Cable Provider Agreement

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					                            CITY OF BAY VILLAGE, OHIO

                           CITIZENS CABLE COMMITTEE

                                   FEBRUARY 8, 2007

                                        7:00 P.M.

Present: Services, Utilities & Equipment Committee Members Councilman Jim Scott,
         Councilman Scott Pohlkamp, Mike Boeckman, Alex Dade, Greg McLean, Dave
         Patzwahl, Alan Rhea, Wayne Reese, John Suter, Dave Tadych

Also Present: Max Gruber, Sue Fink

Councilman Jim Scott opened the meeting at 7:00 p.m. Mr. Scott advised that Mr. Kirk
Zerkle, Vice President & System Manager for WOW! Cable is present to address the
committee. When Mr. Zerkle’s presentation is completed, the committee will continue
the formation of their subcommittees.

Mr. Zerkle thanked everyone for the opportunity to speak with the committee this
evening. He informed the committee that he has lived in Bay Village since 1998, and
understands, as a resident, what it is like to have no cable competition.

WOW! serves 110 communities in the Midwest, Chicago, Detroit, Columbus, and
Cleveland. They became involved in these communities in 2001, acquiring their assets
from Ameritech, at that time operating under the name Americast. Mr. Zerkle noted that
in the mid 1990’s Americast was trying to get a cable franchise in Bay Village.

Mr. Zerkle stated that what makes WOW! unique is that everywhere they provide service
they are in head to head competition with someone else. They are a fairly small
company, about 400,000 customers, compared to Time Warner who has millions of
customers. As a result of that, WOW! has to compete successfully with customer
service. In 2006, WOW! won the J.D. Power award for the top cable provider in north
central United States, and were named the top Internet company by J.D. Power in the
entire country. PC Magazine named WOW! the top Internet company in the country, and
Consumer Reports named WOW! the top broadband provider of Internet in the country.

Mr. Zerkle continued that the culture at WOW! is totally based on four core values:
Respect, Integrity, Accountability, and Servanthood. In the Cleveland area, service is
provided in 16 communities, including Westlake, North Olmsted, Strongsville, North
Royalton, Fairview Park, Brook Park, Brooklyn, Shaker Heights, Maple Heights,
Garfield Heights, Independence, Valley View, Berea, Cuyahoga Heights, and Linndale.
They have been in the area since 1996, and do not do gimmicky pricing, offering service
at a discounted rate for a period of time. All of the pricing is guaranteed until January of
2009, and they do not require a contract. Customers can leave at any time with no
penalty, and a 30-day money back guarantee is offered. Customers are retained at a
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Meeting held February 8, 2007
significantly higher rate than industry standards. Return rate of equipment is less than 1
½ percent, while industry averages are 4%. Most customers leave because they move out
of the area.

WOW! is privately owned by Avista Capital Partners, with corporate offices in Denver.
The investors are anxious to grow not just cable customers, but high speed Internet, and
phone customers. If a city is willing to work with WOW! and negotiate a franchise they
will consider building. Mr. Zerkle has researched all of the communities in Cleveland
that he felt would be a good candidate and sees Bay Village as a community of great
demographics, people that care about good service, pay their bills, and want to get a value
for their families. Mr. Zerkle stated that having competition in the community makes a
huge impact. Where WOW! is not providing service, the average bill is at least $6.00
more per month for the exact same service. Residents in Bay Village are paying $6.00
more for basic cable than residents in Westlake. With WOW! in the community there is
competition and the residents have a choice.

Mr. Zerkle advised that WOW! has been offering phone service for over two years, and
at least 25% of their customers take that service. Unlimited local and long distance
service is available through WOW! for an additional $30.00 per month. There are
charges associated with international rates. New phone customers can keep their phone
number, and the service has all the features such as caller i.d. and voice mail and is
working on innovative services such as caller i.d. on television screens. Video on demand
will also be launched at the end of this month.

Strongsville, Westlake and North Royalton are continuing to see new development and
WOW! is building in the ground with the other utilities to give these customers a choice.
A new community in Berea, Sandstone Ridge, is being developed with 500 homes, and
WOW! has signed up half of the 200 homes built to date.

Mr. Tadych asked Mr. Zerkle what he estimates it would cost WOW! to come into Bay
Village. Mr. Zerkle stated that it would be roughly $2.5 million. If there is not room on
the poles there would be additional cost. Mr. Reese asked how long it takes to build a
city. Mr. Zerkle stated that the engineers believe Bay Village could be completely built
in one year. Mr. Scott asked if they would be able to build the whole city and Mr. Zerkle
stated that Bay Village is a dense city without a lot of half-acre lots. They do offer a
senior discount on basic cable. Basic cable price now is $42.25 for approximately 75
channels, and a limited basic tier is offered including 24 channels for $14.99 per month.
They offer digital offerings, high definition packages, high definition/DVR, and cable
cards. Packages start at $59.99 for two or more services per month. Basic cable, basic
phone and high speed Internet is $89.99 per month. WOW! offers five speeds of Internet
including 6M download and 1M upload which is more than what the competition offers.
They have been testing in the labs and can go 10M down if they need to. Basic cable,
basic phone, and 6M download is $113.00 per month. A complete list of standard and
signature bundle pricing was distributed, as well as a list of the channel line up in
Cleveland. Channels colored purple in the guide are the $14.99 tier, purple and red are
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Meeting held February 8, 2007
$42.25, green listings are the digital product, and high definition television offerings are
also listed. The WOW! website is where further information is available.

Mr. Zerkle also provided a letter that is distributed to their new customers which
basically sets down the expectations before going into a customer’s home, telling them
what WOW! is going to do, what the customer can expect. Surveys are sent to each and
every customer and customer satisfaction rate is 95% on the surveys.

Mr. Greg McLean asked Mr. Zerkle if they would build out glass or copper. Mr. Zerkle
stated that they are a fiber optic based system. They build fiber to a node, and from that
node approximately 350 homes are serviced.

Mr. McLean said that one of the problems here is the “pigmy syndrome” and that is when
the children get out of school the service deteriorates rapidly. Mr. Zerkle stated that there
is not enough bandwidth going into the system. WOW! has more capacity than they need
to take care of those peak times. They have a team in Chicago that is constantly
monitoring the usage. Once they hit the 70% of bandwidth utilization, they look to buy

Alex Dade stated that this is one of the things that is unusual about your offering is that
most cable companies won’t talk about their high speed Internet bandwidth because it
varies so much. Mr. Zerkle agreed and noted that they tell their customers where to go to
test their speeds. The technicians go on the web site and show the customer how to
perform a speed test. All of the technicians have laptops and go right into the customers’
homes and prove to them what speed they are having. Sometimes the customer’s
equipment is prohibiting the speed. If you don’t get 6M, they will be out to fix it.

Mr. McLean asked how many technicians WOW! employs. Mr. Zerkle stated that in
house they have 14 in Cleveland and 10 contracting sources. They report out of Berea
every morning and the work is distributed from there. The corporate office is based in
Denver, Colorado, and the call center is in Colorado Springs, and they also have call
centers in Alabama, and Texas. Mr. Zerkle stated that their call center representatives
do not try to sell up the customers to the highest Internet speeds. Their first question is to
ask what the customer is using the Internet for. They try to put them in a package that
they need, trying not to oversell people.

Mr. Pohlkamp asked what it would take to sell the WOW! corporation to invest in Bay

Mr. Zerkle stated that one factor would be how difficult it will be to negotiate a franchise.
They have several opportunities throughout the country where people are asking for them
to come, and if it is going to take a year and a half to negotiate a franchise it is not going
to work because the company is looking to invest now. Mr. Zerkle was asked if he has
the number of potential customers and if he is confident that this is a viable opportunity
for WOW!. Mr. Zerkle responded affirmatively, noting that they provide service in many
communities smaller than Bay Village and in a lot of comparable communities, such as
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Meeting held February 8, 2007
Fairview Park. Mr. Zerkle stated that he sees the demographic in Bay Village being a
stronger demographic for them as well. Most people here have high speed Internet.
Everyone has a phone and almost everyone takes cable. When you can offer all three
products the pay back is better.

Alex Dade asked Mr. Zerkle what he thinks the market penetration would be in Bay
Village. Mr. Zerkle stated that he is estimating that within three years WOW! could be at
a 30% penetration. They are more than that now with the cities they serve in Cleveland.
People are ready for a change. They feel they will get 15% just because the people have
a choice. Less than 2% of the United States has effective competition. Mr. Dade stated
that he is getting the impression that WOW! has a three to four year return on investment.
Mr. Zerkle stated that almost all of the contracts they inherited from Americast were at
least 15 years, which is standard in the industry. Since WOW! took over in 2001 they
have not had to renegotiate a franchise agreement.

Mr. Reese asked the length of Westlake, North Olmsted and Fairview’s agreements. Mr.
Zerkle stated that the agreements are for 15 years.

Mr. Boeckman asked if there are terms in the contracts that obligate WOW! to do some
upgrades. The issue for the group as they look at technology is that it is ever changing.
Mr. Zerkle stated that if they are not equal to competition the customers will leave them.
Mr. Dade noted that this is the difference in a competitive situation. If one of the
providers does an upgrade the other is obligated to pick up. In the other communities
WOW! is competing head to head with Time Warner and in Fairview Park they are
competing with Cox.

Mr. Scott asked if all of the WOW! infrastructure would be put in above ground. Mr.
Zerkle stated that if the utilities are underground they will be underground. There will be
some inconvenience to the residents. They are going to have to go in their back yards
and get on the poles, or potentially bore underneath their driveways. That is the only way
they can get the plant in the ground or in the air. That is why Bay Village did not pursue
an agreement with Americast back in the mid to late 1990’s. At that time the cable
operator here had just gone through a rebuild and it disturbed a lot of the residences. It
was hard on the residents. There are 40 miles of aerial plant and 13 miles of underground
plant in Bay Village.

Mr. Tadych asked why they would consider aerial when it would be easier to do
underground. Mr. Zerkle stated that it is substantially more expensive to go underground.
You have to bore underneath every driveway, every sidewalk, and every street and be
cognizant of hitting people’s utility lines, underground sprinklers, and invisible fences. It
is also more disruptive to people’s yards to go underground than just lashing up to a pole.
Above ground cabling can be done on a side street within a couple of hours. Mr. Tadych
stated that the reason he is asking is that it would seem like in the future poles are going
to disappear and things will be underground in small communities like Bay Village,
which would be far more ideal. Mr. Zerkle stated that if the city decided they wanted to
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Meeting held February 8, 2007
go underground with their utilities they would all have to go underground at the same
time and share the cost of going in the trenches together.

Mr. Suter asked if, assuming that AT&T is going to be coming to Bay Village, would
they consider sharing costs with them. Mr. Zerkle stated that this is two separate
divisions. AT&T is spending $8 billion to try to stay competitive with the cable
companies. They do not cooperate with cable companies.

Mrs. Sue Fink stated that Time Warner has a walk-in office in Bay Village. She asked
Mr. Zerkle the location of the WOW! walk-in office. Currently there is an office in
Berea and there are payment facilities throughout the communities they provide service
in. Most are on the east side of Cleveland but Mr. Zerkle is trying to get some locations
established on the west side. There are not walk-in facilities to all the communities they
provide service to. Most people pay their bill through the mail, by credit card, or direct
bank debit.

Mrs. Fink stated that the current Bay Village cable provider has an agreement with the
city, public buildings, and educational system to offset the costs for providing service to
those areas. How does WOW! handle that? Mr. Zerkle responded that they offer paid
channels to every city: a government channel, educational channel, and a public access
channel. With some cities this is an obligation, and with some it is a choice. It varies
agreement to agreement. Obviously, Bay does not need two cable providers providing
free service to the school. Sometimes in lieu of providing that they will do something
else. In most of the communities in Cleveland they return a certain percentage of their
revenues to the city in addition to the franchise fee.

Mr. Greg McLean stated that the aerial service now comes in on the pole, which is on the
tree lawn. There are no easements for the back yards but that would be the sensible place
to run this. Mr. Zerkle stated that their goal would be to get on the existing pole lines if
at all possible. Mr. Zerkle stated that if they had to go all underground they will not do it.
They had a franchise in Brecksville and didn’t build it because it was too much
underground, too expensive. The reason he thought Bay Village was a good candidate is
because it is 75% aerial. He added that they are not getting all the customers. There is
no guarantee they are going to get the percentage they need. They expect to be in a three-
way fight, although traditionally phone companies don’t know how to do this business.

All the phones will work as they work today. There is a 4-hour time back up on their
modems so if the power goes down the phone will still work. They support 911 phone
service just like all other phone companies. They do have a battery back up system on
their poles and in addition they have a 500-gallon diesel generator.

Mr. Suter asked if Mr. Zerkle would share a copy of one of their franchise agreements
with another city. Mr. Zerkle agreed.

Mrs. Fink asked if a “me-too” clause is included in the franchise agreement, so that if any
other provider gets an agreement you can opt in to that agreement. Mr. Zerkle stated that
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Meeting held February 8, 2007
typically that is how the company operates. If the city gives special treatment to someone
else they would look for the same.

Mr. Suter stated that Mr. Zerkle advised that it would take about a year to get service
installed. Mr. Zerkle stated that it would take a year to completely build the service and
as certain areas came on line service would be available to those customers. WOW! has
customers just across the track and an active plan within sight of here. Westlake is
completely covered, other than a few apartment buildings.

Mr. Suter asked if a density such as the Knickerbocker Apartments would be offered a
better rate. Mr. Zerkle stated that their rate structure is consistent no matter where you
live, but typically you can negotiate separate agreements with multiple dwelling units.
They are in the midst of negotiating a bulk account with a 130 unit new senior building in
North Olmsted. The Knickerbocker Apartments rate structure could be negotiated.

Mr. McLean stated that he is worried about the future of technology and asked how much
of a scale out is built in to what they will install for what is coming down the road. Mr.
Zerkle stated that at the present time a lot of their bandwidth is being utilized by analog
bandwidth. Within the next two to three years everything will be migrated to digital.
Once they do that migration they will have ample bandwidth available.

Mr. Dade stated that one of the things many of the Bay Village customers were
disappointed with when our cable change happened with the acquisitions was that the
new company reduced the emphasis on video on demand. Mr. Zerkle stated that they
have not officially launched it but they will absolutely have it. The movies are going to
be pay for movies but kids shows, classics, and sports will be free. They have to be
competitive so whatever the competition is doing they have to at least offer, if not more.
They are a smaller company so therefore cannot negotiate as hard with providers like
HBO or Cinemax, but they have to provide what the customers want or they will leave.

 Mr. Tadych asked how the 10% discount to seniors is validated. Mr. Zerkle stated they
validate it or prove the customer is a senior by the honor system.

Mr. Pohlkamp stated that we have a lot of home-based business in Bay Village. It seems
like the WOW! product is well suited for that. Mr. Zerkle stated that they have many
commercial Internet accounts and are migrating towards a lot of commercial phone
accounts. The system they just bought in Evansville, Indiana has their own phone switch
and will allow them to offer a more robust commercial product in the next few years.
There will also be a switch based in Cleveland.

Mr. Reese asked if WOW! anticipates wireless (hot spots/zones) in the future. Mr.
Zerkle stated that they are working toward a proposal with the City of Dublin.

Mr. Boeckman asked the geographic space requirements that a node requires. The nodes
are pole mounted, and are hanging throughout the city.
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Meeting held February 8, 2007
Mr. Suter asked why AT&T needs such big refrigerator boxes. Mr. Zerkle explained that
they have a completely different technology. They work on a copper system and WOW!
works on a fiber optic system. AT&T is trying to migrate to a fiber optic system in its
own way. You can only pump so much on copper and the farther you get away from the
central office the worse that signal gets. With fiber you do not have that loss of signal.
Speed tests can be run on or on the WOW! website,

Mr. Zerkle advised that WOW! does have a referral program. Customers receive a
$25.00 credit for each new customer referred. Much of their customer growth is through
word of mouth.

Digital phone lines are available if for some reason a customer wants to have a dedicated
phone line. Mr. Dade asked if DID, or direct inward dial, service is available. This is
service which automatically routes a call to a business to a specific telephone. Mr. Zerkle
stated they do not have that service at this point.

The acronym WOW! stands for Wide Open West. The founder had a dream of building
competitive cable systems out west and began in Colorado. At one time they had
a12,000 customer system in Colorado but sold it to their founder, who is running it under
the name Champion.

Mr. Zerkle stated the next step is to understand what the city would be looking for as far
as a franchise agreement, and how quickly we could negotiate a franchise agreement.
Mr. Zerkle can provide the city with a copy of their current franchise agreement with
neighboring cities. WOW! is serious about it if they can do it quickly. If it is going to
take two years they will probably spend their money somewhere else.

Mr. Boeckman asked if WOW! is actively talking to other communities regarding
building out and Mr. Zerkle stated that he is not actively talking to anyone else in the
Cleveland area right now, although peers in other regions are talking to people. The
President of WOW! was in Cleveland two weeks ago and Mr. Zerkle talked to her about
the opportunity and she thought it to be a good opportunity and advised that if he can
make it happen quickly she will find the money.

Mr. Reese asked if Mr. Zerkle has talked to Rocky River. Mr. Zerkle replied that he has
not spoken to them yet but Rocky River, Brunswick, and North Ridgeville have inquired.
WOW! has not actively pursued anything until they had a recent change in ownership
who are looking toward new build.

Mr. McLean asked whose modems WOW! uses. Mr. Zerkle stated they use Scientific
Atlanta modems, although their phone modem is supplied by a company called Arris.
Scientific Atlanta makes the DVR’s.

Mr. Reese asked if you can buy your own digital box. Mr. Zerkle stated that WOW! does
not sell equipment. If you subscribe to digital you get the first box free, the second one is
$7.50, but other than modems, they do not have customer equipment.
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Meeting held February 8, 2007

Each city serviced is completely serviced, other than some apartment buildings. There
are density requirements in the franchise agreement. In Bay Village they would serve

Mr. McLean asked the minimum speed provided. Mr. Zerkle stated that the speed is
whatever you are buying. They may say speeds will vary, because they will vary
depending on the customer situation, but if you buy 4M, or 6M that is what they will try
to get to you.

Mrs. Fink referred to the rate sheet distributed by Mr. Zerkle, noting the last box states
installation and other service rates. She asked if the service charges listed on the back are
all of the service charges. Mr. Zerkle replied that all of the fees are listed on the chart
and typically installation charges are $4.99. If you have existing outlets they are all free.
A rate is charged for new outlets but one new outlet is provided free per service
purchased so if you purchase cable, Internet and phone they would run three new outlets
free. Most homes are already wired and they will try to use the existing wiring. If it is
inferior it will be replaced.

Mr. Scott thanked Mr. Zerkle for addressing the committee this evening. Mr. Zerkle
extended an invitation to visit the WOW! facility in Berea.

Mr. McLean asked the level of training of the WOW! technicians. Mr. Zerkle stated that
most of their technicians are universal technicians. WOW! wants their technicians to go
to the homes and do everything. The call center technicians go through a training
program and there are different levels, or tiers, of technicians.

Mr. Tadych asked if WOW! has a broadcasting area if Council wanted to broadcast their
meetings. Mr. Zerkle stated that they would dedicate public access channels for the city
to use however they wanted. Brook Park and Brooklyn use their channels to broadcast
their Council meetings.

Mr. Scott advised that a resident has provided him with the March issue of Consumer
Reports which has a whole spread on high-definition, which is quite interesting reading.
The resident has also provided information regarding web sites to test speeds. You can
access and perform a speed test. Mr. McLean suggested using
a Google search for “speed tests” as well.

Mr. Tadych advised that the survey committee is still compiling their information.
Surveys continue to be returned

Mr. Tadych also reported that after being advised by Mr. Ebert that he was able to get a
reduction in his cable rate, he reduced his cable bill from $103.00 to $47.00 per month,
by calling the cable company. Before he hung up the phone there was more conversation
and the bill went to $54.00 and a DVR box was inherited. The new rate is guaranteed for
Citizens Cable Committee                    9
Meeting held February 8, 2007
one year. Mr. Tadych stated that he thought it was indicative of a willingness on their
part to save their reputation.

Mr. Dade added that having more than one cable provider solves a lot of issues. There is
nothing wrong with a longer-term contract if we are going to have multiple cable
providers because they are going to force each other to upgrade.

Mr. Reese advised that Rocky River Council is having Cox Cable come in to their
Monday night Council meeting to talk to them about competition. Mr. Scott noted that
the representative from Cox Cable he spoke with did get back to him and confirmed that
they still consider Bay Village an uneconomical market.

Mr. Greg McLean related that when he lived in Columbus he used Roadrunner service,
which he found superb. When he came here he signed up for Comcast, which required
about 5 months of technical complications and adjustments. The net result of all this was
a reduction in the per month bill from $49.00 to $32.00 per month for one year, as their
way of apologizing for the difficulties.

Mr. Suter stated that we have never gotten an idea of what shape the current cable
company’s structure is, as far as their equipment. Mr. Scott stated that he got the
impression that there are no major upgrades planned. They are going to find out why
there has been a slow down, if it’s a problem with the nodes. Mr. Scott’s recollection is
that there is not going to be any technology upgrade with Time Warner, which is one
reason why this presentation tonight is so exciting. State of the art technology could be
available in the near future in this community. Mr. Dade noted that Time Warner might
change their plans if there is an over-build.

Mr. Scott asked the Law Director about inviting AT&T to speak to the committee. Mr.
Ebert has advised that because of the ongoing negotiations with AT&T in the city he
recommends that we not invite them. Mr. Scott stated that he will follow the Law
Director’s recommendation.

Mr. McLean stated that tonight it sounds like it would be glass all the way to the node,
which is a lot better build-out than we have now.

Mr. John Suter asked at what point, as far as negotiations with AT&T, since they
consider themselves a utility, does Council come in to this. Mr. Scott advised that City
Council expects eventually to be presented with a proposal worked out between AT&T
and the city. There would have to be an ordinance passed because there would be a
franchise agreement associated with it. Anyone who provides this service in the city will
pay a franchise fee.

Mrs. Fink asked if we were ever able to find out from Time Warner exactly the levels of
service that are being provided. Mr. Scott stated that he has not received a call back yet.
They do have over 5000, or 5/6 of the city, cable customers as of January last year.
Citizens Cable Committee                  10
Meeting held February 8, 2007
Report Subcommittee

Mr. Scott advised that the Report Subcommittee consists of Eric Eakin, Dave Tadych,
Dave Patzwahl, and Don Zimmerman

Cable Technology Subcommittee

The Technology Committee is composed of Alex Dade, Wayne Reese, Mike Boeckman,
and Greg McLean.

Cable Services Subcommittee

John Suter has volunteered to be on the Cable Services Committee and was joined by
Alan Rhea and Mike Boeckman.

The next meeting will be held Thursday, February 22, at 7 p.m.

Meeting adjourned at 8:40 p.m.

Description: Cable Provider Agreement document sample