Testimony to PURA from WPAA-TV: In support of equity in service to our diverse communities about the method of funding for capital expenses associated with CT Community TV

Equity and reasonableness within a system with embedded inequities are challenging and noble goals.

In striving to achieve Goal #6 ‘applicant‐friendly and not unduly burdensome to the applicant and the Department’, the process of 1st in eligibility may have made the program less equitable and reasonable. For the purpose of ‘equity’, many public and private funding processes post a deadline for submissions then rank submissions by criteria such as eligibility, impact, ROI, accountability, lives served and purpose.

The CT Gen Stat § 16-331a and the recent Federal Communication Commission FCC) Order (MB Docket No. 05‐311 Third Order and Report) inform this feedback as well as a few other funding-related CATV Dockets.

What is the purpose of PEGPETIA?

The PEGPETIA program appears to once again be viable. Good News. But does it do what was intended and do it and do it equitably?

It is our understanding from the legislative and regulatory history that PEGPETIA was implemented in part to address capital funding gaps for Community TV caused by the discontinuance of franchise negotiations at the onset of Sec. 16‐331a Regulations. This was a long gap in history to overcome. Now there are PEGPETIA Program Gaps to overcome. Prioritizing a response to gaps in the reopening of the program could address some inequities. For example, allotting more money to P.E.G. in the initial roll‐out would help the targeted entities regain some stability. Unlike the education applicants that are seeking alternative funding sources or a source for ‘new’ initiatives.

A throwback note: During franchise ‘renewals’ local PEG operations were infused with infrastructure support. The focus of these discussions revolved around needs assessments and a determination of “adequate”. Absent re-franchising, many, if not all P.E.G. organizations have not been able to maintain what we at WPAA‐TV refer to as the “tools & stage” to engage media makers, let alone provide state‐of‐the‐art equipment for citizen media makers.

All P.E.G. organizations need some basics systems to maintain efficient operations (i.e. server-based distribution, HD capable cameras, LED Lights and more) before they can seek to achieve the funding program goal of increasing the quantity, quality, and variety of community access programs. 

Prior Project Completion | Questioning ‘Not Eligible’

Our prior testimony cited that previously paid emergency expenditures were excluded from eligibility in Docket 08‐07‐31. It was our intention to bring this to the attention of reviewers such that criteria for reimbursement such as “emergencies’ or ‘lapses in the PEGPETIA Program itself’ could potentially be considered eligible ‘if harm’ could be established. The failure of technology cannot always be predicted. A TV station that is black serves no one. The Proposed Guidelines took the opposite approach adding the question [HAS THE PROJECT BEEN COMPLETED AS OF THE DATE OF THE APPLICATION?] FOLLOWED BY [GRANTS WILL NOT BE ISSUED FOR PREVIOUSLY COMPLETED PROJECTS.]
Similarly, this new clarified provision would exclude eligibility of financing for property acquisition. In the next section, we suggest that property acquisition and renovation is a SUBSTANTIAL OMISSION in this program and for CT PEGs no longer eligible to renew franchises.

Capital Cost Funding in PEGPETIA | Facility Acquisition and renovation

While it is not specifically stated, the PEGPETIA process makes funding for building acquisition and or renovation impossible. Yet the significant turnaround in the FCC Third Order expanded the definition of traditional capital expenditures (a.k.a. costs associated with the construction of PEG access facilities). The FCC expansion incorporates as fundable without ‘caps’ that which is typically considered ineligible within PEGPETIA.  The absence within the PEGPETIA program of funding for traditional capital expense costs has forced PEG organizations to avoid strategic development of facilities or siphon funds from operational expenses.

MB Docket No. 05‐311 Third Order and Report cites immediately on page 2 that its focus on caps and in‐kind has ‘limited exceptions’, including an exemption for certain capital costs related to public, educational, and governmental access (PEG) channels. [Continuing on p. 6] the FCC states “We find that the Act exempts capital contributions associated with the acquisition or improvement of a PEG facility from this definition and remind LFAs that under the Act they may only require “adequate” PEG access channel capacity, facilities, or financial support. In conclusions … the term “capital cost” …should be given its ordinary meaning, which is a cost incurred in acquiring or improving a capital asset. Furthermore as cited in Section 32 (p 20): … it can apply to contributions for both construction‐related and non‐construction related contributions to PEG access facilities. It is further clarified in Section 33 (p 20) we find that the term “capital costs” is not limited to construction‐related costs; rather, it generally encompasses costs incurred in acquiring or improving capital assets for PEG access facilities.

This turnabout in the Order is clarified in Section 35 (p 21) … not simply for the construction of PEG studios, but also for, among other things, the acquisition of equipment needed to produce PEG access programming. …cable companies have urged the Commission to reaffirm, …, that “capital costs” are limited to costs associated with the construction of PEG
access facilities. … capital costs are distinct from operating costs (or operating expenses), which are generally defined as expenses “incurred in running a business and producing output.”… the Commission has distinguished between costs incurred in the building of PEG facilities, which are capital costs, and costs incurred in using those facilities, which are not.

In summary, the FCC order clearly establishes provisions for funding of construction and/or acquisition of facilities.  It is strongly suggested that PEGPETIA be reviewed in this context. It is urged that the Dept. address this omission both retrospectively and strategically. Several organizations in Connecticut have taken on risky strategic venture using operating funds for capital expenditures. A reparation for this exclusion which Federal Law established as central to our existence is suggested even if done so in incremental payments or per square foot allocations.

Eligibility for PEGPETIA | Response to Draft

Retaining a process that aligns closely with the language of the law seems safe. Adding Libraries to eligible entities for ‘education’ portion of funds seems appropriate as they are evolving into technology service centers and have historically been identified to be members of Advisory Councils. It is unclear if the’ mission information’ or’ lack of standing as an organization in good standing with the Connecticut Secretary of State’ would indirectly eliminate the Advisory Councils which was recommended in the initial round of comments

What is the intention of Two-Part Eligibility? Applicant and Project
Do they apply to all applications? Inherent in PEGPETIA is a dichotomy between infrastructure and program projects. The goals of Capital vs. Program Implementations are distinctly different. Nearly every PEGPETIA Application from PEG operations to‐date were infrastructure updates cloaked in program terminology to comply with the original application process. Replacing obsolete equipment is the most common bottom‐line. A few may have expanded capacity but sustainability and efficiency and minimization of failure are the primary objectives for most capital projects. For example, new lights could result in less heat, more efficient use of electricity and less bulb replacement but there could be zero relationships to more or better video outcomes. You need lights for video production. What would be an OBJECTIVE PERFORMANCE MEASURES FOR NEW LIGHTS?

Capital Funds are essentially for outdated equipment & facilities. Some tangential enhanced, expanded, or strengthening of existing services or capacity could happen but this is rare especially when some organizations have equipment that is decades old. Applicants that are not trying to sustain a P.E. or G. operation may be seeking new technologies for new outcomes or services. Herein we suggest that pure infrastructure projects by organizations whose mission is providing PEG are merely PEG Applicants, not Project Applicants. If this Program functions well for a decade we may be able to seek to be more Program | Project orientation.
Question: Will Project Milestones be guidelines for reporting on implementations? The prior process appeared to have preset timelines that may have entities reporting on projects completed months earlier. This can cause some deadline challenges as projects & report deadlines are not aligned.

PROJECT ELIGIBILITY | COMPLIANCE WITH COMMUNITY ACCESS RULES
The language in Project Eligibility Section 6 of the draft application is confusing and potentially unnecessary. Most applicants are ‘Community Access Provider (CAP)’ so why would compliance with ‘community access provider operating rules and regulations’ aka themselves be part of the application? Please note that this language might unintentionally disqualify Wallingford Government TV (WGTV) from funding per the determination in Docket 08‐04‐09 that WGTV Management exercises editorial control.

WPAA‐TV did urge that prior noncompliance with PEGPETIA and CAP Annual Reporting influence eligibility. This recommendation does appear to be part of the new process based on the description of #6 in Applicant Eligibility. Will this self‐report be verified? Prior Applications and compliance is part of the public record. Would a community that has a non‐compliant education channel be eligible for other tech initiative grants?

AFFECTED GEOGRAPHICAL AREA | Inconsistencies in Decisions
In Docket #10‐03‐02 it was concluded that regardless of the size of the population served the base costs for a Community TV station are equivalent and the per sub rate needed to be adjusted to accommodate community size. It was suggested in testimony that base costs for operations be funded from PEGPETIA regardless of size and that fees remain community-based because of the number of people that need to be served is higher. Obviously, the availability of funds for infrastructure was not available consistently for any organization party to this Docket. The smallest entity No. Branford did not seek PEGPETIA money in the initial years of the program and recently renovated a building it does not own with funds accumulated from per sub adjustments. The largest entity WPAA‐TV was awarded a substantial PEGPETIA Grants in 2‐part with mention of accommodation of sub fee losses to a rate lower than the regulation average.

Suggestions to support mergers to broaden the impact of geographical reach were dismissed. In Docket 98‐01‐05RE01 The Dept. concluded no proration of sub fees were needed due to community size. Lakeville Dockets also raises the question of size and funding allocations. Service area and numbers served have been inconsistently recognized in rulings of the Dept. It is challenging. Therefore, it is suggested that the overall capacity of organizations to full‐fill the mission of PEG be assessed in a related docket to help create a system that more equitable serve the end-users, the citizens.  In Sec 16.331a‐2 ‘Number of Community channels required’; each community is said to be eligible for one channel and there is a benchmark for adding channel capacity. It is highly probable that there are geographic regions for which the capacity to add channels have been exceeded and others whose channel capacity for three channels does not meet the max benchmark for one. If channel and CAP area eligibility is inequitable the related funding programs will also be inequitable.

In conclusion, adding Libraries to the eligible for entities seems appropriate. Retaining a process that aligns closely with the language of the law seems safe. Since several communities are financing their building out of operating costs or have done so this specific fund omission is recommended to be fixed both going forward AND retrospectively. There is recent and clear guidance from the FCC that this aspect of funding was intended to be available to P.E.G. operations. It is not available in Connecticut. It can be if this program accounts for it.

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EXHIBIT Expanded Quotes from FCC Order about Facility Capital Costs
MB Docket No. 05‐311 Third Order and Report cites immediately on page 2 that its focus on caps and in‐kind has ‘limited exceptions’, including an exemption for certain capital costs related to public, educational, and governmental access (PEG) channels. Continuing on p. 6 the FCC ..We find that the Act exempts capital contributions associated with the acquisition or improvement of a PEG facility from this definition and reminds LFAs that under the Act they may only require “adequate” PEG access channel capacity, facilities, or financial support.

In conclusion, the following was cited in Section 2 b (p 6): We next conclude that the term “capital cost” in section 622(g)(2)(C) should be given its ordinary meaning, which is a cost incurred in acquiring or improving a capital asset. Applying that interpretation, we conclude that the exclusion for capital costs under section 622(g)(2)(C) could include equipment that satisfies this definition, regardless of whether such equipment is purchased in connection with the construction of a PEG access facility. We then conclude that the record is insufficiently developed for the Commission to determine whether the provision of PEG channel capacity is included within section 622(g)(2)(C)’s exclusion for capital costs.

In conclusion, the following was cited in Section 32 (p 20): concluding that it can apply to contributions for both construction‐related and non‐construction‐related contributions to PEG access facilities. It is further clarified in Section 33 (p 20) we find that the term “capital costs” is not limited to construction‐related costs; rather, it generally encompasses costs incurred in acquiring or improving capital assets for PEG access facilities.
The turnabout is clarified in Section 35 (p 21) Based on the arguments in the record and our further consideration of the statutory text and legislative history we now conclude that the Commission’s earlier statement regarding the definition of “capital costs” was overly narrow. As commenters note, many local governments receive payments from cable operators that are not simply for the construction of PEG studios, but also for, among other things, the acquisition of equipment needed to produce PEG access programming.146 LFAs argue for a broader definition of “capital costs” that would include PEG channel capacity and certain equipment costs associated with PEG access facilities.147 By contrast, cable companies have urged the Commission to reaffirm, based on its previous statement, that “capital costs” are limited to costs associated with the construction of PEG access facilities (and thus do not include channel capacity and equipment such as cameras, or other equipment necessary to run a PEG access facility).148 We also note that capital costs are distinct from operating costs (or operating expenses), which are generally defined as expenses “incurred in running a business and producing output.”154 Reflecting this distinction, the Commission has distinguished between costs incurred in building of PEG facilities, which are capital costs, and costs incurred in using those facilities, which are not.155