoretically possible for the requisite bandwidth to be delivered via some type of terrestrial RF distribution technology. However, there is no indication that the federal government will allocate the necessary spectrum. No products to support such a distribution method have been observed being discussed in the press. Should such RF distribution technology became available there is no guarantee that sufficient spectrum will be allocated at reasonable prices such that a truly competitive marketplace will be formed. If the straight forward projection does occur then the value of the AFN network will rise dramatically. No competitor has a distribution network in place that can immediately deliver as much bandwidth as AFN. AFN can also be incrementally improved to deliver significantly greater bandwidth at far lower cost than any other competitor. It would be truly unfortunate if Ashland citizens were to eliminate their current high quality service as well as their defense against future monopolistic behavior because they are too impatient to see an immediate return on their investment, whether willing or not. If one does not accept the straight forward projection, but instead believes that somehow the needed services will be delivered in a truly competitive environment, then it seems clear that AFN should be sold. Mackin/Collins ms approval as amended. All Ayes. https://old.ashland.or.us/Agendas.asp?AMID=2396&Display=Minutes 2/8 10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon COMMITTEE WORK SESSION Kevin Shultz and Paul Collins presented a draft report of what the Committee will submit to Council. Mr. Collins proposed to remove the sentence at the top of page four that begins "Moreover, although we were intrigued..." and add the sentence on the next paragraph that begins with "Another option which emerge.." that is underlined. Mr. Barth clarified previous documents presented. The term of the $15.5 million bond is 20 years, not 15 and the hospital board is not a self perpetuating board. It is presumed, in the spin off option that the principal will be paid over some undefined time period and would set up an entity for failure if the City does not establish a time period. He encouraged the Committee to discuss this. He asked that the spreadsheet from October 24, 2005 at the end of the packet be stricken from the record. Kevin Shultz, Committee member mentioned that the numbers that were put together for the spin off and maintain and enhance documents could be added as addendums to this report. His approach to the report was to remove the options that were not viable: immediate shut down, common carrier, and status quo. The financial aspects of the common carrier were too unknown and therefore an assessment could not be done. He did include the maintain and enhance option even though the Committee had decided that it was not an option that they would recommend, but they needed to state why that was not a viable option. He included that common carrier in the spin off option would be up to the new director to evaluate. They were strong on recommendations on what not to do, and will leave up to the Council to pursue sale option or spin off. The Committee questioned if the reference to keep and enhance as not a viable option in the report, was adequate for Council. Gino Grimaldi, City Administrator suggested discussing continuing the subsidy and benefits to the community in maintain and enhance section and that there may be a way to reduce subsidy. A discussion about the financial benefits of the City becoming its own ISP should also be included. The potential for going out of city limits should be discussed in maintain and enhance. Councilor Russ Silbiger stated that Council approved AFN to be sold outside the City limits. Mr. Grimaldi responded that staff would need to explore that possibility. Paul Mace, Committee member added that they can list all kinds of opportunities but can they do something in current conditions that is economically viable. Mr. Collins spoke to the layout of the report. At a previous meeting, the Committee decided to put the common carrier option as something they could look at later, but he thought it should continue to exist as a separate possible option. Mr. Collins proposed to the Committee to https://old.ashland.or.us/Agendas.asp?AMID=2396&Display=Minutes 3/8 10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon retain common carrier as an option to consider along with the spin off option. It is helpful to keep in the report to take to Council but it needs further investigation. He proposed to change the report to show that common carrier needs further study. The Committee discussed with staff if further research of figures would be necessary. Lee Tuneberg, Administrative Services and Finance Director responded that they may be able to show indicators, but they don't have any hard numbers that could be put in and projections done on. The question is what revenues could be generated. They could look at operating expenses as they know it. They would have to qualify figures on assumptions. The Committee discussed that it was unsure if they wanted the common carrier option of the spin off to be run by the City. They discussed that they did not want to continue to broaden the options and needed to focus on the two stated options to make a clear and obvious course of action. Public interest would not be best served by continued debate over the options. Mr. Mace added that he believed this could result in negative cash flow and the City would still need to hire someone to manage. The spin off option is a transition plan that can remain cash flow positive. He doesn't think that they can come up with believable numbers without comparisons. Mr. Mackin agreed that this doesn't warrant equal standing to the sale and spin off options. It should be mentioned conceptually as an option for keep and enhance as a positive. Mr. Shultz added that there is the point under the spin off option that the CEO and board could include common carrier and they could include that under maintain and enhance. Councilor Silbiger added that they need to include some sort of financial analysis to go with it. The expenses would still exist, and provides significant negative cash flow. Mr. Barth added that the common carrier is a sub option of keep and enhance and spin off. He stated that the Committee had not address how it would get managed and what the City would do about the debt. The Committee decided to not continue with common carrier as separate option, it will keep it as a hybrid under maintain and enhance and spin off options. The Committee decided that continuing to investigate financial figures should not hold up the report. They can continue to look at it after the report is done. The Committee spoke to the article on Charter seeking buyers for cable assets. The Committee discussed that the City underestimates the number of customers AFN has. The City has 3,785 customers. It may be that the City has more customers than Charter. The point is that the publication points to the $5-$10 million range in common publications and there is support for the high end. Richard Holbo, Telecommunications Engineer added that price is for a monopoly, there is not competition in that market, and they would purchase all available customers for cable TV. The committee made changes to report. It was decided that further detail was needed in the conclusion paragraph. https://old.ashland.or.us/Agendas.asp?AMID=2396&Display=Minutes 4/8 10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon The Committee discussed if the City has legal limitations on partnerships they can enter into. Mr. Holbo responded that if they spend any money, they would have to go out to a competitive process RFP according to State purchasing regulations. Mr. Grimaldi suggested asking how we would do it, not if we could and this is an obstacle that may be removed. The Committee discussed that the table on page 3 will be revised into a matrix. The Committee discussed the first bullet of the maintain and enhance option. Mr. Grimaldi suggested identifying what could be done to resolve the problems. Mr. Collins responded that when they met with the Programming Committee, it was unclear to the Committee how and what decisions were made. No one was in agreement. There were communication and management issues. It is challenging to fix. Mr. Grimaldi responded that it needs to be said but also to describe a resolution for the problem. Mr. Barth added that he does not want report to say that the committee has identified all of the organizational issues and given solutions to them. Councilor Silbiger thought that statement was why AFN had not been successful. Mr. Mace added that in summary that instituting organizational changes of this kind is time consuming, expensive and not always successful. Mr. Grimaldi responded that would have to be weighed against the risk of doing a spin off. The control aspect was discussed and if the City would give up control of AFN while stilling assuming the risk. Mr. Grimaldi suggested the Committee more clearly specify those points. Mr. Holbo responded that the management would have to take less concern about individual personality issues. Mr. Mackin gave an example and spoke to AFN not offering bundled discounts. The City system does not have the capabilities to provide the separation for number of customers of cable TV, cable modem, and which customers have both. It is an organizational fought with frustration. The Committee discussed that the organizational communications issues are systemic, and not easily changeable. Mr. Grimaldi responded that he is not sure if the previous director was encumbered with those types of problems and new leadership can change the dynamics significantly. He added that there is enormous potential within the existing staff that has not fully been tapped. The Committee was unsure that the City would be able to change the organization enough to do the things they need to. Mr. Grimaldi responded that they need to identify what the issues are first before making that statement. The Committee came to the conclusion that more detail was need on the organizational development and communications problem bullet and will add sub bullets to identify. The Committee spoke that given the management cultural, the keep and enhance does not present a viable option. The Committee discussed that they have concluded that the City cannot make a substantial change in the penetration no matter what services they provide. A https://old.ashland.or.us/Agendas.asp?AMID=2396&Display=Minutes 5/8 10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon substantial portion of the community does not believe that a government should own these types of services and therefore will never subscribe. Mr. Grimaldi would like more background on how they came to the conclusion that is not a viable option. The Committee discussed that when AFN faces a competitor, because of the process required and delays, the competitor can move quicker and thus the consumer is making a decision based on price because the product is the same. To continue to use public funds in a risk business will remain controversial. The Committee will add to the report that some of the success comps they found, in general, had weaker competition and some had their own excusive public access channel. Mr. Mace spoke to adding at the end of the report asking Council to pursue the sale option hoping to get letters of intent with hard prices and pursue the spin off option so they reach a decision point and a target date with an expectation of completion of both processes and have the ability to weigh the options. Then the Council should proceed with the selection. NEXT M E ET I N G (S), The next meeting will be October 31, 2005 at 7:30 am. ADJOURNMENT The meeting was adjourned at 9:35 am. Respectfully Submitted, Bryn Morrison Administrative Assistant Administrative Services Department https://old.ashland.or.us/Agendas.asp?AMID=2396&Display=Minutes 6/8 10/23/24, 11:11 AM AFN Options Committee - AFN Options Committee - City of Ashland, Oregon Online City Services Email Updates Sign up to receive local important News & Events. 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