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.. <br /> ' 1 �� j1 ,- w � ` r �� . �'�:' <br /> ��PORfT {�- - � �� �� . yF =� . .� 1 -�.�: <br /> . - . _ ��¢: s - �� - _, {.�.�� ,.�e— <br /> � To the. Honorable Mayor and City:`Council <br /> - ,, ��: <br /> - � � k._ . � _ ' _ � From the :City�Managei� <br /> � . , � - _ .,. . - . .- .T._ <br /> December 6, 1999 <br /> Subject <br /> Telecommunications Industry Changes and the Effect on Local Government <br /> Recommendation <br /> Staff is not presenting a recommendation at this time. Council will receive an oral report <br /> from the Director of Finance and Financial Planning and Carl Pilnick of <br /> Telecommunications Management, Inc., the consultant engaged by the City to negotiate <br /> a franchise agreement with RCN, Inc., for the provision of a cable television system and <br /> local telephone system in Redwood City. A copy of a report from Mr. Pilnick is attached <br /> for your review. <br /> � This report will focus on recent changes in the telecommunications industry and the <br /> effect that these changes will likely have for local residents. This report is not <br /> intended to discuss issues relative to the RCN's application for an encroachment <br /> permit in the Redwood Shores area. � <br /> Executive Summary <br /> Background <br /> As a result of the Telecommunications Act of 1996 and the growing popularity of the . <br /> Internet, many communities are now beginning to realize competition for local telephone <br /> and cable television services. Historically, local telephone service has been a regulated <br /> monopoly with Pacific Bell providing service to this area. Although never legally entitled <br /> as a monopoly, cable television service has been provided by TCI (now known as <br /> AT&T since AT&T acquired TCI earlier this year) without the benefit of any effective <br /> competition. <br /> A product of these regulatory changes is that it is now financially feasible for other <br /> telecommunications providers�to construct the necessary infrastructure and offer local <br /> telephone service, cable television, and Internet access. Previously, a single provider <br /> could only offer one of the foregoing services, which in turn would generate one stream <br /> of revenue for the provider. Now a provider may offer three different services and <br /> accordingly, generate three streams of revenue. With these additional revenue <br /> streams, there is a financial incentive for another telecommunications firm to enter the <br /> area being served by an existing cable operator and construct the necessary <br /> infrastructure to deliver these services and compete with the existing cable operator and <br /> local telephone service provider. <br /> The advantage to subscribers is that after many years of monopoly and near monopoly <br /> conditions, they will have a choice between providers for local telephone service and <br /> cable television. Also, rates may decrease or a least stay level. Some of the <br /> � <br />