HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/19/2019 - RESOLUTION 2019-025 APPROVING THE PURCHASE OF VIDEAgenda Item 15
Item # 15 Page 1
AGENDA ITEM SUMMARY February 19, 2019
City Council
STAFF
Erin Shanley, Broadband Marketing Manager
Colman Keane, Broadband Director
Gerry Paul, Director of Purchasing & Risk Management
Cyril Vidergar, Legal
SUBJECT
Resolution 2019-025 Approving the Purchase of Video Content Licensing and Services from the National
Cable Television Cooperative for Fort Collins Connexion as an Exception to the Competitive Purchase
Process.
EXECUTIVE SUMMARY
The purpose of this item is to seek approval for an exception to the competitive bid or proposal process for Fort
Collins Connexion’s membership with and purchase of video content licensing and services from National
Cable Television Cooperative (NCTC).
To provide video services, Fort Collins Connexion must secure license agreements with video content
providers. NCTC is the largest content aggregator with pre-negotiated agreements that give members access
to video content cost-effectively, efficiently, and better terms. NCTC provides a cost effective and efficient way
to secure license agreements for content which will be viewable via MobiTV, the preferred video provider
selected through an RFP process.
STAFF RECOMMENDATION
Staff recommends adoption of the Resolution.
BACKGROUND / DISCUSSION
As part of Fort Collins Connexion providing video services, license agreements are required with the content
providers for networks. The National Cable Television Cooperative (NCTC) is a non-profit, 750+ member
organization that negotiates master licensing agreements with content providers for hundreds of networks and
with technology providers and hardware vendors, providing cost-effective access to equipment and services.
Based number of cable subscribers, NCTC is the third largest content negotiator in the nation, with Comcast
and Charter being first and second respectively.
NCTC’s pre-negotiated agreements with video content providers give members access to video content cost-
effectively, efficiently, and with better terms. NCTC secures the best possible pricing and terms for its
members regardless of size. In addition, NCTC provides the convenience of paying one monthly invoice that
covers most of the programming license fees.
However, there are certain content families as well as local channels (ABC, NBC, CBS, etc.) not covered by
NCTC which will require direct negotiations. Fort Collins Connexion anticipates negotiating with roughly 20
content families not under contract with NCTC.
As an additional benefit, NCTC has favorable arrangements with technology and hardware vendors. One of
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these is MobiTV. Using the RFP process, MobiTV was selected as the video platform for Fort Collins
Connexion. MobiTV is amenable to Fort Collins Connexion opting into the NCTC contract which provides more
favorable terms than Fort Collins Connexion can negotiate directly with MobiTV.
There are two options on how to source content:
1. Negotiate Individual Agreements with all Content Owners
In order to provide video content (channels), Fort Collins Connexion will need to acquire content rights for
every channel made available to customers. There are hundreds of channels that require content agreement
negotiations. With a lack of negotiating power due to our small comparative size, Fort Collins Connexion would
be subject to each content provider’s sole discretion regarding content rights. This would hamper ability to
negotiate better terms, tiering restrictions, marketing dollars, penetration requirements, pricing, etc. In addition,
Fort Collins Connexion would need to maintain relationships and pay monthly content fees to each content
provider, requiring significant staff resources. Finally, the time necessary to negotiate such a quantity of
individual agreements would be labor intensive and may result in limited channel availability at launch.
This option is not recommended by staff as it would require significant staff time and legal resources for such a
volume of individual contracts.
2. Membership with NCTC
NCTC negotiates rates with content providers, technology providers and hardware vendors on behalf of all its
members. As a member of NCTC, Fort Collins Connexion would benefit from its collective bargaining power
and receive “better volume” pricing and terms as compared to negotiating directly/individually.
An additional benefit is that the City would only need to process and pay a single invoice each month to NCTC,
compared to paying individual invoices for each content provider. Please note that there will be a number of
content providers to which NCTC may not have rights (local channels for example) – such content would still
need to be negotiated separately. Overall, a membership with NCTC will reduce the cost, complexity, and time
spent compared to having to negotiate a large number of individual agreements.
This option is recommended by staff as the best choice for the Fort Collins Connexion and its upcoming video
services.
CITY FINANCIAL IMPACTS
Membership Cost Structure
• The NCTC membership fee is a one-time, $1 per premise passed (using an estimate of homes passed by
the end of year two of the buildout). Current estimates are 35,600 premises passed or $35,600 as the
estimated membership fee.
• NCTC requires a $1500 application fee (payment is required to start the application process). This
payment is applied to the above membership fee once the application is approved.
• There is no further membership fee (no monthly or annual maintenance).
Other Costs Savings
• As a member, Fort Collins Connexion will be able to purchase equipment through NCTC at discounted
rates.
• NCTC uses its total subscriber size to negotiate favorable pricing on equipment and services, available for
members.
Content Provider Costs
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• Detailed cost estimates are unavailable until such time as a contract is negotiated with each content
provider, or by gaining a membership with an organization such as NCTC. However, estimates can be
provided:
o Taking into account experience with other municipal providers, Fort Collins Connexion anticipates an
estimate of ~$60 per month per subscriber for national video content.
o MobiTV is budgeted at $7.00/month per subscriber in addition to national video content license fees.
o Fort Collins Connexion’s projected internet service take rate is 28.2%, with a stretch goal of 50%.
o The budgeted take rate for video customers is 60% of internet customers, while the industry average is
closer to 80%.
o Over the last decade, video content costs have increased dramatically with average annual increases
ranging from 8% to 12 %.
o All of these variables yield a wide range for a projected 5-year potential cost. The range for both
NCTC video content and MobiTV is $34 million to $55 million for the 5-year period.
Low Range Estimate (28% internet take rate, 8% rate increase, 60% video penetration,)
2019 2020 2021 2022 2023 2024
$ 60,068 $ 1,392,370 $ 4,912,158 $ 9,249,198 $ 10,609,144 $ 5,723,580
$ 7,008 $ 150,410 $ 491,328 $ 856,603 $ 909,771 $ 454,460
$ 67,076 $ 1,542,780 $ 5,403,486 $ 10,105,801 $ 11,518,915 $ 6,178,040
High Range Estimate (50% internet take rate, 12% rate increase, 80% video penetration
2019 2020 2021 2022 2023 2024
$ 140,160 $ 3,369,192 $ 12,326,440 $ 24,069,312 $ 28,630,848 $ 16,018,279
$ 16,352 $ 350,957 $ 1,146,432 $ 1,998,740 $ 2,122,799 $ 1,060,407
$ 156,512 $ 3,720,149 $ 13,472,872 $ 26,068,053 $ 30,753,647 $ 17,078,686
5 Year Total:
Total Low: $ 34,816,100
Total High: $ 91,249,918
• Fort Collins Connexion video customers will pay their monthly bill in advance while fees paid to content
providers are paid in arrears. The risk for the City is the non-pay, disconnect customers who fail to pay
their bill. As long as bills are paid in a timely manner, the revenue will offset the cost of goods sold.
• The administrative costs will be significantly lower with NCTC than negotiating and managing invoices and
payments directly with content providers.
• EPB in Chattanooga, TN saw a ~25% reduction in content provider fees when it gained membership in
NCTC.
ATTACHMENTS
1. City Manager Approval Exception (PDF)
ATTACHMENT 1
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RESOLUTION 2019-025
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROVING THE PURCHASE OF VIDEO CONTENT LICENSING AND SERVICES
FROM THE NATIONAL CABLE TELEVISION COOPERATIVE FOR FORT COLLINS
CONNEXION AS AN EXCEPTION TO THE COMPETITIVE PURCHASING PROCESS
WHEREAS, the City recently completed a competitive purchasing process under Request
for Proposals #8720 for broadband video hosting services via sealed proposals; and
WHEREAS, the City is currently finalizing contract negotiations with the selected third-
party video hosting and streaming service provider (Video Host) to enable the broadband
division of the City’s Electric Utility, Fort Collins Connexion (“Connexion”), to deliver video
streaming service; and
WHEREAS, in order for the Video Host to deliver video content for distribution by
Connexion, the City must secure license rights to video content through a content aggregation
service provider; and
WHEREAS, the National Cable Television Cooperative (NCTC) is a non-profit, video
content aggregator service organization that negotiates preferential master licensing agreements
with video content producers, including traditional cable channel operators, on behalf of its
subscribing members; and
WHEREAS, NCTC has secured license rights to an extensive library of video content on
more cost-effective, efficient, and better terms than would be otherwise available from those
content producers to individual NCTC members; and
WHEREAS, based on review and evaluation of available video content aggregation
services, the Purchasing Agent has determined NCTC is able to secure access to substantially all
the video content Connexion will require within the next five years on terms not otherwise
available to the City; and
WHEREAS, there are certain video content families, including local channels (e.g.,
Denver affiliates and public broadcasting channels) not available through NCTC, which will also
require Connexion to enter independent negotiations to secure content rights; and
WHEREAS, membership in NCTC requires the City to pay a $1,500 application fee and
a one-time membership fee of approximately $35,600, based on estimates of the potential
subscriber premises to be passed during the Connexion network buildout; and
WHEREAS, final license fee totals payable by the City to opt-in to NCTC video content
packages are unavailable until the City becomes a member of NCTC, and license fees may vary
based on the terms of master licenses between NCTC and video content producers; and
WHEREAS, based on prior content license fee data provided by NCTC and the
experience of other NCTC members, current estimated monthly license fees are in the range of
$60 per subscriber for national video content; and
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WHEREAS, NCTC members have reported approximately 25% lower monthly expenses
for content licensing through NCTC, compared to license fees charged by other content
aggregation services or through independent negotiations with content producers; and
WHEREAS, sufficient funds to apply for NCTC membership and pay annual content
license fees have been budgeted by Connexion; and
WHEREAS, Section 8-161(d)(1)b. of the Code of the City of Fort Collins authorizes the
Purchasing Agent to negotiate the purchase of supplies and service without utilizing a
competitive process where the Purchasing Agent determines that although a particular material
or service is available from more than one responsible source, a competitive process cannot
reasonably be used, or, if used, will result in a substantially higher cost to the City, will
otherwise injure the City's financial interests or will substantially impede the city's administrative
functions or the delivery of services to the public; and
WHEREAS, the Purchasing Agent has reviewed of the NCTC membership and service
options consistent with the requirements of Section 8-161(d)(1)b. of the Code and City practices
for exceptions to the competitive process; and
WHEREAS, the Purchasing Agent has determined that due to the numerous advantages
offered by NCTC, the existing service compatibility of NCTC’s services with the network
operated by the Video Host selected under Request for Proposals #8720, and the limited
availability of wholesale video content rights for Connexion, a competitive process cannot
reasonably be used and, if used, would result in a substantially higher cost to the City and may
result in the impairment of the City's delivery of services to the public, requisite justifications for
which determinations the Purchasing Agent has submitted to the City Manager for approval; and
WHEREAS, the City Manager has reviewed and approved the justification for the
acquisition of video content aggregation services through NCTC; and
WHEREAS, Section 8-161(d)(3) of the Code requires approval of this purchasing
method by the City Council for expenditures costing more than Two Hundred Thousand Dollars
($200,000) prior to procurement.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
FORT COLLINS, as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That the Purchasing Agent is authorized to purchase membership in and
video content licensing services through the National Cable Television Cooperative (NCTC) for
up to five years as an exception to the competitive purchasing process requirements in the
following amounts:
- up to $35,600 for membership; and
- up to $70/month in licensing fees per subscriber for national video content.
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Passed and adopted at a regular meeting of the Council of the City of Fort Collins this
19th day of February, A.D. 2019.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk