ABOUT THE COMPANY
1.What is OpenBand?
OpenBand is an innovative telecommunications company headquartered in Loudoun County, Virginia, that provides “triple play” – video, phone, and Internet – services via an Open Video System (OVS). OpenBand is a subsidiary of M.C. Dean, Inc., one of the most sophisticated engineering and systems integration companies in the world.
OpenBand has been at the forefront of innovation in fiber optics among telecommunications companies. It was one of the first such companies in the United States to build a fiber-to-the-home (FTTH) system, years ahead of Verizon’s FiOS technology. In addition, it was the first true triple play provider in the Commonwealth of Virginia, as well as the first provider of residential broadband over fiber in Loudoun County.
2. What is an Open Video System?
Open Video Systems (OVS) were created pursuant to the Telecommunications Act of 1996. OVS’s combine the features of common carriers (i.e., telephone companies) and cable companies. In an effort to incentivize investment in these systems with goal of expanding access to broadband and cable access, OVS’s were intended to be subject to a reduced regulatory burden compared to traditional cable providers.
3. Why did Congress create Open Video Systems?
Congress created Open Video Systems in order to provide competition to traditional cable franchises. At the time of the 1996 Telecommunications Act, Congress and the Federal Communications Commission (FCC) were concerned about the anti-competitive behavior of existing cable companies.
To remedy this problem, Congress sought to remove barriers to entry for Open Video Systems in the existing cable market and to subject them to a reduced regulatory burden. It was hoped that these actions would help Open Video Systems expand broadband and cable access to new markets, such as Loudoun County.
4. Why did Congress reduce the regulatory burdens for Open Video Systems?
In passing the 1996 Telecommunications Act, Congress said:
There are several reasons for streamlining the regulatory obligations of such [OVS] systems. First, the Conferees hope that this approach will encourage common carriers to deploy open video systems and introduce vigorous competition in entertainment and information markets. Second, the conferees recognize that common carriers that deploy open [video] systems will be “new” entrants in established markets and deserve lighter regulatory burdens to level the playing field. Third, the development of competition and the operation of market forces mean that government oversight and regulation can and should be reduced. H.R. Conf. Rep. No. 458, 104th Cong., 2d Sess. at 178 (1996) SEE THE CONGRESSIONAL REPORT »
OPENBAND’S CUSTOMERS
5. What is the nature of the contracts between OpenBand and its customers?
In addition to multiple dwelling unit (MDU) service agreements with Leisure World of Virginia Condominiums and Broadlands Apartments, OpenBand is a party to Telecommunications Services Agreements (TSAs), with three Loudoun County Homeowners Associations – Lansdowne on the Potomac, Lansdowne Village Green, and Southern Walk at Broadlands. These agreements, called “bulk billing” agreements, entitle the residents of these communities to obtain bundled cable, phone, and Internet services at a guaranteed 10% discounted rate. In reality, OpenBand’s current rates are far below 10% of the comparable rates found elsewhere in the county.
The TSAs provide a grievance process and remedies to the homeowners and the HOAs in the event that OpenBand fails to meet its cost or service quality obligations under the agreement. Importantly, although the TSAs give customers access to an impartial grievance process, no customer has ever invoked these contractual remedies.
To view OpenBand's Telecommunications Services Agreements, click on the following links:
LANSDOWNE ON THE POTOMAC TSA», SOUTHERN WALK AT BROADLANDS TSA», and LANSDOWNE VILLAGE GREEN TSA».
6. What is a “bulk billing” agreement?
The Federal Communication Commission (FCC) defines a bulk billing agreement as an arrangement whereby
“[T]he [Homeowners Association or HOA] subscribes to the…provider’s service, agreeing to pay the [Cable/OVS provider] a monthly fee. The…provider then connects its service to every unit in the [HOA]. The [Cable/OVS provider] typically bills its fee every month to the [HOA], which factors each unit’s pro rata charge into the unit’s rent, condominium fee, or homeowners’ association dues. The [HOA] must pay the monthly fee to the [Cable/OVS provider]. SEE PARAGRAPH 11 OF THE FCC'S 2010 ORDER »
7. What does the Federal Communications Commission (FCC) say about bulk billing agreements?
In 2010, the FCC examined bulk billing agreements, such as OpenBand’s TSAs, and found that they benefit customers. Specifically, the FCC said that, “we conclude that the benefits to consumers of bulk billing arrangements outweigh their harms…In the large majority of cases, bulk billing appears to lower prices, increase the volume and variety of programming, encourage high quality and innovation, and bring video, voice, and data services to MDU residents.” SEE PARAGRAPH 9 OF THE FCC'S 2010 ORDER»
8. When the Federal Communications Commission (FCC) approved the use of bulk-billing arrangements, did it understand that some of these arrangements included terms as long as 75 years?
Yes. SEE PARAGRAPH 25 OF THE FCC'S 2010 ORDER»
9. When the Federal Communications Commission (FCC) approved the use of bulk-billing arrangements, did it understand in some instances developers had a financial interest and/or received a stream of revenue from the bulk billing arrangements?
Yes. SEE PARAGRAPH 25 OF THE FCC'S 2010 ORDER»
10. Did the Federal Communications Commission (FCC) understand that residents in a community with a bulk-billing agreement who wish to obtain cable services from other providers would be required to pay twice?
Yes. The FCC repeatedly acknowledged that bulk-billing agreements might require customers to pay for two services in the event they wish to purchase the services provided outside of the bulk-billing agreement. Specifically, the FCC said, “[t]he arrangement may deter a second [Cable/OVS] in some cases, however, because it limits the entrant’s patronage to residents in the MDU who are willing to pay for the services of two [cable service providers] or who simply insist on receiving the services of the second [cable service provider] for the characteristics of that service (e.g., high-speed broadband for a home business).” SEE PARAGRAPH 15 OF THE FCC'S 2010 ORDER»
11. Did OpenBand compete with other providers to obtain these agreements?
Yes. In 2000, for example, the developers of Lansdowne on the Potomac wished to offer next-generation technology as an amenity in their planned community. They solicited proposals for this technology platform. OpenBand was one of several companies to propose technology and service solutions and compete for this business.
OpenBand was the only provider to propose a forward-thinking and capital-intensive fiber-to-the-home (FTTH) service platform for Lansdowne on the Potomac and other communities. While the delivery of voice, video and Internet over a single fiber was not yet practical in 2001, OpenBand officials felt that FTTH technology was the platform of the future and proposed installing the fiber to make these communities among the first in the country to possess this cutting-edge technology. OpenBand was the only vendor willing to undertake this significant capital investment. The developers agreed that “fiber was the future” and selected the OpenBand’s Smart Neighborhood solution.
12. Were potential homeowners made aware of the terms of these agreements before buying their homes?
Yes. OpenBand respectfully rejects all claims that homeowners were not made aware of OpenBand’s relationship with their homeowners associations (HOA). OpenBand’s Smart Neighborhoods and state-of-the-art system were significant selling points for the residents of these communities. Promotional materials for these communities advertised OpenBand’s relationship as the telecommunications services provider, and OpenBand staffed an office in the Community Sales Center.
Until recently, the Southern Walk at the Broadlands website advertised that, "OpenBand delivers all communications services" to the community. Similarly, Lansdowne on the Potomac's website advertises that, “Lansdowne also is one of the first communities in the Nation to have fiber optic Internet service. This technology allows very high speed internet access at an affordable cost.”
What’s more, original homeowners signed a separate homeowner's agreements (also called "3-Way Agreements") with OpenBand and their HOA. In doing so, homeowners agreed to convey the agreement to any subsequent homeowner. The HOA’s are also responsible, according to the terms of the TSA, to inform new homeowners of OpenBand’s agreement with the HOA and its responsibility to provide platform services for a minimum 10 percent discount relative to comparable providers of platform services.
Prior to signing the agreement, original homeowners were also provided an individual consultation with an OpenBand representative to explain all aspects of Smart Neighborhood services and technology. The consultations provided all information relating to OpenBand’s role as the telecommunications services provider for the development and its agreement with the HOA. In most consultations, homeowners worked directly with OpenBand and the real estate developer to choose where the cable and telephone fixtures would be located in their house.
Finally, OpenBand opened and staffed an office within the sales office of each development to give customers easy access to OpenBand representatives in order to educate homeowners on the substance of these agreements. Thus, it is completely inaccurate to suggest homeowners in one of these three communities were not made aware of OpenBand’s relationship with their HOA.
To view OpenBand's Homeowners Agreements, click on the following links:
LANSDOWNE ON THE POTOMAC 3-WAY», SOUTHERN WALK AT BROADLANDS 3-WAY», AND LANSDOWNE VILLAGE GREEN 3-WAY»
13. Did the developers disclose their minority-ownership interest in OpenBand to the homeowners prior to purchase?
Yes. Every original homeowner signed a three-way agreement acknowledging that the developer owned a minority interest in OpenBand. For instance, the three-way agreement signed by homeowners in the Southern Walk at Broadlands community reads:
4. Acknowledgement. By signing this Agreement, you acknowledge that: …(D) you understand that affiliates of the real estate developer who is developing the Development, Broadlands Associates, hold an ownership interest in OBB through its wholly-owned subsidiary, Broadlands Communications, LLC;
SEE ITEM 4(D) OF THE SWB HOMEOWNERS AGREEMENT »
Item #3 of the Lansdowne on the Potomac Homeowners Agreement and item #4(d) of the Lansdowne Village Green Homeowners Agreement contained similar disclosures.
14. Is OpenBand a monopoly?
No. OpenBand is not a monopoly.
A recent decision in the U.S. District Court for the Eastern District of Virginia dismissed a complaint filed by the Lansdowne on the Potomac Homeowners Association (HOA) alleging that OpenBand violated federal antitrust laws. The judge in that case ruled that the HOA did not have a plausible claim that OpenBand violated federal anti-trust laws.
15. Are there other providers in Loudoun with similar arrangements with their customers as OpenBand?
Yes. The Brambleton Community Association, located in Loudoun County, maintains a similar bulk billing agreement with Verizon. That agreement, which is 15 years in length, requires all Brambleton residents to pay for video, phone, and Internet as part of their homeowners association fees.
OPENBAND’S SERVICE
16. Is OpenBand’s system state-of-the-art?
Yes. In 2010, the Loudoun County Cable & Open Video System Commission engaged Columbia Telecommunications Corporation (CTC), a nationally recognized engineering consulting firm to conduct an unprecedented technical analysis of OpenBand’s system. CTC specifically compared OpenBand’s system to other “state-of-the-art” systems, and found:
"In general, the OpenBand system is more advanced than Comcast’s system…OpenBand’s system can be upgraded to match or exceed Verizon’s capacity without disruption of outdoor rights-of-way or new construction—by replacement of electronics and replacement of the last 2,000 feet of cable (which is in conduit and can be replaced without new digging). The portion of OpenBand’s system serving Lansdowne Town Center is of a more modern design and is equivalent to the Verizon system."
SEE PAGE 20 OF THE CTC REPORT »
17. Does OpenBand provide good picture quality?
Yes. In 2010, the Loudoun County Cable & Open Video System Commission engaged Columbia Telecommunications Corporation (CTC), a nationally recognized engineering consulting firm to conduct an unprecedented technical analysis of OpenBand’s system. CTC specifically examined OpenBand’s picture quality found:
"Our examination of the picture quality of the individual cable channels at the Loudoun County headend and at selected test points within the community found that the cable system provided good picture quality on the satellite-delivered analog and digital video services. Furthermore, we found the cable network transmission signals to the subscribers at our test points to be comparable in quality to the signals received at the headend."
SEE PAGE 2 OF THE CTC REPORT »
In addition, CTC reviewed the Federal Communications Commission’s (FCC) semiannual proof-of-performance tests for picture quality, and found that, “the distribution system met or exceeded the FCC’s minimum performance criteria for cable systems.” SEE PAGE 2 OF THE CTC REPORT »
18. Are OpenBand’s rates comparable to those of other providers?
No. OpenBand’s rates are significantly BELOW those of other providers! The Loudoun County Board of Supervisors’ independent analysis of non-promotional cable rates for four providers in Loudoun County found that OpenBand’s monthly cable rate is lower than those of Comcast, Verizon, and Direct TV. According to the County’s analysis Comcast’s monthly rate is 25% more expensive than OpenBand’s rate, Verizon’s monthly rate is 38% more expensive than OpenBand’s rate, and Direct TV’s monthly rate is 29% more expensive than OpenBand’s rate. SEE THE COUNTY'S ANALYSIS »
Comparison of Monthly Cable Rates in Loudoun County
|
Cable Company |
Monthly Prince |
Percent (%) Above OpenBand |
OpenBand
Comcast
Verizon
Direct TV |
$47.28
$56 to $62
$64.99
$60.99 |
---
24.8
37.5
29.0 |
Note: Calculation for Comcast is based on a monthly rate of $59.00.
Source: Loudoun County Board of Supervisors, Finance/Government Services and Operations Committee Information Item #10, July 13, 2011.
19. Is it true that OpenBand has not raised rates in 6 years?
Yes. OpenBand’s last rate increase of 1.3% occurred on January 1, 2006. One year later, on January 1, 2007, OpenBand lowered its monthly rate by 4%.
20. Is OpenBand’s system reliable?
Yes. A recent review of trouble tickets by the Loudoun County Board of Supervisors revealed that OpenBand consistently receives fewer trouble tickets per subscriber than Verizon. A comparison to Comcast could not be conducted because Comcast does not report data as comprehensively as OpenBand and Verizon. SEE THE COUNTY'S ANALYSIS »
21. Is OpenBand willing to meet with its customers to resolve concerns?
Yes. Like every cable company, OpenBand periodically experiences service disruptions. When such issues appear, OpenBand will go to great lengths to resolve every quality of service issue identified by its customers individually, or through their homeowners associations (HOA).
OpenBand’s 24-hour customer call center is located right here in Virginia. Customers have instant access to our representatives who will help them solve any service issues or complete a trouble ticket so that OpenBand representatives can fix trouble spots as they arise. In an era where many of our competitors have automated or exported their customer service overseas, OpenBand is proud that our customers have access to company representatives that live and work near them.
In the past, HOAs have formed Technology Committees in an effort to streamline communication with OpenBand. Representatives from OpenBand have routinely attended Technology Committee meetings, including participating in over 60 meetings of the Lansdowne on the Potomac HOA Technology Committee in the previous 5 years. At these meetings, OpenBand representatives have gone above and beyond the terms of TSA by providing network and service reports, in addition to troubleshooting every issue identified at such meetings. The company will continue to be responsive to any customer or HOA in order to resolve service issues in the future.
OPENBAND’S FRANCHISE AGREEMENT
22. What is a franchise agreement?
A franchise agreement is an agreement between cable or OVS providers and local franchising authorities, which are commonly county or municipal governments. The agreements, which may vary between jurisdictions, impose basic regulatory requirements upon cable operators in return for the ability to operate within the jurisdiction and for the use of public rights of way.
23. What is the process for obtaining an Open Video System franchise agreement in Loudoun County?
Section 15.2-2108.1 of the Code of Virginia delegates the authority to grant franchise agreements to Open Video Providers to the Government of Loudoun County. Chapter 809.10 of the Loudoun County Ordinances designates the Loudoun County Board of Supervisors (the “Board”) as the specific franchising authority. The Board has established a Cable & OVS Commission (the “Commission”) to oversee the franchise process and to make independent recommendations to the Board. The Commission is comprised of ten members. Each member of the Board of Supervisors appoints one Commissioner and one member is appointed by the public school system.
The Commission must approve an application for a franchise agreement prior to its consideration by the Board. Upon the Commission’s approval, the agreement is referred to the Board’s Finance Committee. While the Finance Committee does not vote to approve the agreement, it does vote to forward the agreement to the full Board. Once before the full Board, a franchise agreement is placed on the agenda of a Regular Business Meeting. At this meeting, the Board can vote to place the agreement on the agenda of a Public Hearing. After the agreement is the subject of a Public Hearing, the Board can vote to approve or not to approve the agreement.
24. In 2011, did OpenBand consent to a franchise terms that exceeded Loudoun County’s authority to request under the federal law?
Yes. As previously mentioned, the agreement approved by the Cable & OVS Commission in March 2011 required, among other things, that OpenBand to make specific changes to its technology and channel offerings. SEE PAGE 2, PARAGRAPH 3 OF THE CABLE & OVS COMMISSION MINUTES »
Local governments have limited authority to condition OVS franchises. An OVS operator's channel carriage obligations are matters of federal law, not local franchising requirements. Specifically, under the 1996 Telecommunications Act and FCC rules, OVS operators are required to provide public, educational and governmental channels and to carry local broadcast stations that desire carriage on the OVS system. In addition, the FCC's rules require OVS providers to determine the level of demand for carriage on the OVS system among potential video providers in a non-discriminatory manner.
Nothing further is required regarding provision of programming channels by OVS operators, and by federal law, local governments may not impose technology conditions on OVS systems beyond those set forth in the Telecommunications Act and FCC rules.
25. Is it true the Loudoun County’s Attorney stated that OpenBand’s 2011 franchise agreement exceeded the terms of the agreements with Comcast and Verizon?
Yes. According to Matt Ames, the attorney representing Loudoun County, “[f]or example, neither of the other agreements specifies the number of HD channels to be provided, requires a phase- out of any model of converter, or requires the company to install probe devices to try to identify problems related to picture quality. The enforcement provisions of the proposed agreement are also stronger and more comprehensive than those in the Verizon and Comcast franchises. Finally, the agreement provides for performance reviews every two years.” SEE THE REPONSE TO QUESTION #4 BY LOUDOUN COUNTY'S ATTORNEY»
26. Would the 2011 franchise agreement negotiated between OpenBand and the County have produced significant improvements?
Yes. In 2011, OpenBand agreed to many good-faith enhancements during the course of negotiations with the Loudoun County Cable & OVS Commission, including:
• Expanding its HD Programming;
• Introducing a greater quantity of Video on Demand (VOD) programming;
• Phasing out older converter boxes;
• Deploying signal monitoring devices to monitor service quality issues; and
• Significantly increasing the liquidated damages related to a host of infractions.
27. Did the 2011 franchise agreement negotiated between OpenBand and the County subject OpenBand to a more severe penalties and higher standards than its competitors?
Yes. See the table below.
Liquidated Damages Contained in Loudoun County Franchise Agreements
|
|
Company |
|
Standard |
OpenBand
(proposed) |
Verizon |
Comcast |
|
Term of Franchise Agreement |
10-12 years |
15 years |
15 years |
|
Subscriber Survey Agreement |
Every 2 years at own expense |
Every 3 years |
Every 3 years |
|
Required Performance Evaluations |
Every 2 years |
Every 3 years |
Every 3 years |
|
Penalties |
|
|
Failure to restore letters of credit |
$1,000/day |
$150/day |
$150/day |
|
Failure to indemnify County |
$1,000/day |
$100/day |
$100/day |
|
Failure to comply with subscriber complaints |
$100/day per complaint |
$10 per complaint |
$10 per complaint |
|
Failure to respond to suscriber request for repair or adjustment |
$50/day per occurrence |
$25 per occurrence |
$25 per occurrence |
|
Failure to activate subscriber service upon request |
$50/day per occurrence uncapped |
$10/day, not to exceed $500 |
$10/day, not to exceed $500 |
|
Failure to repair or restore damage to private property |
$100/day per occurrence |
None |
None |
|
Failure to pay any fee, tax, or lien |
$100/day |
None |
None |
|
Failure to adhere to Franchise Agreement |
$75/day uncapped |
None |
None |
|
Total Limit on Liquidated Damages |
Unlimited |
$20,000 |
$20,000 |
Source: Loudoun County Cable and Open Video System Commission, http://www.loudoun.gov/cable.
28. In 2011 did the Cable & Open Video System Commission recommend approval of OpenBand’s franchise agreement?
Yes. In 2011, OpenBand agreed to many good-faith concessions during the course of negotiations with the Loudoun County Cable & OVS Commission (the “Commission”) In March 2011, the attorney representing Loudoun County said of the mutually agreed to terms: “OpenBand has agreed to do things that Comcast and Verizon have refused to do and could not be legally required to do.” SEE THE REPONSE TO QUESTION #4 BY LOUDOUN COUNTY'S ATTORNEY »
Specifically, OpenBand agreed to:
• Expand its HD Programming;
• Introduce a greater quantity of Video on Demand (VOD) programming;
• Begin phasing out older converter boxes;
• Deploy signal monitoring devices to monitor service quality issues; and
• Significantly increase the liquidated damages related to a host of infractions.
OpenBand and the Commission worked collaboratively to address many of the issues and concerns raised by our customers. At the end of the process, OpenBand’s good-faith effort to concede every reasonable request of the County prompted the County’s attorney to acknowledge that OpenBand’s proposed agreement was “more favorable to the county than either Verizon or Comcast’s” agreements. SEE THE RESPONSE TO QUESTION #4 BY LOUDOUN COUNTY'S ATTORNEY »
29. Why did OpenBand decline the Board of Supervisors’ offer in 2011 for a 4-year franchise agreement?
For nearly two years, OpenBand negotiated in good faith with the County’s Cable & OVS Commission. At the end of this arduous process, the Commission and OpenBand reached a mutually acceptable agreement in Spring 2011. The County’s outside counsel called this agreement “more advantageous to the County in every respect” when compared to the franchise agreements of other cable providers. The Commission approved the agreement on March 9, 2011. SEE THE RESPONSE TO QUESTION #4 BY LOUDOUN COUNTY'S ATTORNEY »
The issue of the length, or term, of the agreement was part of OpenBand’s negotiations with the County. The Commission agreed with OpenBand’s position that a franchise term of at least 12 years would be necessary in order to meet the significant requirements imposed on the company in the agreement. Prior to the Board of Supervisors’ consideration of the agreement, the County’s outside counsel advised members of the previous Board that a 2-year term was of no use to the county. SEE THE REPONSE TO QUESTION #4 BY LOUDOUN COUNTY'S ATTORNEY »
Nonetheless, with no advance consultation with OpenBand, at its September Business Meeting the previous Board of Supervisors accepted an on-the-spot amendment to reduce the proposed term of OpenBand’s franchise agreement from 12 years to 4 years. Considering that the agreement would be backdated to 2009, the amendment would have had the practical effect of limiting OpenBand’s franchise agreement to 2 years. There was no discussion by the previous Board as to the practical consequences of this action on OpenBand’s ability to meet the requirements of the agreement.
Shortly after the Board reduced the term, as well as added other punitive language to the agreement, OpenBand informed the Board that it could not accept these non-negotiated provisions.
30. Why did OpenBand file a lawsuit against the Loudoun County Board of Supervisors?
On December 2, 2011, OpenBand reluctantly filed a claim against the Board of Supervisors in the Loudoun County Circuit Court for the previous Board’s unreasonable disapproval of OpenBand’s franchise application in November 2011. While OpenBand has reapplied for a franchise agreement, Virginia law requires an appeal of a certain government actions to be filed within 30 days of the occurrence of the event. Thus, in order not to forfeit its right to appeal the previous Board’s decision, OpenBand was required to file the claim.
Importantly, however, OpenBand has one year from the date the claim is filed to serve the County and thus start the lawsuit. At the moment, OpenBand does not intend to serve the County. As the only locally based telecommunications services provider, OpenBand is sensitive to the time and expense involved with litigation and has expressed its desire to reach a reasonable franchise agreement so that such expenditures need not occur. The company hopes that a reasonable franchise agreement can be negotiated in the coming months negating the need for this lawsuit. READ OPENBAND'S CLAIM HERE»
31. Is OpenBand currently operating pursuant to a lawful franchise agreement?
Yes. OpenBand is currently operating pursuant to the Continuity of Service Provision in Section 5.9.1 of its existing Franchise Agreement. That provision requires OpenBand to continue providing service for 36 months after the expiration of the agreement, or longer as requested by the County. The end of this 36-month period will occur on June 30, 2012.
