HONOLULU - Community Television Producers Association (CTPA), (the community media organization credited with the creation of PEG Access in Hawaii) and another local organization that advocates for consumer rights filed complaints with the State Ethics Commission in September 2002 regarding the Administrator of the Cable Television Division (CATV) at the Hawaii State Department of Commerce and Consumer Affairs (DCCA), who serves as the state's cable television regulator. The complaints were also filed with the Legislature's Office of the Ombudsman due to the possible violations of state law. The complaints charge that recent actions by State Cable Administrator Clyde Sonobe will ultimately and unduly result in a loss to the consumers of Hawaii $10 million or more. Sonobe, whose position is exempt (appointed by the Governor) is responsible for drafting and negotiating the cable franchise agreements (D&Os) regulating cable TV operators in Hawaii.  Under Sonobe's direction, the DCCA's CATV approved of the purchase by AOL, the giant media conglomerate, of Time-Warner's cable TV systems -- serving Honolulu as Oceanic, and Maui and Hawaii Counties as Hawaiian Cablevision.  With the DCCA's approval this summer of  AOL/Time-Warner's purchase of Kauai's cable system, the state's entire cable television industry became an AOL/Time-Warner monopoly (D&O 291).

When DCCA conducted the initial round of franchise transfer approvals for AOL, Sonobe inserted two small but significant changes that effectively reduced the funds provided to Hawaii Public Television, Olelo: The Corporation for Community TV, and the community access providers for Kauai (Ho'ike), Maui (Akaku), and Hawaii (Na Leo O Hawaii) Counties. The changes excluded AOL Time Warner profits from advertising and Home Shopping channel revenues from the franchise fee calculation.

The two specific issues being questioned in the ethics complaints:

    •  DCCA's process that implemented the AOL/Time-Warner franchise agreements was faulty and probably illegal, and

    •  the State cable regulator’s wife is employed by another AOL/Time-Warner subsidiary in Hawaii (Time-Warner Communications), which appears to be a major conflict of interest.

Explanation

The public file reveals AOL/Time-Warner's transfer application did not request the reduction in public benefits that Sonobe inserted.  Public notices did not include any mention of the change in policy. The public hearings included no reference to the new policy being considered, nor would the hearings officer answer any questions at the hearing.  Finally, the new policy implemented in the cable franchise was not reviewed by the state's Cable Advisory Committee, as required by law (HRS  440G-8 & -13). (The Governor's not appointing anyone to the advisory committee after the last remaining member left in 1996 has been repeatedly pointed out to him, his employee Joe Blanco, Legislators, the Ombudsman, DCCA and the Legislative Reference Bureau. All notified have yet to provide an  update on this matter.)

CTPA President Jeff Garland  noted, “State Senators (Buen, Chumbley & English) who explored the complex issue during special legislative briefing last year were stonewalled by the DCCA. The only access center that dared to raise concerns - Maui’s Akaku - was subsequently threatened with closure by the DCCA. 'Olelo expressed an intent to disapprove of Decision and Order 261 (D&O 261), but has yet to do so. In D&O 261, four small and specific changes were inserted without due process: a change in the definition of "gross revenue" (D&O 261 page 16) reducing the calculation by approximately ten per cent (amounting to over $500,000 per year); capping 'Olelo's funding portion at 3.7 million; mandating 25% of the capped funds get passed through to the Educational sector; and cutting two community access TV channels that were to be provided for community use (D&O 261 page 20 - 21).  The value of the two channels is conservatively estimated to be five hundred thousand dollars per year. The cap on 'Olelo's funds at 3.7 million could amount to a reduction of 1 million dollars or more a year in operating expenses used to educate the Public in media literacy and facilitate free speech in the public electronic park also known as 'the electronic soapbox.' ”

The change in the definition of “gross revenue” of cable companies is the subject of heated discussion by public interest groups across the country and has been characterized as "corporate welfare" by leading regulators in other jurisdictions.  A Pasadena, California case cited as precedent by Hawaii’s DCCA is still the subject of active appeal by many jurisdictions represented by the National Association of Telecommunications Officers and Advisors (NATOA).  The pending federal appeal by NATOA is online at:    http://www.natoa.org/membersonly/articles/5th_Circuit_Brief.pdf

The second important issue is an appearance of substantial impropriety. CTPA recently learned that Sonobe's spouse is employed by Time-Warner Communications at Time Warner Telecom Sales and Support Services, which provides telephone service to Hawaii's business community.  Time-Warner Communications is regulated by the State Public Utilities Commission (PUC) and not by Sonobe.  However, the DCCA does employ the State Consumer Advocate who represents the public interest in proceedings at the PUC that indeed do directly affect Time-Warner Communications.  Also, the CATV division of DCCA has in the past been a participant in PUC proceedings that affect cable system operators and other telecom providers including Time Warner Communications, and the past Executive Director of the DCCA Consumer Advocacy division, Gregg J. Kinkley, was recently appointed to the PUC.

The cable company that benefited from Sonobe's cable policy initiative is Hawaii’s newest monopoly, Time Warner Cable, and the telecom company that employs his wife, Time Warner Communications, share the same AOL/Time-Warner parent corporation.  In both cases their interest in State regulation of communication utilities is profound.  Although Sonobe's employment with the DCCA now primarily revolves around regulating just that one company, there is no indication that cable administrator Sonobe recused himself from participating in the franchise's decisions and orders.

Some Troubling Historical Points

Past history concerning DCCA appointees is a troubling one that follows the same pattern of disregard for process. The DCCA director appoints the majority of all Hawaii access center board directors. The clause that mandates that the majority of public access directors be named by the DCCA director was written into the bylaws by the all-DCCA-appointed original boards. This clause has been objected to by the public, but the DCCA-controlled boards have never allowed it to be changed.

At the time of the AOL-TW hearings that resulted in the great losses, the DCCA-appointed 'Olelo board director who had the position of 'Olelo board President was Susan Au Doyle. She neglected to represent or appoint someone to represent the public or 'Olelo at those hearings. What is most troubling is that both Doyle and Sonobe admit that Doyle had been told of the proposed reductions in public benefits before the Decision and Orders were finalized. Withholding that information from those she purported to represent reeks of collusion at worst and deriliction of duty at best. Ms. Doyle knew the value of public representation at these cable franchise transfer hearings as she was the past DCCA CATV administrator under DCCA director Robert Alm -- who was also appointed as an 'Olelo board director by the current DCCA Director Matayoshi.

In the early 1990s when Alm was the director of DCCA, without a proper hearing he inserted changes into Decisions and Orders that gave approximately 20% of franchise fees to KHET Public Television (Hawaii is the only state in the country that funds an already federally funded PBS Station). When Alm was an Olelo director, he attempted to merge 'Olelo with KHET.  He wound up on KHET's board of directors before the ink on his 'Olelo board resignation papers had dried.

In 1993 State auditor Marion Higa determined that DCCA had been overcharging for services and recommended these fees should be cut back in the future as per state law. Ms. Matayoshi ignored the recommendation and the law and continued overcharging the public for CATV's services. When her violation of the statute was brought to government officials' attention Ms. Matayoshi requested that the law be changed so that the overcharges could be moved into the general fund. Legislators went along with this as it was a way to gain additional tax dollars without appearing to raise any taxes, even though it put an inappropriate burden on those who were paying fees to DCCA for particular services.

Conclusion

DCCA has exhibited a long history of acting without proper public input. It has diverted public funds to a private not-for-profit (KHET). It has overcharged its clients. It has allowed a private corporation (Time-Warner) to support PEG access less than ever before without a concomitant lowering of rates.

The disturbing lack of public process and the questionable practices of the DCCA & its cable office are far too important to ignore. Besides the potential for wrongful personal enrichment, the potential damage to the public interest is great.  Community access media, with their promise of free speech and free access to public information, cannot afford to suffer losses of such valuable and scarce resources. One or two people controlling the negotiation process in a manner that excludes stakeholders should cease. A complete audit of the DCCA Cable TV Division, ‘Olelo, and Oceanic Time-Warner Cable is needed to ensure that no ethical, legal, or fiscal violations have occurred.