Satellite Dish Program Analysis (Presentation at 6-30

601 Lido Park HOA Multiple Dwelling Unit (MDU) Satellite Dish Program Analysis I was asked by the 601 Lido Park Board of Governors to investigate satellite dish options with the goal of consolidating individual dish service to eliminate multiple dishes on the roof. Such a contract is called a “MDU” (Multiple Dwelling Units) contract for services. Here are my findings and recommendations: FINDINGS: History: At the October 28, 2013 Board of Governors meeting, Conrad Timpe requested that the Board consider consolidating the Direct TV satellite dishes on the roof into a two-‐dish master system through one provider. Action was deferred until receipt of a proposed contract from a vendor (October 28, 2013 Board of Governors meeting minutes). Conrad Timpe contacted Direct TV, and some time later, Tay Hampton of Western Satellite contacted Conrad Timpe regarding his request. At the Board of Governor’s meeting held on November 25, 2013, Mr. Hampton of Western Satellite LTD, INC. gave a presentation to the board on a two-‐dish MDU installation (one for domestic DIRECT TV channels; one for international DIRECT TV channels [Brazilian, Chinese, Filipino, Korean, Russian, and Vietnamese language stations packages]) to consolidate the existing dish installation and upgrade the infrastructure. The meeting minutes include a statement that, “Mr. Tay (sic) noted that this would not affect owners with other providers”. There were no meeting notes discussing TWC’s existing contract, or any possible exclusivity clauses in the agreement with Western Satellite to utilize DIRECT TV. There were no notes in the minutes of any discussion of what would be done with any existing DISH Network dishes. Further, the minutes confirm that the previous Board voted to approve the proposal for the installation of a Direct TV system to service the building for a cost not to exceed $8,000 subject to the review of the contract by the Association’s attorney (reference number G2013-‐26 in meeting minutes). A contract for Western Satellite LTD INC services entitled, “Construction Contract” dated January 3, 2014, was received by the HOA, and forwarded by Brian Hoyle to Denise Iger for comment. Ms. Iger, the attorney representing the HOA, redlined the Construction contract and attached a required document entitled, “Labor Code Attachment”, which relates to California Civil Code section 2810, “which is required by law to be kept in the Association’s files once it is completed … and required of all construction, security and janitorial contracts” (D. Iger, email to B. Hoyle, January 16, 2014). Mr. Timpe forwarded this contract and Labor Code attachment to me for review on April 28, 2014. See exhibits A & B. I made several calls to Mr. Hampton and arranged a meeting to discuss his proposed contract. Board members Michael Koehn and Tom Sparks, as well as Conrad Timpe and myself met with Mr. Hampton on May 14, 2014. Mr. Hampton answered 1 questions posed by the attendees. He stated his company would install five cables for domestic service and five cables for international service, with the two dishes not to exceed 36” in diameter. He represents Western Satellite (WS), which has submitted four documents to the HOA: (1) a contract for the installation of the dishes; (2) “Right of Entry” agreement to provide exclusive service to the property for DIRECT TV; (3) Liability Insurance and; (4) Addendum to Right of Entry agreement (for revenue sharing). Mr. Hampton also informed attendees that DIRECT TV would require existing customers to pay for upgrades to support new DIRECT TV HD technology if the proposed consolidated two-‐dish system is not installed. I then contacted DIRECT TV directly in an effort to seek another bid for the work for comparison. DIRECT TV confirmed that my contact was their first contact for the 601 Lido Park Drive address, and provided me a referral to Installs Online, a DIRECT TV registered MDU Installer. [It should be also be noted that DIRECT TV stated that they would pay for any upgrades necessary to maintain service quality for customers. There would be no fees charged to customers with or without installation of the MDU dishes.] On May 21, 2014, Mr. Timpe and myself met with Andy Krueger, a representative of Installs Online. Mr. Krueger toured the property with guidance from Ivo, and inspected the cables in the utility closets on floors one and nine, as well as the roof. Mr. Krueger stated that the existing cables were more than adequate to provide delivery of quality service. He also stated that, should his company be selected, they would be the exclusive provider of DIRECT TV service to the building, would warrant all work, make repairs within the DIRECT TV guidelines of 72 hours after receipt of a call, and require at least a 3-‐5 year commitment from the HOA. Legal Issues: Before moving forward, it is important to note that the HOA must comply with both the FCC’s ruling on satellite dishes and California Civil Code Section 4725, in addition to the Civil Code Section 2810 outlined above. See exhibits B and C for reference. The significant aspects of these rulings and Civil Codes, as I understand them, include the requirement that the HOA allow owners to install satellite dishes, but allows the HOA to require that owners consolidate individual service to a Multiple Dwelling Unit dish provided the cost to the individual is not greater than existing cost, and the quality of the satellite service is equal to or better than the existing service. The HOA is advised to seek legal clarification as these rulings and codes relate to any further efforts to modify the satellite dish policy. Service Needs of the Property: The HOA has not determined the number of owners who would subscribe to satellite service. As of my inspection in May, 2014 there are ten satellite dishes on the roof. Seven are for domestic DIRECT TV service; one is for international service; and two are for DISH TV service. Of these ten, 4 or more may not be operational given their age. Two of the dishes are directly attached to the structure and may 2 have affected the waterproofing. See exhibit D (photos). Eight of the ten dishes are not permanently installed but rest on platforms. This is the technique for installation that both of the MDU vendors propose to adopt. Lastly, there is no HOA personnel charged with monitoring the satellite dish installations or removals. Existing Cable/Video TV Contracts: The HOA has an annual contract with Time Warner Cable (TWC) for basic cable service. This contract automatically renewed on January 1, 2014 and requires a 60-‐
day notice prior to the auto-‐renewal date to cancel. Under the current terms of the contract, the per-‐unit fee is $30.16; the total monthly fee for this contract is $1,628.64, and the total annual fee is $19,543.68 per year. These fees are paid from our HOA dues and are found in the HOA budget. Early termination of this contract would entitle TWC to the remaining value of the contract. TWC will be merging with Comcast, and the representative from TWC, Matthew Rodriquez, informed me that he expects the future service options to be limited with higher costs going forward. He also indicated that any interference with existing TWC cable would constitute automatic termination of the contract. TWC needs one dedicated cable to each unit to provide internet, telephone and basic cable TV service. There was no mention of this contract during Board discussions per the meeting minutes. Whether they use the basic service or not, every owner is paying for such service. If a significant portion of the members subscribes to DIRECT TV, perhaps the Board should reconsider providing TWC basic cable to each unit. It might be better for the HOA to subsidize TWC internet instead of basic cable TV service. See Exhibit E. Proposed Contracts Received: The HOA received a Construction Contract from Western Satellite dated January 2, 2014, which Ms. Iger reviewed, and a “Right of Entry” Agreement (which Ms. Iger did not review) on or about May 2, 2014. Attached is a copy of the contract and supporting documents submitted by Western Satellite to provide all new cable throughout the property, install one domestic dish and one international dish, remove all other dishes, and deliver DIRECTTV service to all units at current market rates. Western Satellite would maintain all equipment. Total initial cost to the HOA for DIRECT TV is $7,800.00. The additional charge for DISH installation would be $4,675 (discounted to $3180.00 if done together with DIRECTTV). Western Satellite agreed to offer $25 per subscriber profit-‐share to the HOA for each new subscriber. Western Satellite left the term of the contract open – they would accept 2-‐5 year term. See Exhibits A and F. As mentioned above, I sought another bid through DIRECT TV for the same service. Andy Krueger of Installs OnLine submitted a contract and supporting documents to remove dishes from roof, install one domestic DIRECT TV dish to existing wiring (which he said was more than adequate), provide on-‐going maintenance of existing equipment, and handle all new installation requests. He is unable to offer profit share program given his reduced contract cost, and he requires a 3-‐5 year commitment. He said DIRECT TV doesn’t allow less than 3-‐year commitment on a MDU contract. The contract cost is $4,022.69, with an additional $100 fee to install 3 a second dish for international programming. The monthly fees for DIRECT TV service would be at current market rates. Ms. Iger did not review this contract. See Exhibit G. Comparison Between Proposed DIRECT TV Contracts: Comparison of the two proposed contracts received shows some potentially significant differences. Costs: Western Satellite’s agreement is $7,800 for a 2-‐dish MDU system, including new cables, dishes, switches and connectors for all units, with additional costs possible for a maintenance contract after one year. The Installs OnLine contract is $4,180 for a 2-‐dish MDU system, utilizing existing cables, new dishes, with switches and connectors to all units. Western Satellite also is offering for a limited time a discount of up to $750 if the order for equipment is completed by the end of June 2014. Payment Structure: Western Satellite’s Agreement requested 50% prior to installation with remainder due upon completion and service connection, with modifications proposed by Ms. Iger. Installs Online agreement does not specify the payment structure. Exclusivity: The Western Satellite agreement limits video service, regardless of how delivered, to be provided by WS exclusively (exception for franchise cable television). No other satellite dishes or television antennas may be installed in the Common Areas (except those already installed). The Installs Online agreement provides exclusivity for DIRECT TV Service only. Western Satellite has a provision to allow it to change digital satellite service provider (currently DIRECT TV) at its sole discretion. Revenue Sharing: Western Satellite will provide a one time $25 commission to the HOA for each DIRECT TV subscriber at the Entertainment, Choice or Choice Plus levels. There are several additional tiers of subscriptions for DIRECT TV, and the agreement should be clarified as to whether or not these tiers are subject to commission. Installs Online provides no revenue sharing to the HOA. See Exhibit H. Term: Each agreement has a blank to be filled in for the term of the agreement. Western Satellite would accept a 1-‐5 year term. Installs Online would accept a 3-‐5 year term. Both agreements have an automatic 5-‐year renewal (unless provided with a 90-‐day notice to cancel). System Ownership: All components provided by Western Satellite remain property of WS. HOA will indemnify WS for loss or damage. At termination, WS will offer to sell system to HOA for replacement value, abandon the system, or remove at its discretion. All components installed by Installs Online become the property of the HOA upon installation. 4 Additional Services: There is a provision within the Western Satellite agreement that provides the option for WS to build and incorporate into the system broadband communication, including internet, VOIP and other data and information services at its discretion. No such provision exists in the Installs Online agreement. License/Insurance: Both vendors are licensed contractors. Both contractors have liability insurance. Western Satellite maintains Workers Compensation insurance. Installs Online does NOT maintain Workers Compensation insurance. See Exhibit I. Maintenance/Repair: WS would maintain and repair for the first year of the contract, and then possibly charge an annual maintenance fee thereafter. However, the WS agreement also says that they retain ownership of installed equipment, so presume they will need to maintain the equipment for the term of the agreement. Installs Online references a Service Agreement, which was not attached. Service response time: WS states response time will depend upon on the issue for existing customers: site outage (>10% of subscribers affected -‐ within 24 hours of verification; individual outage -‐ within 48 hours of verification Mon-‐Sat) and within 48 hours for new customers. Installs Online claims they will be out to the property within 72 hours after receipt of a call for service, and within 2 days for new subscriber. Fees for DIRECT TV Subscriptions: WS will charge published rates for individual subscriptions. WS can offer “bulk” prices if Board elects to engage a MDU package servicing all units (similar to the existing TWC agreement – all units would receive DIRECT TV), which may be up to 50% off published rates. There is also a referral discount when an existing subscriber refers a new subscriber, and both may get $100 discount. Installs Online can also provide bulk packages (servicing all units) at a discount for “basic service” starting at $19.98/mo. per unit. DIRECT TV package pricing currently on offer 4/10/14 – 7/23/14. Package Channels Regular Individual Bulk Rates Subscription Subscription OFFER ** Western Satellite or Installs Online*** Select 130 $49.99 $24.99 Entertainment 140 $57.99 $29.99 $19.99 Choice 150 $66.99 $34.99 $22.99 Xtra 205 $73.99 $39.99 $30.99 Ultimate 225 $81.99 $44.99 Premier 285 $129.99 $92.99 Preferred Choice* 125 $45.99 $14.99 5 World Direct A La varies $12.99-‐
$12.99-‐$35.99 Cart $35.99 (INTERNATIONAL)* *Preferred Choice only available with a World Direct A La Cart package. World Direct A La Cart must be added to a base package. **New subscriber pricing per month for 12 months with 24-‐month agreement. After 12 months, regular rates are: select $49.99, entertainment $57.99, choice $66.99, xtra $73.99, ultimate $81.99, premier $129.99, and preferred choice $45.99. ***The HOA would pick one of the base packages to provide to each unit. Individual owners could upgrade to other packages at a discount, based on the base package the HOA has selected. See table below. DIRECT TV Bulk Upgrade Pricing (monthly)*: UPGRADE OPTIONS BASE PACKAGE Choice Xtra Ultimate Premier Entertainment $15.99 $27.99 $39.99 $87.99 Choice $17.99 $29.99 $77.99 Xtra $18.49 $66.49 * The cost to an individual owner wishing to upgrade their unit to a more extensive package. For example, if the HOA chooses the ‘Choice’ base package, all units would be charged the ‘Choice’ bulk rate in the first table. If an individual owner wants the ‘Ultimate’ package, they would be individually billed $29.99 for the upgraded service. RECOMMENDATIONS TO THE BOARD: 1. Develop and vote on a satellite dish policy to conform to Civil Code 4725 and FCC ruling (OTARD). Also, see attached example of typical residential satellite dish addendum (See Exhibit J). 2. Identify an HOA staff member to monitor and supervise compliance with satellite dish policy and agreements with TWC/Satellite MDU provider, if adopted. 3. Rather than just consolidating the satellite dishes on the roof, consider entering into a bulk DIRECT TV package to provide basic tv service via DIRECT TV to all units. 4. Consider renegotiating TWC contract to provide basic cable internet service instead of basic cable tv service to each unit. Do not allow TWC agreement to “auto renew” in January 2015 without renegotiation. 5. Given that Western Satellite maintains ownership of MDU equipment, and therefore has a responsibility to maintain said equipment in order to provide 6 service, and given that Western Satellite maintains Workers Compensation insurance whereas Installs Online does not, select Western Satellite to undertake the dish consolidation (even though the bid from Installs Online is less expensive). ATTACHMENTS: Exhibit A: WS Construction Contract reviewed by D. Iger. Exhibit B: Labor Code Section 2810 (D. Iger); Exhibit C: Civil Code 4725 and FCC Ruling Exhibit D: Photos of Existing Installation Exhibit E: Time Warner Cable (TWC) Exhibit F: WS Right of Entry Agreement, DISH Scope of Work, Contractor’s License Exhibit G: Installs Online Right of Entry Agreement Exhibit H: Revenue Sharing: WS Exhibit I: Evidence of Insurance Exhibit J: Sample Satellite Dish Policy Submitted by: Katherine Johansen. Reviewed by Conrad Tempe. 7

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