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Item 10ECity of Southlake, Texas MEMORANDUM April 29, 2003 TO: Billy Campbell, City Manager FROM: John Eaglen, Assistant to the City Manager (481 -1433) SUBJECT: Authorize the City Manager to Assess Liquidated Damages against Charter Communications, and Establishing Procedures for Handling the Appeal Process Action Requested: City Council to authorize the City Manager to assess liquidated damages against Charter Communications for the time period of the 3 rd Quarter 1999 through the 4 t11 Quarter of 2002, totaling $135,166.67, and to establish procedures for completing the appeal process by the designation of a hearing officer hired by the Fort Worth Area Charter Consortium of Cities. Background Information: The City of Southlake approved a transfer of the control of the cable television franchise from Marcus Cable Associates, L.L.C. to Paul G. Allen, effective March 26, 1999. The Fort Worth Area Charter Consortium Cities (the "consortium ") consists of the following municipalities: Fort Worth, Denton, Duncanville, Burleson, North Richland Hills, Benbrook, Keller, Southlake, Hurst. These cities all transferred control of their respective cable television franchises from Marcus to Paul Allen in 1999, and began meeting on a regular basis in 2000 to troubleshoot common cable television issues with Charter Communications. Performance issues relating to customer service has been a sticking point between Charter and the consortium for several years. The consortium has actively engaged Charter in dialogue regarding how to get Charter to perform at the standards imposed by the Franchise agreements with consortium cities. In September 2002, the consortium hired C2 Consulting Services, Inc. to perform an audit (the "audit ") of Charter Communications compliance with the customer service standards identified within each of the Cities' franchise agreements. The audit is allowable per the consortium cities' Franchise agreements. Billy Campbell, City Manager April 29, 2003 Page 2 of 7 Summary ofAudit Findinzs Relevant to this action The audit provided seven (7) findings. The finding that pertains to the assessment of liquidated damages is finding #1, "The Cities should find that the Company has not met its burden of proof concerning compliance with the 90% service level standard for the period of January 2001 through June 2002." This finding, the 90% service level standard (the "standard ") is defined in Section 7.4 of the City of Southlake Franchise agreement: "Under Normal Operating Conditions, telephone answer time by a Trained Company Representative, including wait time, shall not exceed thirty (30) seconds from when the connection is made. If the call needs to be transferred, the time to complete the transfer time shall not exceed thirty (30) seconds. These standards shall be met no less than ninety percent (90 %) of the time under Normal Operating Conditions, measured on a quarterly basis." Section 27.3 of the Franchise defines "Normal Operating Conditions:" " Normal Operating Conditions means those service conditions which are within the control of the Company. Those conditions which are not within the control of the Company include, but are not limited to, natural disasters, civil disturbances, power outages, telephone network outages, and severe or unusual weather conditions. Those conditions which are within the control of the Company include, but are not limited to, special promotions, pay - per -view events, rate increases, regular or seasonal demand periods, changes in billing cycle, changes in the form of bills and other billing matters, changes in channel lineups or services that are within Company's control, and repairs, rebuilds, maintenance and upgrade of the cable system including computer software and hardware." The audit finds that Charter has been adjusting their statistics by claiming "abnormal" occurrences (in the scope of the audit 68% of the time) in order to meet the standard. The audit noted in particular that unadjusted statistics reflect that weekend performance is significantly below the standard. Potential results to the City of continued poor customer service performance by Charter include the following: ■ Frustrated customers increasingly move to other means (satellite dish), potentially resulting in diminished franchise fees payable to the City; Billy Campbell, City Manager April 29, 2003 Page 3 of 7 ■ Over time, potentially increasing the City's service level, as frustrated customers increasingly expect to have the City handle customer service issues with Charter. Charter's Response to the consortium on performance — pre and post - audit "Charter Communications has strict customer complaint resolution procedures in place, and while never perfect, we believe we provide an outstanding job responding to communities with customer issues." — Charter Presentation to Consortium, March 8, 2002. "We also intend to demonstrate that the $2.669 (Fort Worth's Total Assessment) million in penalties assessed are unwarranted because they bear no relationship to any potential harm that could have resulted even if Charter's telephone answering service did not meet the standards imposed by the City." Charter Communications Response to the City of Fort Worth, April 15, 2003 Section 21 of the City of Southlake's Franchise agreement states that "Company acknowledges that non - compliance with the customer service standards identified above will harm subscribers and the City and the amounts of actual damages will be difficult or impossible to ascertain. For the second quarter of 1999 and thereafter, the City may therefore assess the following liquidated damages against Company for non- compliance..." Basis for Assessment of Liquidated Dama ,-es Section 21.1 of the City of Southlake Franchise agreement stipulates the following schedule of assessing liquidated damages during a calendar quarter. The measurements for assessment are on a quarterly basis: ■ First non - compliance - $1.00 per subscriber; ■ Second non - compliance - $2.00 per subscriber; ■ Third non - compliance - $3.00 per subscriber. City Council Action Items 1. Authorize the City Manager to assess liquidated damages against Charter Communications — Per Section 23.1 of the City of Southlake Franchise agreement, "Liquidated damages shall be assessed by the City Manager or his or her designee." This agenda Billy Campbell, City Manager April 29, 2003 Page 4 of 7 item is to have the City Council authorize the City Manager to assess liquidated damages against Charter Communications. Staff recommends that, in similar fashion with other consortium cities, that City Council authorize the City Manager to assess liquidated damages against Charter for the period of the 3 d Quarter of 1999 through the 4th Quarter of 2002. 1 Designation of Hearing Officer for Appeal By Charter Communications — Per Section 23.3 of the City of Southlake Franchise agreement, "Company shall have an opportunity to be heard at a meeting of the City Council or by a person designated by the Council as a hearing officer prior to action being taken by the Council." Charter has indicated to other consortium cities that have already assessed damages that they intend to follow the appeal process allowed under each City's Franchise agreement. By being one of the last consortium cities to take action against Charter Communications, staff has been able to witness Charter's response to other cities that have already assessed damages. Charter's initial strategy has been to meet with each consortium city on an individual basis and feel out the potential for forgiving the damages in return for an agreed upon "action plan." These meetings with consortium cities (Fort Worth, Burleson, Denton) have not constituted the formal hearing per the Franchise agreement(s). Section 23.4 of the City of Southlake Franchise agreement states that, "The City Council may adopt additional procedures, including appointment of a City official or other person to act as a hearing officer. The Council's decision may be based upon the record of proceedings conducted by the hearing officer or a proposal for decision submitted by the hearing officer." In order to efficiently deal with the appeal process, and to keep Charter dealing with the consortium versus individual cities, the consortium has discussed the potential of jointly hiring a hearing officer to handle Charter's appeal with all cities at one time and submit the findings to each City Council. Staff recommends that City Council designate a hearing officer hired by the consortium to hear Charter's appeal and submit said findings to City Council for final decision. Billy Campbell, City Manager April 29, 2003 Page 5 of 7 Financial Considerations: The audit findings indicate that Charter was not in compliance with the standard from the first quarter of 2001 through the second quarter of 2002. The total amount due to the City of Southlake by the audit findings total $53,240. On the basis of the audit, the City of Fort Worth questioned Charter representatives with respect to Charter's quarterly reports for the period from the third quarter of 1999 through the fourth quarter of 2000 and for the third and fourth quarters of 2002. The City of Fort Worth determined that Charter has not been able to substantiate the adjustments for abnormal operating conditions as reflected in Charter's quarterly reports to the City for those time periods. As a result of this finding, consortium cities have assessed liquidated damages for these additional time periods outside of the audit. The summary of the damages due to the City of Southlake is below: Total Damages Due to Southlake $135,166.67 * - Period Covered In Scope of Audit — upon adjustment, totaling $53,240. In total, the consortium's assessment of liquidated damages against Charter is estimated to exceed four million dollars. Potential Legal Fees - To date, Charter has indicated to consortium cities that they would like to handle this matter outside of legal channels. Quarter Number of Amount of Total Amount Subscribers Damages Per of Damages for Subscriber Quarter 3 Quarter 1999 3,152 $1 $3,152 4 th Quarter 1999 3,219 $2 $6,437 1 st Quarter 2000 3,306 $3 $9,917 2nd Quarter 2000 3,276 $3 $9,827 3 Quarter 2000 3,320 $3 $9,961 4 th Quarter 2000 3,483 $3 $10,450 1 st Quarter 2001 * 3,509 $3 $10,528 2nd Quarter 2001 * 3,525 $3 $10,575 3 Quarter 2001 * 3,521 $3 $10,563 4 th Quarter 2001 * 3,532 $3 $10,596 1 st Quarter 2002 * 3,582 $3 $10,746 2nd Quarter 2002 * 3,592 $3 $10,776 3 Quarter 2002 3,629 $3 $10,887 4 th Quarter 2002 3,584 $3 $10,751 Total Damages Due to Southlake $135,166.67 * - Period Covered In Scope of Audit — upon adjustment, totaling $53,240. In total, the consortium's assessment of liquidated damages against Charter is estimated to exceed four million dollars. Potential Legal Fees - To date, Charter has indicated to consortium cities that they would like to handle this matter outside of legal channels. Billy Campbell, City Manager April 29, 2003 Page 6 of 7 However, in the instance of litigation regarding this matter, the consortium would join together to pool resources for legal representation (similar to the litigation involving the cities that joined in the City of Denton's lawsuit against TXU). Legal costs would be dependent upon the nature and complexity of the case. Citizen Input / Board Review: Not Applicable. Legal Review: Legal review of this issue has been completed. Alternatives: Alternatives include the following items: ■ Input towards the discussion as desired regarding the assessment of liquidated damages against Charter Communications; ■ Assessment of liquidated damages at desired scope, either within scope of the audit (I Quarter 2001 through the 2 nd Quarter of 2002), or within the scope of assessment already levied by other consortium cities (I Quarter 1999 through 4 th Quarter 2002); ■ Input towards the discussion as desired regarding procedures for hearing Charter's appeal per the Franchise agreement (either City Council hearing the appeal, or designation of a City official or other person to act as hearing officer). Supporting Documents: Supporting documents include the following items: ■ Copy of audit performed by C2 Consulting Services, Inc., received January 6, 2003; ■ Page 32 of the existing Franchise agreement between the City of Southlake and Paul G. Allen, highlighting the Procedure for Assessment of Liquidated Damages; ■ Copy of letter from the City of Fort Worth, dated April 2, 2003, Assessment of Liquidated Damages and Notice of Violation and Opportunity to Cure. The City of Southlake's letter to Charter would be based upon this copy. Billy Campbell, City Manager April 29, 2003 Page 7 of 7 Staff Recommendation: Staff Recommendation consists of the following components: Authorize the City Manager, per the existing Franchise agreement with Paul G. Allen, to assess liquidated damages against Charter Communications for the period of the 3 rd Quarter of 1999 through the 4 Quarter of 2002, totaling $135,166.67; ■ Per the existing Franchise agreement with Paul G. Allen, City Council designation of a hearing officer hired by the consortium of cities, to handle Charter's appeal allowed by the Franchise agreement, and authorizing the City Manager to pay the proportional costs associated with hiring the hearing officer. JE M ONSULTING SERVICES, INC. 7 801 ROn CFOs s Do] I as. Texas 2 52 48 (9 ? 2) ? 26 -7216 (9 ?2) ?26 -0212 (fax) January 6, 2003 Ms. Shawna Cortez Ms. Sheri Campbell- Husband City of Benbrook City of Burleson 911 Winscott Road 141 West Renfro Benbrook, Texas 76126 Burleson, Texas 76028 Mr. John Cabrales Ms. Jeanne Fralicks City of Denton City of Duncanville 215 E. McKinney PO Box 380280 Denton, Texas 76201 Duncanville, Texas 75138 Mr. Randy Westerman Mr. Mario Canizares City of Fort Worth City of Hurst 401 West 2nd Street 901 Precinct Line Road Fort Worth, Texas 76102 Hurst, Texas 76053 Ms. Phyllis Lee Ms. Paulette Hartman City of Keller City of North Richland Hills PO Box 770 7301 N.E. Loop 820 Keller, Texas 76244 North Richland Hills, Texas 76180 Mr. Dolph Johnson Mr. John Eaglen City of Saginaw City of Southlake PO Box 79070 1400 Main Street, Suite 460 Saginaw, Texas 76179 Southlake, Texas 76092 Dear City Representatives: C2 Consulting Services, Inc. ( "C2 ") submits the following report concerning a review of Charter Communications' ( "Charter" or the "Company ") call centers located in Fort Worth, Denton, and Duncanville. The study entailed a review of call center reporting by Charter to the Cities for the period January 1, 2001 through June 30, 2002. As will be discussed more fully below, not all of the data was made available by Charter, so some of the conclusions are based only on the data that was provided and not necessarily representative of the entire review period. Project Activities C2 performed the following project activities: • Reviewed monthly and quarterly call center reports provided by the Cities • Prepared detailed requests for information that were submitted to Charter City Representatives January 6, 2003 Page 2 • Reviewed Charter responses to requests • Met with Charter representatives to discuss each of the call center telephone systems and data collection and reporting techniques • Performed on -site reviews of source documents developed by Charter to prepare the reports to the Cities • Discussed "adjustment" computations with Charter representatives • Reviewed "typical" call center call counts by day by hour or half hour increments • Discussed certain findings with Charter representatives SUMMARY OF OVERALL FINDINGS Based on the above activities, C2 presents the following overall findings. Please note that not all findings are relevant for every call center. Those specific to each call center will be discussed in greater detail within the appropriate section. A. Charter was unable to produce various data requested for each of the call centers. B. The data reported on the monthly and quarterly reports, in many instances, did not tie to the telephone source reports. C. Two of the call centers did not appropriately consider abandoned calls in the compliance computation. D. Charter was unable to provide a supportable computation for adjustments made to telephone system statistics which were ultimately used to show compliance with the standards. E. Charter is currently unable to report "trunks busy" for two of the call centers. F. Locations that have calls transferred to the Fort Worth call center after hours and on weekends are not receiving any compliance information for these periods. G. Charter currently excludes calls related to high speed Internet service from one of the call centers. OVERVIEW Each of the three call centers have differing ways in which telephone statistics are obtained, computed, and reported to the Cities. C2 provides the following overview of each call center to demonstrate some of the differences and, where appropriate, similarities. Fort Worth Call Center The telephone system used by the Fort Worth call center runs on a Windows NT -4 based computer system. On average, the Fort Worth call center handles over 6,000 per weekday, and approximately 8,000 on the weekend, with the highest volumes on Monday. Generally, system statistics are captured every half hour based on the following four classifications: • New Sales • Spanish • Customer Service • Repair For every half -hour increment, the telephone system reports: Incoming calls Calls abandoned City Representatives January 6, 2003 Page 3 • Service level (based on 30 second answer times) • Average talk time • Other data (not necessary for testing compliance) Added to this data are the ARU (automated routing unit) calls for daily calls answered and completed by the automated menu system. C2 notes that Charter considers all of these calls answered within the 30 second requirement. Generally, the Cities receive monthly reports that include the following statistics:' • Calls Offered - All calls from the four CSR categories above plus the ARU handled calls • Answer Rate - Percentage computed based on Calls Handled Within 30 Seconds divided by Calls Offered • Calls Handled Within 30 Seconds - Service level percentage times incoming calls plus all ARU handled calls • All Trunks Busy - Minutes of time that all incoming calls received a busy signal • Answer Rate Under Normal Operating Conditions - Percentage of Calls Handled Within 30 Seconds divided by Adjusted Calls Offered • Adjusted Calls Offered - Calls Offered minus calls considered by Charter to be received due to abnormal operating conditions • Description of Abnormal Operating Conditions - A general description of what Charter considered as abnormal and the length of time the occurrence lasted (This information is derived from the technical department reports) The above information is recorded on a daily basis and summarized for each month. The data is for all calls received at the call center and does not separate out any individual city. The adjusted answer rate for the month (total Calls Handled within 30 Seconds divided by total Adjusted Calls Offered) is reported to the Cities as Charter's demonstration of compliance for the entire region. With respect to staffing, Charter representatives reported that there are between 60 and 80 CSRs available to take calls. The staffing is adjusted based on the time of day and day of the week. For example, according to Charter, the weekday staffing is full until lOpm and then adjusted downward due to significantly lower call volumes. However, the call center is a 24/7 operation. Denton Call Center The Executone telephone system used by the Denton call center is somewhat antiquated in that the manufacturer is no longer in business or able to provide information concerning the system operation. The Denton call center receives calls from other jurisdictions, but the City of Denton contributes the largest call volume. On average, the Denton call center handles over 500 calls per day during business hours, with the largest volumes on Mondays. The calls received are separated into two main categories. Calls included in the first category are not used in the compliance computation, and are calls that are routed to administrative staff. All other calls are considered to be inbound calls to be answered by a CSR and included in the computations reported to the Cities served by this call center. ' The Cities include Benbrook, Burleson, Fort Worth, Hurst, Keller, North Richland Hills, Saginaw and Southlake. One of the issues with respect to the Fort Worth call center is the unavailability of historical staffing levels. This will be discussed in greater detail later in this report. City Representatives January 6, 2003 Page 4 Based on the telephone system's K2 daily report, Charter reports the following telephone system statistics (as adjusted) for each hourly increment that the center is open: • Inbound Calls — Calls received by the Denton call center • Handled by ARU — Calls routed to administrative staff • Calls Abandoned — All calls reported as abandoned after the recording • Answered in 30 Seconds — Calls reported on the K2 as answered within 30 seconds • Level % - Calls Answered in 30 Seconds divided by Inbound Calls • Length of Call — Average length of call for the day based on K2 report • Trunks Busy % - There is no data used to generate the percentages shown in this column The total calls Answered in 30 Seconds for the month divided by the Inbound Calls (as adjusted) are used to demonstrate Charter's compliance with the 90% service level standard.' The data reported to the Cities only includes the Denton call center statistics, and does not reflect the Company's performance for after hours or weekend service offered by the Fort Worth call center. According to Charter representatives, the staffing at the Denton call center consists of at least 7 CSRs at any given time during weekdays, with 2 CSRs handling the walk in traffic. There are 13 CSRs employed that have staggering shifts from Sam to 7pm. On Saturdays, there are at least 3 CSRs available to take calls from Sam to 5pm with an additional CSR from Sam to 1pm. The exception is that from 1:OOpm to 2:OOpm, the calls are forwarded to Fort Worth for a lunch hour break. Duncanville Call Center The Duncanville call center is operated with the same Executone telephone system as that used in the Denton call center. On average, the Duncanville call center handles 130 calls per day Monday through Friday and approximately 60 on Saturdays. The highest volumes are received on Mondays and Tuesdays. There are a few differences in the data captured and reported when compared to the Denton reporting. First, the telephone system statistics are captured in half -hour increments. Second, the statistics that are reported are found directly from the K2 report without adjustment. There are at least 3 CSRs to handle calls at the Duncanville call center during the week. There is also one supervisor that is made available when required. The office hours are 8:30am to 5:30pm during the week and 8:30am to 5pm on Saturday. From 12:30pm to 1:30pm on Saturday, the phones are rolled over to Fort Worth for the lunch hour break. 3 Based on comparison of the reports submitted to the City of Denton and the telephone system statistics, the Inbound Calls captured by the system are "adjusted" before being included in the report. Such "adjustment' will be discussed in detail later in this report. 4 There is an error in the computation in that Duncanville statistics remove abandoned calls inappropriately. However, the numbers used all come directly from the K2 report. City Representatives January 6, 2003 Page 5 ISSUE DISCUSSION A. Unavailability of Data During the on -site reviews at each of the call centers, C2 noted that certain data was either not currently maintained by Charter, or could not be produced. The following discussion identifies such data by call center location. 1. Fort Worth Call Center As noted above, the compliance computation includes the ARU handled calls that are all considered to be answered within 30 seconds. During the on -site, the Company explained that this data was taken directly from the ARU system daily and transferred to a spreadsheet report. However, no source documents are produced from the system to later verify the accuracy of the ARU statistics.' Therefore, C2 was unable to verify any of the reported ARU handled calls for the entire period under review. This issue is significant due to the fact that, on average, it appears that ARU calls represent between 20% and 30% of all calls reported on a daily basis. Additional data that has not been provided to date relates to the staffing levels at the call center. Charter did provide shift information for each employee, but C2 requested that a more condensed analysis of CSRs by time of day be prepared. As of the writing of this report, this analysis has not been provided. Also related to staffing is the fact that Charter stated it cannot provide historical staffing information. This is significant from the standpoint that any analysis of call center "normalcy" is somewhat hampered without understanding the number of CSRs available during the historical period under review. 2. Denton Call Center Charter's inability to produce requested data from the Denton call center activity is much more significant. None of the 2001 information could be found and is thought to have been destroyed. January and February, 2002 also could not be located. The unavailability of such data is extremely significant in that C2 cannot verify any of the statistics reported before March 2002, and as noted below, the statistics reported to the City of Denton during the period available show gross inaccuracies. Also important is the inability of Charter to provide any information concerning the "trunks busy." Although the reports indicate compliance with a 0% shown, the 0% actually is only a placeholder and is not reflective of any actual compliance. C2 notes that such information is required to demonstrate compliance with the standard of less that 3% busy signals. In is interesting to note that, unlike the Fort Worth call center, the Denton call center internal reports do show staffing levels by day. As would be expected with only 13 employees, there is little fluctuation. Charter did not produce any historical staffing information for the 2001 period. 3. Duncanville Call Center Charter was able to provide the telephone system statistics for the first 5 months of 2001 and part of 2002. However, even within the data provided were numerous days that were not readable due to printer errors. Charter representatives stated that they were unsure of the location of the remaining months. Again, the ' A Charter representative demonstrated the method by which the data is obtained. In addition, the Company stated that is was going to start retaining source documentation from the actual system. 6 These statistics were generated based on selected Call Center Pulse Reports showing the number of calls by category. City Representatives January 6, 2003 Page 6 lack of source documentation is significant from the standpoint that reported statistics can not be verified However, where data was made available, C2 noted little necessary adjustment to the reported statistics. Based on the internal reports prepared by Charter, there are a number of days where there were no telephone statistics generated, as the telephone system was "down." C2 is unable to determine the impact of this lack of data, but points out that any statistics reported to the City do not include the number of callers that attempted to contact the Duncanville call center during these days. According to the internal reports, there were 10 days where no statistics were available, either due to the entire system being out of service or technical difficulties with printing the information. In C2's opinion, these days should be accounted for in the reporting. At a minimum, on a going forward basis, the average number of calls per day should be considered abandoned for all days where the telephone system is down. With respect to days that have inaccessible statistics, the previous day's activity could be considered as a substitute. C2 notes that unlike the Fort Worth call center, Charter was able to provide all of its internal reports for the period under review that included historical staffing for the Duncanville call center. B. Variances in Reported Data There were a number of variances noted between the data shown on the telephone system statistics reports and the final reports submitted to the Cities. 1. Fort Worth Call Center C2 did not note any major discrepancies in the data from the telephone system reports and those included as unadjusted data on the reports to the Cities.' The issue with the reports is primarily related to the adjustment methodology discussed below. 2. Denton Call Center Based on the information that was available (3/02- 6/02), there were gross errors in the telephone statistics reporting.' In many instances, C2 was unable to tie either the number of calls answered within 30 seconds or the number of calls answered by CSRs. The Charter representatives had no explanation for the discrepancies. Based on discussions with Charter, the Company adjusted the reports to the City of Denton for the period January through June 2002. Although the calls handled by CSRs and calls answered within 30 seconds now tie to the telephone system reports, the Company continues to exclude an important statistic (abandoned calls) as discussed below. 3. Duncanville Call Center Based on the monthly telephone system reports that could be made available, the Duncanville call center telephone system statistics tie to the reports submitted to the City. As with the Denton call center, the Duncanville call center reports have not accurately taken into account the abandoned calls statistic. C2 reiterates the inability to verify the ARU handled calls. s Charter provided information subsequent to the period under review which also showed such errors. City Representatives January 6, 2003 Page 7 C. Treatment of Abandoned Calls Each of the call centers has a different methodology for handling "abandoned calls" in reporting to the Cities. Typically, these calls are those that enter the telephone system and then are abandoned by either the customer or the system. 1. Fort Worth Call Center The Fort Worth call center reports all abandoned calls on its daily internal pulse reports. These calls are included in the total number of calls routed to the CSRs. As a result, the reported statistics accurately take into account the abandoned calls in developing a compliance service level. 2. Denton Call Center The reports provided by the Denton call center originally included daily abandoned call statistics. However, no where in the compliance computation do these calls appear to have been included. In fact, based on the inability to tie many of the reported numbers, C2 cannot definitively state any conclusions with respect to the treatment of abandoned calls. In the revisions provided to the City of Denton in December, Charter excludes the abandoned calls in the computation. In C2's opinion, this is incorrect. Any revision should add abandoned calls to the total calls handled by CSRs before computing compliance. In fact, the 30- second compliance statistic that is reported in the K2 report performs this same calculation. 3. Duncanville Call Center The compliance computation made by the Duncanville call center actually deducts the abandoned calls from the calls answered." This actually compounds the problem in that such calls should be added to the calls answered statistic. The impact of this problem is shown in the following table: 9 In other words, the inclusion of abandoned calls lowers the compliance statistic, reflecting the Company's inability to answer such calls within 30 seconds. 10 The actual computation should be to add the total number of calls handled by CSRs to the total abandoned calls (after the recording begins). The total number of calls answered within 30 seconds should be divided by this result to show daily service levels. " This is one of two major issues with respect to the Duncanville call center computation. Otherwise, the statistics reported appear to be directly from the telephone system reports without adjustment. Originally C2 Reported Re- computation Difference May -01 88.60% 84.81% 3.79% Jul -01 90.00% 85.04% 4.96% Aug -01 87.70% 83.43% 4.27% Sep -01 88.40% 85.12% 3.28% Oct -01 92.40% 89.87% 2.53% Nov -01 92.20% 90.12% 2.08% Jan -02 90.40% 90.11% 0.29% Feb -02 91.70% 89.05% 2.65% Mar -02 93.20% 89.52% 3.68% Apr -02 88.40% 85.37% 3.03% May -02 88.30% 84.11% 4.19% Jun -02 84.20% 82.62% 1.58% 9 In other words, the inclusion of abandoned calls lowers the compliance statistic, reflecting the Company's inability to answer such calls within 30 seconds. 10 The actual computation should be to add the total number of calls handled by CSRs to the total abandoned calls (after the recording begins). The total number of calls answered within 30 seconds should be divided by this result to show daily service levels. " This is one of two major issues with respect to the Duncanville call center computation. Otherwise, the statistics reported appear to be directly from the telephone system reports without adjustment. City Representatives January 6, 2003 Page 8 As shown, several of the months are missing. This is due to some actual reports not being available from the Cities. However, from the above data, C2 notes that the three quarters where all months were available, the re- computation shows that Charter did not meet the 90% requirement during any of them (third quarter 2001, first quarter 2002, and second quarter 2003). The statistics reported to the City of Duncanville showed that Charter met the requirement during the first quarter 2002. D. Unsupported Adjustment Methodology The telephone system statistics from the Fort Worth and Denton call centers were significantly adjusted for what the Company termed as "abnormal" conditions. 1. Fort Worth Call Center Based on discussions with Charter representatives, the Company adjusts the actual Calls Offered for each daily event considered to be "abnormal." As shown on the reports submitted to the Cities, adjustments can be generally classified as follows: • Cut Cable by Third Party • Power issues with TXU • No Problem Found ( "NPF ") • Box Driver or other Headend Issues • Bad Weather • Other Power Supply Issues As C2 understands it, the basic methodology employed by the Company is to identify the total time that each outage occurred, record all Calls Offered during each of the half -hour increments, and select some or all of the calls recorded as adjustment for the day. Based on Charter representatives, there is no explainable computation that is made to compute the adjusted calls other than looking at the total received during the time period in question and using those as the basis. In fact, there were a number of days in which the adjustment actually exceeds the total number of calls offered during the outage period reported. 13 In C2's opinion, there are a number of problems with Charter's adjustment methodology. To begin with, the categories for adjustment do not always appear to be outside of the control of the Company. For example, "No Problem Found" gives no indication as to whether the incident occurred due to Company or outside activities. It appears that issues involving box driver and other headend problems are Company issues and should not be cause for adjustment. In many instances noted during the period under review, the other power supply issues appeared to be issues that were not related to anything outside the Company's control. Examples of this include "blown fuse," "replace power supply," "repaired cable short," etc. 12 The first quarter 2002 does show a re- computation of 89.6 %. If rounded up, the requirement could be considered met. " Several examples of this include 5/21/01 in which the total outage period calls were 8,551 and the Company adjusted the actual calls offered by 8,930. The raw data for that day showed a service level of 55 %, and the adjusted data showed a service level of 92 %. Another example is 5/28/01 with outage period calls shown as 2,535 and adjustment calls shown as 4,926. The service level for this day was raised from 51% to 90 %. One more recent example is 3/18/02 with outage period calls shown as 222, and adjustment calls shown as 1,872. The service level was raised from 62% to 77 %. City Representatives January 6, 2003 Page 9 With respect to "Cable Cuts by Third Party," there are several issues that should be noted. First, there is not sufficient information to indicate that, in fact, the numerous cuts reported were due to third party activities. Second, of the 546 days under review, 244 days reported at least one third party cable cut. This means that approximately 45% of the time, Charter claims to experience abnormal call volumes related to cable cuts. In C2's opinion, there is some point at which cable cuts become normal operating conditions particularly since the Charter representatives stated that they staff based on historical call volumes, (not adjusted call volumes). Third, Charter has not been able to demonstrate that the call volumes actual change due to such cable cuts. A review of calls received during each half hour on days without adjustment do not seem to vary significantly from many of the days that show one of more cable Cuts. 14 Clearly, power outages can have an effect on the Company's ability to provide cable service. And clearly, outages caused by TXU are outside of the Company's control. However, at least two other factors must be considered. First, Charter is required to have certain backup power that does not appear to have been taken into account in the reported TXU power outages. Second, much like the cable cuts, TXU power outages are reported for 195 days of the 546 day period. Again, with over 35% of the days having reported TXU power outages, it appears that such occurrences are either not "abnormal," or not being appropriately taken into account by the Charter adjustment methodology. Overall for the period, Charter only had 174 days of 546 (32 %) that did not reflect an "abnormal" occurrence. This would indicate that Charter is experiences abnormal conditions 68% of the time where CSRs' ability is hampered in meeting the 90% standard. When looking at the days of the week individually, the following adjustment percentage to the total calls actually reported was noted: Reported Adjusted C2 also notes that without adjustment, the weekend performance is considerably below standards. This is significant from the standpoint that all Cities are served on Sundays and all or part of Saturdays. Based on the information provided, the overall actual service level for Saturdays was 67 %, but the adjusted service level was 85 %. For Sundays, the actual service level was 78 %, and the adjusted service level was 90 %. Based on the unadjusted telephone statistics, Charter met the 90% answer rate for Saturdays and Sunday only 12% and 28% of the time, respectively. Without further justification for the adjustment methodology, it is C2's opinion that the adjusted service levels reported by Charter during the period January 2001 through June 2002 should not be accepted. 14 This is not to say that there could be call volume spikes during outage periods in which a significant number of subscribers are affected. However, there is nothing in the data provided that proves that any of the changes in call volumes are actually related to the outages that occurred. Calls Calls % Adjusted Monday 543,638 437,968 19.44% Tuesday 499,564 420,379 15.85% Wednesday 539,128 464,587 13.83% Thursday 474,007 395,191 16.63% Friday 490,553 412,833 15.84% Saturday 414,053 326,318 21.19% Sunday 272,528 237,866 12.72% C2 also notes that without adjustment, the weekend performance is considerably below standards. This is significant from the standpoint that all Cities are served on Sundays and all or part of Saturdays. Based on the information provided, the overall actual service level for Saturdays was 67 %, but the adjusted service level was 85 %. For Sundays, the actual service level was 78 %, and the adjusted service level was 90 %. Based on the unadjusted telephone statistics, Charter met the 90% answer rate for Saturdays and Sunday only 12% and 28% of the time, respectively. Without further justification for the adjustment methodology, it is C2's opinion that the adjusted service levels reported by Charter during the period January 2001 through June 2002 should not be accepted. 14 This is not to say that there could be call volume spikes during outage periods in which a significant number of subscribers are affected. However, there is nothing in the data provided that proves that any of the changes in call volumes are actually related to the outages that occurred. City- Representatives Januaiv 6, 2003 Page 10 Barring additional information to support the "abnormal" impacts, C2 recommends that the monthly reports be restated to reflect only actual telephone system statistics as shown in the following table: 2. Denton Call Center As noted above, there were a number of errors noted in the telephone system statistics provided with respect to differences in the actual reports and the statistics ultimately reported to the City of Denton. Charter representatives initially stated that the differences were due to adiustments that were made for ``abnormal" conditions. However, when additional technical backup was reviewed (outage reports), many of the days with discrepancies showed no outages or other abnormal conditions. In fact, Charter representatives conceded that there was no explanation for all of the adiustments that had been made, and that errors in reporting had occurred. Charter provided the City of Denton with "revised" reports from review period months January 2002 through June 2002. However, as noted above, C2 C2 Charter Recommended Reported Actual Adjusted Service Level Service Level Jan -01 89.48% 91.08% Feb -01 90.21% 91.93% Mar -01 60.63% 90.63% Quarter 77.00% 91.17% Apr -01 87.65% 91.66% May -01 71.63% 91.24% Jun -01 50.77% 90.88% Quarter 68.43% 91.29% Jul -01 40.22% 53.11% Aug -01 58.84% 70.94% Sep -01 63.36% 79.60% Quarter 53.14% 67.16% Oct -01 72.95% 90.59% Nov -01 85.78% 93.21% Dec -01 79.47% 91.16% Quarter 78.84% 91.61% Jan -02 80.96% 90.22% Feb -02 88.09% 93.57% Mar -02 76.61% 89.61% Quarter 81.35% 91.00% Apr -02 82.20% 92.03% May -02 85.39% 94.53% Jun -02 80.42% 90.42% Quarter 82.65% 92.32% Overall 72.58% 86.95% 2. Denton Call Center As noted above, there were a number of errors noted in the telephone system statistics provided with respect to differences in the actual reports and the statistics ultimately reported to the City of Denton. Charter representatives initially stated that the differences were due to adiustments that were made for ``abnormal" conditions. However, when additional technical backup was reviewed (outage reports), many of the days with discrepancies showed no outages or other abnormal conditions. In fact, Charter representatives conceded that there was no explanation for all of the adiustments that had been made, and that errors in reporting had occurred. Charter provided the City of Denton with "revised" reports from review period months January 2002 through June 2002. However, as noted above, C2 City Representatives January 6, 2003 Page 11 continues to take issue with the revisions with respect to the treatment of abandoned calls and provides the following recommendations for the revised period. *Charter had a number transposition in its revised computation Based on the above computation, Charter has not complied with the 90% standard during either of the first two quarters of 2002. 3. Duncanville Call Center As stated above, the Duncanville telephone system statistics are not adjusted for "abnormal" conditions other than not reporting for those days where the entire system was down or unavailability of data due to technical printing difficulties. E. "Trunks Busy" Reporting 1. Fort Worth Call Center As you are aware, the standard for "trunks busy" is less than 3% measured on a quarterly basis. The Fort Worth telephone system captures the actual daily busy minutes which can be translated into a monthly percentage. During the 18 month review period, the actual "trunks busy" statistics were adjusted in 7 months, with only 3 months significantly adjusted. These three months provided descriptions of "abnormal" conditions as either severe weather or the bankruptcy of the high speed Internet service. In C2's opinion, both of the occurrences can be considered outside of the control of the Company, deserving of adjustment. However, as with the adjustment to calls, Charter cannot provide a supportable computation of the calculations made. C2 notes that, with the exception of the three months where the adjustments actually placed Charter in compliance with the standard (where compliance was not shown by the actual statistics), Charter reported non - compliance for months during the review period. The first of these was in June 2001, but the quarterly computation resulted in 2.5 %. All of the others were in the third quarter 2001, with the quarterly average at 10 %. 2. Denton Call Center According to Charter representatives, the Executone system does not capture the "trunks busy" statistic. In reviewing the telephone reports, C2 did not note any such information. However, the reports submitted to the City of Denton indicate that the "trunks busy" statistic is 0 %. Given that no statistic is generated, 15 C2 cannot make any recommendations with respect to the period January 2001 through December 2001 because of Charter's inability to provide the telephone system statistics. Service Level Service Level C2 Originally Revised Recommended Reported by Charter Service Level Jan -02 90% 80% 73% Feb -02 88% 85% 77% Mar -02 90% 71% 67% Apr -02 90% 59% 56% May -02 90% 67% 63% Jun -02 90% 63% 64% *Charter had a number transposition in its revised computation Based on the above computation, Charter has not complied with the 90% standard during either of the first two quarters of 2002. 3. Duncanville Call Center As stated above, the Duncanville telephone system statistics are not adjusted for "abnormal" conditions other than not reporting for those days where the entire system was down or unavailability of data due to technical printing difficulties. E. "Trunks Busy" Reporting 1. Fort Worth Call Center As you are aware, the standard for "trunks busy" is less than 3% measured on a quarterly basis. The Fort Worth telephone system captures the actual daily busy minutes which can be translated into a monthly percentage. During the 18 month review period, the actual "trunks busy" statistics were adjusted in 7 months, with only 3 months significantly adjusted. These three months provided descriptions of "abnormal" conditions as either severe weather or the bankruptcy of the high speed Internet service. In C2's opinion, both of the occurrences can be considered outside of the control of the Company, deserving of adjustment. However, as with the adjustment to calls, Charter cannot provide a supportable computation of the calculations made. C2 notes that, with the exception of the three months where the adjustments actually placed Charter in compliance with the standard (where compliance was not shown by the actual statistics), Charter reported non - compliance for months during the review period. The first of these was in June 2001, but the quarterly computation resulted in 2.5 %. All of the others were in the third quarter 2001, with the quarterly average at 10 %. 2. Denton Call Center According to Charter representatives, the Executone system does not capture the "trunks busy" statistic. In reviewing the telephone reports, C2 did not note any such information. However, the reports submitted to the City of Denton indicate that the "trunks busy" statistic is 0 %. Given that no statistic is generated, 15 C2 cannot make any recommendations with respect to the period January 2001 through December 2001 because of Charter's inability to provide the telephone system statistics. City Representatives January 6, 2003 Page 12 this information is not necessarily accurate. In fact, it would be more appropriate to report "unknown" rather than a 0% which can be misperceived. 16 3. Duncanville Call Center As with the Denton call center, the Executone system in Duncanville does not provide the "trunks busy" statistic. Again, the reporting to the City of Duncanville indicates that the "trunks busy" time is 0 %. In C2's opinion, both the Denton and Duncanville call centers are unable to demonstrate any compliance with the "trunks busy" standard. F. Fort Worth After Hours Service C2 understands that, of the Cities included in the consortium, only Denton and Duncanville do not have all of their calls answered by the Fort Worth call center. However, it is also C2's understanding that all of Denton's and Duncanville's calls (along with other cities served by these two call center) are forwarded to the Fort Worth call center after 5- 5:50pm Monday through Friday, after 5pm on Saturday, and all day Sunday. Given that much of Denton's and Duncanville's calls are handled by the Fort Worth call center, it is C2's opinion that these Cities should also receive compliance information from that center. When asked, Charter representatives stated that the reported statistics to the Cities of Denton and Duncanville do not include any service level information from Fort Worth. Clearly, this is inappropriate when the standard is supposed to apply to all customer service related calls for each of these two Cities. This issue was briefly discussed with the Fort Worth call center management, and the Company stated that there is no easy way to determine the number of calls that are forwarded from the other call centers. If the system does not allow some way in which to separate out these after hour and weekend calls, then the Fort Worth statistics should be maintained in such a way as to separately demonstrate the compliance during these time periods. G. Fort Worth Excludes Internet Calls During 2002, the Fort Worth call center separated the video calls from high speed Internet. A separate CSR group receives calls concerning high speed Internet service with completely separate telephone statistics. However, with respect to the Denton and Duncanville call centers, the calls that are referred to CSRs are not separated. In C2's opinion, it is inconsistent to include these calls in two locations and not in Fort Worth. C2 does not render an opinion as to whether such calls should be included given the controversy over high speed Internet service. However, C2 does recommend that the data collection and reporting be consistent. REVIEW OF ACTIVITIES BY DAY In an attempt to estimate a call volume that can be handled at a 90% service level, C2 reviewed a number of individual days that were identified as having met the standard and not showing any "abnormal" adjustment by Charter. These days were segregated by day of the week into half -hour or hour increments. C2 makes the following observations: 16 It appears that Charter merely reported what was included on the spreadsheet as 0% because no data had been input into the spreadsheet. City Representatives January 6, 2003 Page 13 A. Fort Worth Call Center As noted above, there were only 174 days during the review period that did not have adjustment. To further reduce the sampling, C2 only chose from those days where the 90% standard was met." Thirty days were chosen, with at least two of each individual day included. The results are as follows: Mondays Tuesdays Wednesdays Thursdays Fridays Saturdays Sundays Est. CSR Avg. Daily Calls 5,100 4,900 5,000 4,700 4,300 2,900 2,200 Est. ARU Avg. Daily Calls 1,500 1,300 1,500 1,300 1,200 1,400 1,400 Est. Total Avg. Daily Calls 6,600 6,200 6,500 6,000 5,500 4,300 3,600 C2 does not suggest that these are necessarily absolute levels that should be used to set the basis for reasonable daily call levels. However, given the data that was available, these are the best estimates that can be calculated at this time. To more accurately determine the call levels that allow Charter to achieve compliance, a time and motion study would have to be performed to provide certain additional data, including, but not limited to: • Categorization of all CSR calls received by half hour increment • Staffing for each half hour increment • Categorization of all ARU calls • Monitoring of specific levels of calls by half hour increment that significantly impact service levels • Identification of each special promotion, PPV event, soft disconnect, or other action on the part of the Company that could increase the number of calls received However, it is C2's opinion that the above statistics provide an estimated baseline for purposes of determining large variations that could be investigated as to cause. Of course, if Charter is able to receive higher volumes of calls within the 90% service standards, then the above daily baselines should be adjusted accordingly. B. Denton Call Center The call statistics for the Denton call center are currently maintained at hour increments. For consistency and comparison, the Company may want to reprogram the telephone system to provide half hour increments as provided in both of the other two call centers. That aside, a review of the data that was available (March 2002 through June 2002) yielded the following average daily call volumes: " C2 notes that not all of the days that met the two qualifications were included. Those included were chosen randomly. " All of the available daily data was included in the analysis. And as shown in the recommended revision of the statistics, Charter has not been able to meet the 90% standards with these volumes. However, the volumes are based on averages and potentially point to the need for additional staff. City Representatives January 6, 2003 Page 14 Given these averages over a period of four months, it is reasonable to assume that these call volumes will continue. Again, C2 notes that these call volumes do not include any after hours calls made to the Denton call center that are forwarded to Fort Worth. C. Duncanville Call Center As noted above, much of the telephone system data was either not available or unreadable for the Duncanville call center. Based on the data that was available, the following daily averages were computed: Avg. Daily Mondays Calls Mondays 760 Tuesdays 663 Wednesdays 588 Thursdays 525 Fridays 605 Saturdays 348 Sundays N/A Given these averages over a period of four months, it is reasonable to assume that these call volumes will continue. Again, C2 notes that these call volumes do not include any after hours calls made to the Denton call center that are forwarded to Fort Worth. C. Duncanville Call Center As noted above, much of the telephone system data was either not available or unreadable for the Duncanville call center. Based on the data that was available, the following daily averages were computed: As with the Denton call center, these statistics do not include any of the after hours calls that are received by the Duncanville call center and forwarded to the Fort Worth call center. ADDITIONAL OBSERVATIONS During the course of the study, the City of Fort Worth provided the results of its own attempts to contact the Fort Worth call center. C2 finds it interesting that the general trend in the Fort Worth statistics (not necessarily statistically significant by generally accepted sampling techniques) follows the unadjusted trend in the Fort Worth telephone system statistics. As shown in the following graph, the trend lines are very similar, with the lower line based on the City call percentages, and the top line based on the actual unadjusted monthly service levels of the call center. 19 Unless the Company is able to show that there were factors that make these four months abnormal. Avg. Daily Calls Mondays 142 Tuesdays 149 Wednesdays 133 Thursdays 109 Fridays 114 Saturdays 63 Sundays N/A As with the Denton call center, these statistics do not include any of the after hours calls that are received by the Duncanville call center and forwarded to the Fort Worth call center. ADDITIONAL OBSERVATIONS During the course of the study, the City of Fort Worth provided the results of its own attempts to contact the Fort Worth call center. C2 finds it interesting that the general trend in the Fort Worth statistics (not necessarily statistically significant by generally accepted sampling techniques) follows the unadjusted trend in the Fort Worth telephone system statistics. As shown in the following graph, the trend lines are very similar, with the lower line based on the City call percentages, and the top line based on the actual unadjusted monthly service levels of the call center. 19 Unless the Company is able to show that there were factors that make these four months abnormal. City Representatives January 6, 2003 Page 15 Comparison of City Study to Actual Call Center Activities 100.00% 90.00% 80.00% 70.00% 60.00% a a J v 50.00% . a fA 40.00% 30.00% 20.00% 10.00% 0.00% OVERALL RECOMMENDATIONS Fort Worth f Charter Based on the data that was provided by Charter and the information that was obtained on -site, C2 makes the following recommendations :20 1. The Cities should find that the Company has not met its burden of proof concerning compliance with the 90% service level standard for the period January 2001 through June 2002. 2. The City of Denton should find that the Company has not been able to provide any information prior to March 2002 to verify the accuracy of reporting for all months under review. 3. The City of Duncanville should find that the Company has not been able to provide all monthly information to verify the accuracy of the reporting during the period under review. 4. The Cities of Denton and Duncanville should find that Charter be required to provide call center service level information for after hours calls that are forwarded from their respective call centers to the Fort Worth call center. 5. The Cities should find that the Fort Worth call center should keep historical source documentation with respect to daily ARU calls and staffing levels. 20 These recommendations are based on the results of the study as reported. In the event that Charter is able to provide additional information after reviewing the report, C2 is willing to consider the impact of such information at the Cities' request. Jul -01 Aug -01 Sep -01 Oct -01 Nov -01 Dec -01 Jan -02 Feb -02 Mar -02 Apr -02 May -02 Jun -02 City Representatives January 6, 2003 Page 16 The Cities of Denton and Duncanville should find that the telephone systems in their respective call centers should be modified or upgraded to provide "trunks busy" information. With respect to adjusting call volumes for "abnormal" incidences, C2 provides the following alternative approaches: a. Require the initial reporting to be based only on the raw data, with an opportunity for Charter to provide specific dates and times for agreed upon "abnormal" occurrences. This approach would not require an exact computation, but would allow for the exclusion of those days where "abnormal" situations arose in the compliance calculation. b. Again require the initial reporting to be based only on the raw data. However, based on the call volumes identified above, (broken down into half hour increments), allow Charter to show that "abnormal" situations forced call volumes significantly above the norms. This approach also requires that Charter be able to show that the calls received during those half hour increments were related to the "abnormal" incident and not some other issue that is within the Company's control. c. Require Charter to conduct a time and motion study that shows the impact of specific occurrences that are both within and outside the control of the Company to establish a "situation adjustment." (This may not be a reasonably workable alternative, but would provide an adjustment computation for specific types of occurrences.) Of the three, the first alternative is the simplest approach to initiate, provided that the Cities and the Company can agree as to what is "abnormal." C2 appreciates this opportunity to work with the consortium of Cities. If you have any questions concerning the findings and recommendations included in this report, please contact Ms. Connie Cannady at 972.726.7216. Very truly yours, C2 Consulting Services, Inc. 22.2 Liquidates damages may be assessed for violation for the provision of Section 26.4 for submission of reports within five (5) business days in the amount of $1,000 per day. 23. Procedure for Assessment of Liquidated Damages: The procedure for consideration and assessment of liquidated damages is as follows: 23.1 Liquidated damages shall be assessed by the City Manager or his or her designee. 23.2 Company may obtain a review of the assessment by the City Council by making a written request within ten (10) business days after receipt of notice in writing of the assessment and its basis. 23.3 Company shall have an opportunity to be heard at a meeting of the City Council or by a person designated by Council as a hearing officer prior to action being taken by the Council. 23.4 The City Council may adopt additional procedures, including appointment of a City official or other person to act as a hearing officer. The Council's decision may be based upon the record of proceedings conducted by the hearing officer or a proposal for decision submitted by the hearing officer. 24. Payment of Liquidated Damages Liquidated damages shall be paid on or before the tenth (10 business day following assessment or, if Company requests review by the City Council, on or before the tenth (10 business day following issuance of the Council's decision. 25. Ombudsman Company will provide a senior employee (at the Vice President or Director level) as director of government affairs and ombudsman reporting directly to a regional vice president of CC Holdings. The director of government affairs will have responsibility for working with the City and other cities in the area to address problems that may arise under the Franchise and shall be Company's ombudsman for both the City and subscribers. Company will give the City an opportunity to comment on the detailed job description of the director of government affairs before the position is filled. 26. City Liaison Company shall continue to provide solving liaison services for the City of the type being provided to the City of Fort Worth by Charter's Customer Care Group in the Fall of 1998. The purpose of this service is to provide the City with direct access to supervisory level personnel 32 April 2, 2003 VIA CERTIFIED MAIL Ms. Margaret A. Bellville Executive Vice President Chief Operating Officer 12405 Powerscourt Drive St. Louis, MO 63131 -6604 Mr. Paul G. Berra Director of Gov't Relations — National Charter Communications 12405 Powerscourt Drive St. Louis, MO 63131 -6604 Ms. Lee A. Clayton Sr. Vice President Midwest Division Charter Communications 12405 Powerscourt Drive St. Louis, MO 63131 -6604 Ms. Celeste Vossmeyer Mr. Dan Spoelman Vice President — Gov't Relations Vice President of Operations Charter Communications Charter Communications 12405 Powerscourt Drive 4800 Blue Mound Road St. Louis, MO 63131 -6604 Fort Worth, TX 76106 Re: Assessment of Liquidated Damages and Notice of Violation and Opportunity to Cure Dear Ms. Bellville, Mr. Berra, Ms. Clayton, Ms. Vossmeyer and Mr. Spoelman: Marcus Cable Associates, LLC d /b /a Charter Communications, a Wired World Company ( "Charter ") is the grantee under a franchise with the City of Fort Worth ( "City ") to operate a cable system in the City (the "Franchise")'. This letter constitutes the City's notice to Charter of Charter's failure to comply with the terms and conditions of the Franchise and an opportunity to cure pursuant to Section 626(d) of the Communications Act of 1934, as amended. ' Ordinance No. 8291, as amended by Ordinance Nos. 10193, 12105 and 13718. 47 U.S.C. § 546(d). Under the Franchise, Charter is required to adhere to the following customer service standard (the "Customer Service Standard "): Under Normal Operating Conditions, telephone answer time by a Trained Company Representative, including wait time, shall not exceed thirty (30) seconds from when the connection is made. If the call needs to be transferred, the time to complete the transfer time shall not exceed thirty (30) seconds. These standards shall be met no less than ninety percent (90 %) of the time under Normal Operating Conditions, measured on a quarterly basis. A violation of this Customer Service Standard is subject to the assessment of liquidated damages as follows: (i) First non - compliance: $1.00 per subscriber; (ii) Second non - compliance within three (3) consecutive calendar quarters: $2.00 per subscriber; (iii) Third non - compliance within six (6) consecutive calendar quarters and each subsequent non - compliance: $3.00 per subscriber. Based on an audit of Charter's records undertaken by C2 Consulting Services, Inc. (the "Audit "), the City finds that Charter was not in compliance with the Customer Service Standard for the period from the First Quarter of 2001 through the Second Quarter of 2002. A copy of the Audit is attached. The City is especially disturbed that the findings of the Audit conclude that Charter's quarterly reports to the City during the same time period are, to a significant extent, not supported by Charter's own records, especially where raw data has been adjusted due to alleged conditions outside the scope of "normal operating conditions ", as that term is used in Federal Communications Commission regulations. For example, with the exception of the Third Quarter 2001, Charter's quarterly reports to the City showed that Charter was in compliance with the Customer Service Standard in each of the quarters covered by the Audit. However, the Audit reveals that Charter's own data reflects that Charter was not in compliance with the Customer Service Standard in any of the quarters covered by the Audit. On the basis of the Audit, City staff members have questioned Charter representatives with respect to Charter's quarterly reports for the period from the Third Quarter of 1999 through the Fourth Quarter of 2000 and for the Third and Fourth Quarters of 2002. The City finds that Charter has not been able to substantiate the adjustments for abnormal operating conditions as reflected in Charter's quarterly reports to the City for those time periods. s Ordinance No. 13718, Exhibit `B ", Section 7.4. 4 Ordinance No. 13718, Exhibit `B ", Section 21.1. This provision is subject to Section 21.4, which provides that the first event of non - compliance shall be cause for the assessment of liquidated damages in the amount of $0.25 per subscriber if Charter has complied with the telephone service standards set forth in Exhibit `B ", Section 7 for eight (8) consecutive quarters. s See 47 C.F.R.76.309. Accordingly, the City hereby assesses liquidated damages against Charter for violation of the Customer Service Standard for the following calendar quarters and in the following amounts: Quarter Number of Subscribers Amount of Damages per Subscriber Total Amount of Damages for Quarter 3 Quarter 1999 69,002 $1 $69,002 4 Quarter 1999 68,512 $2 $137,024 1 st Quarter 2000 69,226 $3 $207,678 2" Quarter 2000 ** 68,162 $3 $204,486 3 Quarter 2000 ** 68,917 $3 $206,751 4 Quarter 2000 73,277 $3 $219,831 1 st Quarter 2001* 74,507 $3 $223,521 Y Quarter 2001 * 76,340 $3 $229,020 3 Quarter 2001* 74,323 $3 $222,969 4 Quarter 2001 * 68,055 $3 $204,165 1 st Quarter 2002* 63,724 $3 $191,172 2nd Quarter 2002* 62,503 $3 $187,509 3 Quarter 2002 61,479 $3 $184,437 4 Quarter 2002 ** 60,670 $3 $182,010 TOTAL $2,669,575 *Quarter covered by Audit ** Quarter in which Charter acknowledged non - compliance Charter's failure to comply with the terms of the Franchise may be considered by the City as a basis for the denial of Franchise renewal unless cured as provided herein. Payment of the above - referenced liquidated damages is due within ten (10) business days of receipt of this letter. If Charter wishes to appeal this assessment, it must do so within ten (10) business days in the form of a written letter that sets forth the basis for the appeal. This letter must be certified, addressed to me, and a copy must be provided to the City Attorney, City Hall, 1000 Throckmorton, Fort Worth, TX 76102 as well as the Cable Services Manager, 401 W. 2nd Street, Fort Worth, TX 76102. If such a letter is received, I will provide Charter an opportunity to state its case, either before me informally or in a formal hearing before the City Council in accordance with the Franchise. Sincerely, Gary W. Jackson City Manager 6 Ordinance No. 13718, Exhibit `B ", Section 24. ' Ordinance No. 13718, Exhibit `B ", Section 23.