HomeMy WebLinkAbout7.F. Review of Franchise Transfer Application from Comcast Corporation General Business 7. F.
SH 1KOPEF
TO: Mayor and City Council
Mark McNeill,City Administrator
FROM: Kris Wilson,Assistant City Administrator
DATE: 06/24/2014
SUBJECT: Review of Franchise Transfer Application from Comcast Corporation
Action Sought
The Council is asked to authorize the appropriate officials to enter into the attached Engagement Agreement with
Moss&Barnett for the review of the cable franchise transfer application received from Comcast Corporation.
Background
Several weeks ago it was announced in the media that Comcast Corporation is divesting itself of cable systems in
Minnesota in order to strengthen its efforts to obtain FCC approval for the purchase of Time Warner. Comcast is
looking to transfer all of its cable franchise agreements in the Twin Cities metropolitan area to a newly formed,
independent company called Midwest Cable,Inc. This new company will be partially owned by Charter
Communications, a cable company that serves many non-metro cities such as Rochester,Mankato, St. Cloud,
Duluth,etc. It is expected that Midwest Cable will enter into a contract arrangement with Charter to manage the
systems acquired from Comcast.
Last week the City received the official notification and request to transfer the franchise(see attached). The City
has 30 days to determine whether Comcast's application is complete and 120 days to review and make a ruling on
the application. The City's review is to determine whether Midwest Cable,Inc.has the legal,technical and
financial wherewithal to provide quality service to the City's residents.
This is a technical and highly specialized topic,which the City last went through in 2005 with the transfer of our
franchise from Time Warner to Comcast. Therefore,staff is recommending that the City retain the services of
Brian Grogen of the law firm Moss&Barnett to guide our review of the transfer application. Mr.Grogen recently
completed a franchise fee audit of Comcast on behalf of the City and is very well versed in the issues of cable
franchising.
Additionally,Moss&Barnett will be representing numerous cities in the metro area who have received the same
transfer application from Comcast. This will allow for some cost sharing for items such as a financial analysis of
the new Midwest Cable,Inc.
As part of his representation,
Mr. Grogen will present his findings to the City Council and make recommendations as to how the City might
proceed. This is likely to be sometime in September.
Recommendation
I recommend that the City retain the services of Moss&Barnett to review the franchise transfer application
received from Comcast Corporation.
Budget Impact
The initial cost estimate from Moss&Barnett is a not to exceed amount of$7,500. Depending on Comcast's level
of cooperation, a larger amount could be needed before the review is complete. The Telecommunications Division
budget has only$3,000 allocated for attorney's fees,but additional funds should be available in the larger
Administration Department budget and/or the Council's unallocated line.
Relationship to Vision
This item relates to Goal B: Positively manage the challenges and opportunities presented by growth,development
and change.
Requested Action
The Council is asked to authorize the appropriate officials to enter into the attached Engagement Agreement with
Moss&Barnett for the review of the cable franchise transfer application received from Comcast Corporation.
Attachments: Letter from Comcast
Engagement Agreement with Moss&Barnett
OldOne Comcast Center
CO A A C A S T Philadelphia,Pennsylvania 19103
i
June 17,2014
John Peterson
City Administrator
City of Shakopee
129 Holmes Street South
Shakopee,MN 55379
Re: Comcast Corporation/Ndwest Cable,Inc.Transaction
Dear Mr.Peterson:
As you may have read,Comcast Corporation("Comcast"),the ultimate parent of the entity holding the cable
franchise in your community,is divesting its ownership of certain cable systems in connection with its acquisition
of Time Warner Cable. Pursuant to an agreement with Charter Communications,Inc.("Charter"),Comcast will
spin off a new,independent company,which will become Midwest Cable,Inc.("Midwest Cable,"currently known
as"SpinCo"),a publicly traded company that will be the ultimate owner of your franchise. Upon completion of the
transaction,Comcast shareholders(but not Comcast itself)will own approximately two-thirds(2/3)of Midwest
Cable,and Charter will own approximately one-third(1/3)of Midwest Cable.
As a preliminary matter,Comcast will undertake,certain pro forma internal restructurings,and your cable
franchisee will become Comcast of Minnesota,LLC,(still remaining entirely under the ownership and control of
Comcast). Immediately thereafter,in connection with the spin-off,your cable franchisee will become an indirect,
wholly-owned subsidiary of Midwest Cable.
With over 2.5 million cable customers,Midwest Cable will begin operations as the fifth largest cable television
provider in the United States. Moreover,Midwest Cable's strategic regionalized footprint will allow for a focused
and efficient delivery of high quality and innovative services to its customers. Midwest Cable will be led by
President and CEO Michael Willner,a 40-year cable industry leader and the co-founder and former CEO of Insight
Communications. Further,Midwest's Cable's Board of Directors will include leading communications industry
executives and innovators,with current Charter Communications CEO Tom Rutledge serving as Board Chairman.
In addition,through a services agreement with Charter,Midwest Cable will be able to take advantage of Charter's
expertise in technology and provision of services.
If you determine that your consent is not required for this transaction to proceed,you need not take any further
action. If,however,you believe your consent is necessary,we have provided copies of the Federal Communications
Commission's("FCC')Form 394,other information,and a draft consent resolution to help facilitate the consent
process.
• FCC Form 394. FCC Form 394(required copies enclosed)is designed to provide you with the relevant
information needed to assess the financial,legal,and technical qualifications of Midwest Cable to be the
ultimate parent entity of your cable franchisee.
• Timing. According to the FCC's rules,where consent is required,you have a maximum of 120 days from
the date you receive this information to review all materials and act upon our request for consent to the
transaction. (Please note,your franchise may specify a shorter time frame.)
• Consent Resolution. Should you choose to affirmatively consent to the transaction,we have enclosed a
draft consent resolution to be used to help expedite the consent process. We would request that a consent
resolution,if needed,be placed on your agenda for consideration at your earliest convenience.
We invite you to visit the"Recent Official Transaction Communications"section of
http://corporate.comcast.com/twctransaction/official-filings-together for additional information about the
transaction. If you have any questions about the FCC Form 394,the consent resolution,or any of the enclosed
documents,please give me a call at(215)286-5585,send an email to klay_fennell@comcast.com,or send a
facsimile to(215)286-8408. You may also contact Mark Brown,Vice President,Government Affairs,at Charter by
phone at(202)621-1900,by email at mark.brown@,chartercomcom,or by facsimile at(202)733-5960.
Sincerely,
Klayton F.Fennell
Vice President,Government Affairs
Attachment and Enclosures
ENGAGEMENT AGREEMENT
This Engagement Agreement sets forth the agreement between the City of Shakopee,
Minnesota ("City's and Moss & Barnett, A Professional Association ('Moss & Barnett' ,
concerning legal representation regarding the proposed transfer of the cable franchise
currently held by Comcast Communications ("Comcast'). For purposes of this
representation, Moss & Barnett understands that its client is the City not any of its
individual officers, agents or employees or any other entity.
A. The scope of the engagement is to assist the City in reviewing FCC Form 394
regarding the proposed transfer of the City's cable system from Comcast to
Midwest Cable, Inc. This representation will include analyzing the legal,
technical and financial qualifications of Midwest Cable, Inc. and preparing a
written report for the City which will include a draft resolution for the City
Council's consideration. The anticipated total fees for the above described task
are estimated not to exceed Seven Thousand Five Hundred and No/100 Dollars
($7,500).
B. If additional services and costs are required beyond those set forth in paragraph
A. above, Moss & Barnett's 2014 hourly rates for communications work on behalf
of municipal clients shall apply as follows: $165/hour for paralegal work and
$435/hour for senior shareholder work. Moss & Barnett generally finds that the
average hourly rate for municipal franchise renewal work is approximately
$295/hour. Our billing rates are subject to change from time to time, generally
in January of each year. Moss & Barnett will confer with the City prior to
incurring costs in excess of the above estimate.
C. Moss & Barnett will represent the City with Brian Grogan as the primary attorney
responsible for all services. While other professionals at Moss & Barnett may
perform services on the City's behalf in connection with the services referenced
above, it is understood and agreed that Brian Grogan will not be removed or
replaced as the primary and responsible attorney for all services without the
prior written consent of the City. Moss & Barnett will use its best judgment to
determine the most economical use of its attorneys and staff personnel.
D. The City will receive an itemized statement of its account from Moss & Barnett
on a monthly basis, which summarizes the services rendered, and the costs and
expenses incurred on the City's behalf. Moss & Barnett reserves the right to
increase the hourly rates of any attorneys and staff. Such increases will,
however, not be implemented without the prior approval of the City. Time is
billed by the one-tenth of an hour, which is the minimum time charged for any
service. Billed time includes all time spent on the City's behalf in connection with
the matter referenced above, including conferences, telephone calls, drafting
and reviewing of documents and memoranda, preparing and reviewing of
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correspondence, negotiations, legal research, interoffice conferences, and travel
to and from locations away from the office.
E. The City will reimburse Moss & Barnett for all reasonable and necessary costs
and expenses which we incur on the City's behalf. These costs and expenses
include charges for subcontractors working on the City's behalf, photocopying,
delivery and messenger services, WESTLAW, travel, mileage, food and lodging.
F. The periodic statement of account which the City will receive from Moss &
Barnett will include a brief description of activity on the matter. We do not
itemize all specific services rendered on a particular date. The City will contact
Moss & Barnett in writing within thirty (30) days of receipt of its statement if the
City has a question regarding any charges on its statement. If Moss & Barnett
does not hear from the City, it will assume that there are no questions or
problems.
G. All balances on the City's account are due thirty (30) days after the date of the
statement. Interest at the legal rate shall accrue on the unpaid balance of the
City's account from the due date.
H. Moss & Barnett is a general service law firm that the City recognizes has
represented, now represents, and will continue to represent numerous clients
nationally and internationally, over a wide range of industries and businesses
and in a wide variety of matters. Given this, without a binding conflict waiver,
conflicts of interest might arise that could deprive the City or other clients of the
right to select this firm as their counsel. Thus, as an integral part of the
engagement, the City agrees that Moss & Barnett may, now or in the future,
represent other entities or persons, including in litigation, adverse to the City on
matters that are not substantially related to (a) the legal services that we have
rendered, are rendering, or in the future will render to the City under the
engagement and (b) other legal services that we have rendered, are rendering,
or in the future will render to the City (an "'Allowed Adverse Representation'.
The City also agrees that it will not assert that either (a) this firm's
representation of the City in any past, present, or future matter or (b) this firm's
actual, or possible, possession of confidential information belonging to the City is
a basis to disqualify this firm from representing another entity or person in any
Allowed Adverse Representation. The City agrees that any Allowed Adverse
Representation does not breach any duty that this firm owes to the City.
I. Moss & Barnett assures that its services will be accomplished in a timely manner
and with the cooperation and assistance of the City. In this regard, the City
agrees to designate a contact whom Moss & Barnett will contact and who will
regularly review, discuss, and meet with Moss & Barnett regarding the services
provided, the time for performance of the services, and to assist in arranging
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meetings, conferences, and other arrangements with City personnel to facilitate
the performance of services by Moss & Barnett and to ensure that all information
and issues required for review by the City are made available to Moss & Barnett.
The City designates John Peterson, Telecommunications Coordinator, as its
contact person for this project.
J. This Agreement may be terminated for any reason by either the City or Moss &
Barnett upon giving thirty (30) days written notice to the other. If such notice is
given to Moss & Barnett, it shall immediately cease work. All fees and costs
incurred to the date of receipt of the notice will be paid to Moss & Barnett.
Otherwise, there shall be no further liability to the City.
K. Although Moss & Barnett is not required to do so, it is Moss & Barnett's policy to
retain files for ten (10) full calendar years after a file has been closed. Files will
thereafter be destroyed unless the City specifically directs us otherwise. If the
City wishes all or a part of the City's file returned to the City, please notify Moss
& Barnett as soon as possible. All reasonable steps will be taken to preserve
confidential communications and secrets from disclosure to third parties.
L. This Agreement contains all of the terms of the services and financial
arrangement between the City and Moss & Barnett and can only be modified by
a written document signed by both parties.
MOSS & BARNETT,
A Professional Association
By:
Brian T. Grogan, Esq., Shareholder
Dated: 12014
CITY OF SHAKOPEE, MINNESOTA
By:
Its:
Dated: 12014
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