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HomeMy WebLinkAbout4.F.3. Approval of Transfer of Cable Franchise, Res. No. 7544 Consent Business 4. F. 3. SHAJ0I E E TO: Mayor and City Council FROM: Kris Wilson, Assistant City Administrator DATE: 01/20/2015 SUBJECT: Approval of Transfer of Cable Franchise, Res. No. 7544 (B) Action Sought The Council is asked to offer Resolution No. 7544, a resolution approving the transfer of the cable franchise and change of control of the grantee, and move its adoption. Background On June 17, 2014, the City received a formal application from Comcast requesting the City's consent to transfer its existing cable franchise to Midwest Cable Inc. Comcast is transferring its franchises with area cities and exiting the Minnesota market as part of its national merger with Time Warner. On June 24, 2014, the City Council authorized hiring the law firm of Moss & Barnett to review the transfer request and advise the City in regards to it. Since that time attorney Brian Grogen has requested, received and reviewed volumes of information regarding the proposed new franchise holder. He has also negotiated several extensions of the deadline for the City to take action. Recently he advised staff that his review of the transfer application is complete and that he is recommending that the City consent to the transfer with certain stipulations, as outlined in the attached resolution. The stipulations include that the new franchise holder (Midwest Cable Inc., also to be known as Greatland Connections Inc.) shall assume all obligations of the existing franchise agreement, which extends until 2019; that the new franchise holder shall provide a high-definition channel for the City's Government Access Channel by January 1, 2016, and that Comcast shall reimburse the City for all legal fees incurred for review of the proposed transfer. Budget Impact This action has no budgetary impact. The agreement stipulates that the City will be reimbursed for its costs in reviewing the transfer application and the new franchise holder will be obligated to pay the City the same franchise fee and PEG fee as Comcast currently pays. 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 offer Resolution No. 7544, a resolution approving the transfer of the cable franchise and change of control of the grantee, and move its adoption. Attachments: Resolution No. 7544 RESOLUTION NO. 7544 A Resolution Approving the Transfer of the Cable Franchise and Change of Control of the Grantee WHEREAS, Comcast of Arkansas/Florida/Louisiana/Minnesota/Mississippi/Tennessee, Inc. ("Grantee"), currently holds a cable television franchise ("Franchise") granted by the City of Shakopee, Minnesota ("City"); and WHEREAS, Grantee owns, operates and maintains a cable television system in the City ("System") pursuant to the terms of the Franchise; and WHEREAS, on February 12, 2014, Comcast Corporation ("Comcast") and Time Warner Cable Inc. ("TWC") entered into an Agreement and Plan of Merger; and WHEREAS, on April 25, 2014, Comcast and Charter Communications, Inc. ("Charter") entered into the Comcast/Charter Transactions Agreement (the "Agreement"), pursuant to which the Grantee, through a restructuring under Comcast's ownership, will become Comcast of Minnesota, LLC ("New Grantee") and immediately thereafter will become a wholly-owned subsidiary of Midwest Cable, Inc. ("Midwest Cable") (the "Transaction"); and WHEREAS, on or about June 17, 2014 the City received from Grantee, FCC Form 394 - Application for Franchise Authority Consent to Assignment or Transfer of Control of Cable Television Franchise ("Application"); and WHEREAS, Federal law and the terms of the Franchise require that the City take action to consider the Application within one hundred twenty (120) days of the date of receipt, or on or before October 15, 2014; and WHEREAS, on or about August 22, 2014 Comcast and Midwest Cable agreed to extend the Application review period for sixty (60) days until December 15, 2014 to allow the City time to review the additional information concerning the qualifications of Midwest Cable provided to the City on September 30, 2014; and WHEREAS, on or about September 30, 2014 Comcast and Midwest Cable agreed to a further extension of the Application review period for thirty (30) days until January 15, 2015 to allow the City to review certain service agreements related to the Transaction as well as certain SEC financial filings to be made available for review on October 31, 2014; and WHEREAS, on or about December 23, 2014 Comcast and Midwest Cable agreed to a further extension of the Application review period through and including January 30, 2015; and WHEREAS, Section 18 of the Franchise requires the City's advance written consent prior to the Grantee's transfer of the Franchise; and WHEREAS, as a result of the proposed Transaction Grantee has requested consent from the City to the proposed transfer of the Franchise; and 2626775v3 WHEREAS, the City has reviewed the proposed Transaction, and based on information provided by Grantee and Midwest Cable, the City has elected to approve the proposed Transaction subject to certain conditions as set forth herein. NOW, THEREFORE, the City of Shakopee, Minnesota hereby resolves as follows: 1. All of the above recitals are hereby incorporated by reference as if fully set forth herein. 2. The Franchise is in full force and effect and Grantee is the lawful holder of the Franchise. 3. New Grantee will be the lawful holder of the Franchise after completion of the Transaction. 4. The City hereby consents and approves of the proposed Transaction subject to the below conditions. a. New Grantee agreeing to assume any and all liabilities, known and unknown, under the Franchise. b. Within twenty (20) days of the date of adoption of this Resolution, New Grantee shall execute and file with the City the Acceptance and Agreement attached hereto to verify New Grantee's compliance with the terms and conditions of this Resolution; and c. Within thirty (30) days following close of the Transaction, Midwest Cable (also to be known as GreatLand Connections Inc.) shall execute and provide the City with the Corporate Parent Guaranty attached hereto and incorporated by reference. d. On January 1, 2016 the City shall have the right to request one (1) high definition ("HD")access channel for government programming. Upon activation of the HD access channel for government programming, the City will return one (1) of the three (3) existing standard definition ("SD") PEG access channels. New Grantee will deliver the HD signal to subscribers so that it is viewable without degradation, provided that it is not required to deliver a HD PEG channel at a resolution higher than the highest resolution used in connection with the delivery of local broadcast signals to the public. New Grantee may implement HD carriage of the PEG channel in any manner (including selection of compression, utilization of IP, amount of system capacity or bandwidth and other processing characteristics) that produces a signal as accessible, functional, useable and of a quality comparable (meaning indistinguishable to the viewer)to broadcast HD channels carried on the cable system, assuming the quality of the HD signal received by 2 2626775v3 New Grantee from the PEG programmer is comparable to that received from the broadcast channels. ii. City acknowledges that HD programming may require the viewer to have special viewer equipment (such as an HDTV and an HD-capable digital device/receiver), but any subscriber who can view an HD signal delivered via the cable system at a receiver shall also be able to view the HD PEG channel at that receiver, without additional charges or equipment. By agreeing to make PEG available in HD format, New Grantee is not agreeing it may be required to provide free HD equipment to customers including complimentary municipal and educational accounts and universal service accounts, nor modify its equipment or pricing policies in any manner. The City acknowledges that not every customer may be able to view HD PEG programming (for example, because they don't have an HDTV in their home or have chosen not to take an HD capable receiving device from New Grantee or other equipment provider) or on every TV in the home. iii. New Grantee will provide a bill message announcing the launch of the HD PEG channel; however the City acknowledges that not all customers may receive the bill message notice in advance of the channel launch in the interests of launching the channel sooner. e. In accordance with Section 6.6 of the Franchise, New Grantee shall maintain and repair, free of charge, the existing fiber line extending from the Shakopee West Junior High (200 10th Ave. East) to the Fire Station 1 (2700 Vierling Drive East) for use by the City. New grantee shall not impose upon City any fees or charges for the use of the fiber line — consistent with the practice in place as of the date of execution of this Resolution. f. New Grantee will participate in quarterly meetings with members of the City or the City's designees for the first two (2) years following the close of the Transaction to verify that subscriber issues and concerns are being addressed by New Grantee or any other entity that may have interaction with subscribers within the City. If issues are not being addressed, New Grantee agrees to meet with the City, as directed, to explain steps being undertaken to address subscriber concerns and New Grantee will provide regular and timely updates to the City to provide verification of corrective actions being undertaken to address unresolved issues. g. New Grantee will maintain an "escalated complaint program" to escalate unresolved cable television complaints from subscribers. One or more specifically identified employee(s) of New Grantee shall be available to City via email for reporting issues. These specifically identified employee(s) of New Grantee will have the ability to escalate service issues to a senior officer of New Grantee or 3 2626775v3 New Grantee's parent company when necessary. New Grantee will follow-up with City by email or by phone with a summary of the results of the complaint(s). h. New Grantee's compliance with the requirements of paragraphs c, d, e, f and g, of this Resolution shall be handled under the Franchise. New Grantee shall be subject to available enforcement procedures and remedies as if these obligations were set forth in the Franchise. Comcast shall, within twenty (20) days of the date of adoption of this Resolution,fully reimburse City for all of the City's reasonable costs and expenses in connection with the City's review of the proposed Transaction, including without limitation, all costs incurred by the City for experts and attorneys retained by the City to assist in the review as well as notice and publication costs ("Reimbursement"). The Reimbursement shall not be deemed to be "Franchise Fees" within the meaning of Section 622 of the Cable Act (47 U.S.C. §542), nor shall the Reimbursement be deemed to be (i) "payments in kind" or any involuntary payments chargeable against the Franchise Fees to be paid to the City by New Grantee pursuant to the Franchise. ii. The Reimbursement shall be considered a requirement or charge incidental to the awarding or enforcing of the Franchise. iii. It is understood that the language in this paragraph 4.i has been agreed to solely for the purpose of this Resolution and this Reimbursement, and does not prejudice any party from taking a different position regarding the Franchise Fee issues in the future. 5. In the event the proposed Transaction contemplated by the foregoing resolution is not completed, for any reason, the City's consent shall not be effective. If any of the conditions set forth herein are not met, the City's consent to the proposed Transaction shall be null and void and of no effect. This Resolution shall take effect and continue and remain in effect from and after the date of its passage, approval, and adoption. Approved by the City of Shakopee, Minnesota this 20th day of January, 2015. ATTEST: CITY OF SHAKOPEE, MINNESOTA By: By: Its: Its: 4 2626775v3 ACCEPTANCE AND AGREEMENT Comcast of Minnesota, LLC hereby accept this Resolution No. ("Resolution") and any attachment incorporated by reference in the Resolution and agrees to be bound by the terms and conditions of this Resolution and the terms and conditions of the Franchise referenced within the Resolution. Dated this day of , 2015. COMCAST OF MINNESOTA, LLC By: Its: SWORN TO BEFORE ME this day of ,2015. NOTARY PUBLIC 6 2626775v3 CORPORATE PARENT GUARANTY THIS AGREEMENT is made this day of , 201_ (this "Agreement"), by and among GreatLand Connections Inc. (f/k/a Midwest Cable, Inc.), a Delaware corporation (the "Guarantor"), the City of Shakopee, Minnesota ("Franchising Authority"), and , a ("Company"). WITNESSETH WHEREAS, on July 20, 2004 the Franchising Authority adopted Ordinance No. 709, granting a Cable Television Franchise which is now held by Comcast of Arkansas/Florida/Louisiana/Minnesota/ Mississippi/ Tennessee, Inc. (the "Franchise"), pursuant to which the Franchising Authority has granted the rights to own, operate, and maintain a cable television system ("System"); and WHEREAS, pursuant to the Comcast/Charter Transaction Agreement dated April 25, 2014 by and between Charter Communication, Inc., a Delaware corporation, and Comcast Corporation, a Pennsylvania corporation, ("Agreement"), the Franchise will be transferred to the Company and the Guarantor will acquire control of the Company as an indirect subsidiary of Guarantor as a result of Comcast Corporation's contribution and spin off of certain cable television systems pursuant to the Agreement("Change in Control"); and WHEREAS, Company and Comcast Corporation have requested the consent to the Change of Control in accordance with the requirements of Section 18 of the Franchise; and WHEREAS, pursuant to Resolution No. , dated , 201_, Franchising Authority conditioned its consent to the Change of Control on the issuance by Guarantor of a corporate parent guaranty guaranteeing certain obligations of Company under the Franchise. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, in consideration of the approval of the Change of Control, Guarantor hereby unconditionally and irrevocably agrees to provide all the financial resources necessary for the observance, fulfillment and performance of the obligations of the Company under the Franchise and also to be legally liable for performance of said obligations in case of default by or revocation or termination for default of the Franchise. This Agreement, unless terminated, substituted, or canceled, as provided herein, shall remain in full force and effect for the duration of the term of the Franchise. 7 2626775v3 Upon substitution of another Guarantor reasonably satisfactory to the Franchising Authority, this Agreement may be terminated, substituted, or canceled upon thirty (30) days prior written notice from Guarantor to the Franchising Authority and the Company. Such termination shall not affect liability incurred or accrued under this Agreement prior to the effective date of such termination or cancellation. GREATLAND CONNECTIONS INC. (F/K/A MIDWEST CABLE, INC.) By: Its: SWORN TO BEFORE ME this day of ,2015. NOTARY PUBLIC 8 2626775v3