HomeMy WebLinkAbout9. CenturyLinks Qualifications to provide cable television services - Res. No. 7600 11111164111 General Business 9.
SHA K rF F
TO: Mayor and City Council
FROM: John Peterson, Telecommunications Coordinator
DATE: 08/18/2015
SUBJECT: CenturyLink's Qualifications to Provide Cable Television Services -
Res. No. 7600 (D)
Action Sought
The City Council is asked to offer Resolution No. 7600, a resolution regarding
findings of fact with respect to the proposal of CenturyLink for a Cable
Communications Franchise, and move its adoption.
Background
On June 16 the Council held a public hearing to consider an application from
CenturyLink for an additional Cable Communications Franchise. At that time the
Council accepted the application and directed the City's staff and legal counsel to
proceed with negotiations.
Attorney Brian Grogan, of Moss & Barnett, has completed the attached report
addressing CenturyLink's legal, technical and financial qualifications to provide
cable television service within Shakopee. Mr. Grogan will be present at the Council
meeting to present the key findings of this report and answer any questions.
Following Mr. Grogan's presentation, the Council will be asked to consider adoption
of the attached Resolution. This is the next step in the process of responding to
CenturyLink's franchise application, but it does not grant a franchise at this time.
Assuming the Council concurs with Mr. Grogan's report finding CenturyLink
qualified, the next step is to negotiate the actual terms under which CenturyLink
would operate within the city. Negotiation of these terms has begun and will
continue in the coming weeks, with a draft franchise agreement scheduled to come
before Council for consideration later this year.
Requested Action
The City Council is asked to offer Resolution No. 7600, a resolution regarding
findings of fact with respect to the proposal of CenturyLink for a Cable
Communications Franchise, and move its adoption.
Attachments: Report of Findings
Resolution No. 7600
Report to the
City of Shakopee, Minnesota
Regarding Qwest Broadband Services, Inc.,
d/b/a/ CenturyLink - Proposal for a
Cable Communication Franchise
June 29, 2015
Prepared by:
Brian T. Grogan, Esq.
Yuri B. Berndt, Esq.
••i•• Moss & Barnett
150 South Fifth Street, Suite 1200 I Minneapolis, MN 55402
(P) 612-877-5000 I (F) 612-877-5999 i (W) lawmoss.com
TABLE OF CONTENTS
INTRODUCTION 1
STATUTORY REQUIREMENTS 2
PROCEDURE FOLLOWED BY CITY 10
INFORMATION REVIEWED 11
CENTURYLINK'S LEGAL QUALIFICATIONS 12
CENTURYLINK'S TECHNICAL QUALIFICATIONS 13
CENTURYLINK'S FINANCIAL QUALIFICATIONS 17
RECOMMENDATIONS 23
EXHIBIT A COMCAST LETTER
EXHIBIT B ENTITY DETAILS FROM THE DELAWARE DIVISION OF
CORPORATIONS
EXHIBIT C MINNESOTA SECRETARY OF STATE BUSINESS RECORD DETAILS
EXHIBIT D MINNESOTA SECRETARY OF STATE UCC/TAX LIEN FILING
RECORD SEARCH AND JUDGMENT RECORD SEARCH
EXHIBIT E PACER CASE LOCATOR SUMMARY AND THE ACTIVE CASE
SUMMARY
EXHIBIT F CORPORATE PARENT GUARANTY
EXHIBIT G PROPOSED RESOLUTION
2867164v1
INTRODUCTION
Qwest Broadband Services, Inc., d/b/a CenturyLink (hereinafter referred to as
"CenturyLink") requested the issuance of a cable communications franchise from the City
of Shakopee, Minnesota ("City") to provide cable services in the City.
The City contacted Moss & Barnett seeking input regarding the appropriate procedure to
be followed to consider the award of a cable communications franchise to CenturyLink or
any other applicant. Moss & Barnett reviewed state and federal statutory requirements
with City representatives and developed a comprehensive franchise procedure to comply
with applicable laws. This report will include a summary of Moss & Barnett's findings and
recommendations.
In accordance with Minnesota Statutes Section 238.081, the City published a Notice of
Intent to Franchise and requested applications for a franchise from any interested
applicants. Applicants were instructed to obtain from the City a Request for Proposal
Official Application Form. Prior to the deadline for submitting applications the City
received only one (1) application - from CenturyLink.
Pursuant to Minnesota Statutes Section 238.081, the City held a public hearing to receive
input from interested parties regarding CenturyLink's application.
This report will review relevant statutory requirements that the City must follow in
processing a request for a cable communications franchise. Thereafter, the report will
review CenturyLink's legal, technical and financial qualifications to provide cable services
in the City and address whether CenturyLink's application complies with State statutory
requirements. Finally, this report will provide recommendations for the City Council's
consideration in taking action with regard to CenturyLink's application.
1
2867164v1
STATUTORY REQUIREMENTS
A. Federal Regulatory Scheme: Competition Among Cable Television
Providers and the Federal Cable Act
The Cable Communications Policy Act of 1984, as amended by the Cable Consumer
Protection and Competition Act of 1992 and the Telecommunications Act of 1996
(hereinafter collectively referred to as the"Cable Act"), contains many provisions relevant
to the application before the City. According to the Cable Act, one of its primary purposes
is to:
promote competition in cable communications and minimize unnecessary
regulation that would impose an undue economic burden on cable systems 1
Furthermore, 47 U.S.C. Section 541(a)(1) provides that a franchising authority may award
one or more franchises within its jurisdiction. To that end, the Cable Act states:
that a franchising authority may not grant an exclusive franchise and may
not unreasonably refuse to award an additional competitive
franchise.2
Any applicant whose application for a second franchise has been denied by a final decision
of a franchising authority is not without recourse. The applicant may appeal an adverse
decision pursuant to the provisions of Section 635 of the Cable Act.
The Cable Act also provides that a city may require certain assurances from the
prospective franchisee. Subsection 4 of 47 U.S.C. Section 541(a) provides that:
in awarding a franchise, the franchising authority—
a. shall allow the applicant's cable system a reasonable period of time to
become capable of providing cable service to all households in the franchise area;
b. may require adequate assurance that the cable operator will provide
adequate public, educational, and governmental access channel capacity, facilities,
or financial support; and
c. may require adequate assurance that the cable operator has the financial,
technical, or legal qualifications to provide cable service.
When Congress passed the 1992 amendments to the Cable Act, Congress suggested that
it favors competition in the delivery of cable communications services. The Senate report
that accompanied the amendments concluded that:
147 U.S.C. Section 521(b).
2 47 U.S.C. Section 541(a)(1) (emphasis added).
2
2867164v1
Based on the evidence and the record taken as a whole, it is dear that there
are benefits from competition between two cable systems. Thus, the
Committee believes that local franchising authorities should be
encouraged to award second franchises. Accordingly, [the Cable Act
as amended], prohibits local franchising authorities from unreasonably
refusing to grant second franchises 3
B. Federal Communications Commission Observations on Competition in
the Cable Television Industry
The Federal Communications Commission's ("FCC's") annual competition reports in
video markets have found that subscribers have generally benefited from "head-to-head"
competition in the delivery of cable services. Benefits enjoyed by consumers as a result
of the increased competition include:
a. lower monthly charges for services and equipment;
b. additional program offerings;
c. access to alternative sources of telecommunications and Internet services;
d. new digital services; and
e. better customer service from the incumbent cable operator.
The FCC completed rulemaking proceedings on competition in the video marketplace
resulting in the FCC's issuance of what is now known as the FCC 621 Order.4 The Sixth
Circuit affirmed the FCC 621 Order in 2008.5 In the 621 Order the FCC summarized the
evidentiary record in the following manner:
The record indicates that in today's market, new entrants face "steep
economic challenges"in an "industry characterized by large fixed and sunk
costs,' without the resulting benefits incumbent cable operators enjoyed
for years as monopolists in the video services marketplace. According to
commentators, "a competitive video provider who enters the market today
is in a fundamentally different situation"from that of the incumbent cable
operator: "[w]hen incumbents installed their systems, they had a captive
market," whereas new entrants "have to 'win' every customer from the
incumbent" and thus do not have "anywhere near the number of
subscribers over which to spread the costs."
3(emphasis added). S. Rep. No. 102-92,June 28, 1991, reprinted in 1992 U.S. Code Cong. &Admin. News
1133, 1141, 1146, 1151; H.Conf. Rep. No. 102-862, reprinted in 1992 U.S. Code Cong. & Admin. News
1231, 1259.
4 See In the Matter of Implementation of Section 612(a)(1) of the Cable Communications Policy Act of
1984, 22 FCC Rd 5101 (Mar. 5, 2007).
5 See Alliance for Community Media v. FCC, 529 F.3d 763 (6th Cir. 2008).
3
2867164v1
C. Minnesota Statutory and Judicial Treatment of Competition in the Cable
Television Industry
Minnesota Statutes
In addition to the requirements contained in the Cable Act, Minnesota has several
statutory provisions that must be carefully followed by the City when considering the
award of a franchise. In particular, Minnesota Statutes Chapter 238.08, titled Franchise
Requirement, states that a municipality must require a franchise or extension permit of
any cable communications system providing service within the municipality. Further,
Minnesota Statutes Section 238.081, Franchise Procedure, provides a precise
procedure to be followed by a municipality when requesting applications for a cable
communications franchise.
The text of Section 238.08 and Section 238.081 is set forth below to provide the City with
the exact requirements of state law on this matter.
Minnesota Statute Section 238.08, Franchise Requirement, provides in pertinent
part:
Subd. 1. Requirement; conditions.
(a) A municipality shall require a franchise or extension permit of any cable
communications system providing service within the municipality.
(b) No municipality shall grant an additional franchise for cable service for an
area included in an existing franchise on terms and conditions more favorable or
less burdensome than those in the existing franchise pertaining to: (1) the area
served; (2) public, educational, or governmental access requirements; or (3)
franchise fees. The provisions of this paragraph shall not apply when the area in
which the additional franchise is being sought is not actually being served by any
existing cable communications system holding a franchise for the area. Nothing
in this paragraph prevents a municipality from imposing additional terms and
conditions on any additional franchises.
Subd, 2. Other requirements Nothing in this chapter shall be construed to
prevent franchise requirements in excess of those prescribed unless such requirement is
inconsistent with this chapter.
Subd, 3. Municipal operation. Nothing in this chapter shall be construed to limit
any municipality from the right to construct, purchase, and operate a cable
communications system. Any municipal system shall be subject to this chapter to the
same extent as would any nonpublic cable communications system.
4
2867164v1
Subd. 4, Fee, tax or charge, Nothing in this chapter shall be construed to limit the
power of any municipality to impose upon any cable communications company a fee, tax
or charge.
Minnesota Statute Section 238.081, Franchise Procedure, provides in pertinent
part:
Subd, 1, Publication of Notice. The franchising authority shall have published
once each week for two successive weeks in a newspaper of general circulation in each
municipality within the cable service territory, a notice of intent to consider application
for a franchise other than a franchise renewal pursuant to the United States Code, Title
47, Section 546.
Subd, 2, Required information, The notice must include at least the following
information:
(1) the name of the municipality making the request;
(2) the closing date for submission of applications;
(3) a statement of the application fee, if any, and the method for its submission;
(4) a statement by the franchising authority of the desired services to be
offered;
(5) a statement by the franchising authority of criteria and priorities against
which the applicants for the franchise must be evaluated;
(6) a statement that applications for the franchise must contain at least the
information required by subdivision 4;
(7) the date, time, and place for the public hearing, to hear proposals from
franchise applicants;
(8) the name, address, and telephone number of the individuals who may be
contacted for further information.
Subd, 3, Other recipients of notice. In addition to the published notice, the
franchising authority shall mail copies of the notice of intent to franchise to any person it
has identified as being a potential candidate for the franchise.
Subd. 4, Contents of franchising proposal, The franchising authority shall
require that proposals for a cable communications franchise be notarized, and contain,
but not necessarily be limited to, the following information:
(1) Plans for channel capacity, including both the total number of channels
capable of being energized in the system and the number of channels to be
energized immediately;
5
2867164v1
(2) A statement of the television and radio broadcast signals for which
permission to carry will be requested from the Federal Communications
Commission;
(3) A description of the proposed system design and planned operation,
including at least the following items:
(i) the general area for location of antennae and the head end, if
known;
(ii) the schedule for activating two-way capacity;
(iii) the type of automated services to be provided;
(iv) the number of channels and services to be made available for access
cable broadcasting; and
(v) a schedule of charges for facilities and staff assistance for access
cable broadcasting;
(4) the terms and conditions under which particular service is to be provided to
governmental and educational entities;
(5) a schedule of proposed rates in relation to the services to be provided, and
a proposed policy regarding unusual or difficult connection of services;
(6) a time schedule for construction of the entire system with the time
sequence for wiring the various parts of the area requested to be served in
the request for proposals;
(7) a statement indicating the applicant's qualifications and experience in the
cable communications field, if any;
(8) an identification of the municipalities in which the applicant either owns or
operates a cable communications system directly or indirectly, or has
outstanding franchises for which no system has been built;
(9) plans for financing the proposed system, which must indicate every
significant anticipated source of capital and significant limitations or
conditions with respect to the availability of the indicated sources of capital;
(10) a statement of ownership detailing the corporate organization of the
applicant, if any, including the names and addresses of officers and
directors and the number of shares held by each officer or director, and
intracompany relationship including a parent, subsidiary or affiliated
company; and
(11) a notation and explanation of omissions or other variations with respect to
the requirements of the proposal.
Substantive amendments may not be made in a proposal after a proposal
has been submitted to the franchising authority and before award of a
franchise,
Subd, 5. Time limits to submit applications. The franchising authority shall
allow at least 20 days from the first date of published notice to the closing date for
submitting applications
6
2867164v1
Subd. 6. Public hearing on franchise. A public hearing before the franchising
authority affording reasonable notice and a reasonable opportunity to be heard with
respect to all applications for the franchise must be completed at least seven days before
the introduction of the franchise ordinance in the proceedings of the franchising authority.
Subd. 7. Award of franchise. Franchises may be awarded only by ordinance.
Subd. 8. Costs of awarding franchise. Nothing in this section prohibits a
franchising authority from recovering from a successful applicant the reasonable and
necessary costs of the entire process of awarding the cable communications franchise.
In addition to the above referenced state statutes, Minnesota Statutes Section 238.084
identifies the required contents of a franchise ordinance. Given that the City has an
existing cable franchise with Comcast (the "Comcast Franchise") that complies with the
requirements of Section 238.084, the City may, if it so determines, grant substantially the
same ordinance to CenturyLink if the City finds that CenturyLink is a qualified applicant.
In this proceeding the applicant, CenturyLink, was provided a copy of the Comcast
Franchise. The reason for using substantially the same franchise as the base document
to begin negotiations is to ensure that any and all entities providing cable communications
service within the City are generally regulated in a similar manner. Both the Comcast
Franchise and Minnesota Statutes Section 238.08 include provisions requiring some form
of level playing field obligation which the City must consider before the award of a second,
competitive cable franchise.
Specifically, the Comcast Franchise at Section 12.2 contains a requirement that permits
the City to grant competitive franchises:
Section 12.2 Competition.
A. If another Multichannel Video Programming Distributor operates in the
City's rights-of-way without City authorization, either in the form of a franchise or
other legally required authorization, and the City has dear authority under
applicable laws to mandate a Franchise or other legally required authorization on
that Multichannel Video Programming Distributor but fails to do so, then Grantee
shall not be required to comply with those terms of this Franchise which are not
also imposed upon the Multichannel Video Programming Distributor,
B. If the City makes a decision to commence construction and operation of a
Cable System in the City, or should construction of a Cable System by the City
commence without an identifiable final decision, then Grantee may seek
modification of this Franchise as of the date of the final decision to commence
7
2867164v1
construction and operation, or at the commencement of construction if it begins
without an identifiable final decision, in the manner described below;
1. Notwithstanding any provision to the contrary contained in this-
Franchise,
hisFranchise, Grantee shall not be required to provide the City with proprietary
information or to respond to requests for information that require it to
release proprietary information where it reasonably believes that the
release of such information would provide the City a competitive advantage.
2. Any audits of Franchise Fees must be conducted by an independent
auditor who has agreed in advance in writing not to disclose any portion of
the Grantee's books and records or other proprietary information to the
City, other than the aggregate amount of Gross Revenues (without
disclosing the amounts of underlying categories of Gross Revenues) used
to calculate the Franchise Fees payable hereunder; and
3. If Grantee shall be required to move, relay, or relocate any of its
facilities in connection with the construction or preparation for construction
of a Cable System by the City (regardless of whether any such removal,
relaying, or relocation is required under the terms of this Franchise, or under
any applicable pole attachment agreement to which Grantee and the City
are parties), then the City shall be obligated to pay all of Grantee's
reasonable costs for labor and materials to effect such work.
If the City and Grantee cannot mutually agree on appropriate modifications
to this Franchise as outlined above, Grantee may seek resolution of such
matter in a court of competent jurisdiction,
D. Judicial Treatment: The Minnesota Court of Appeals' Decision Regarding
Minnesota's Cable Statutes and Competing Cable Television Franchises
In its report accompanying the 1992 amendments to the federal Cable Act, the United
States Senate observed that:
In addition to mergers between an incumbent cable system and a potential
competitor, incumbent cable systems often wage legal battles to prevent
cities from awarding second franchises or building their own franchises 6
In 1999, the Minnesota Court of Appeals addressed one of these"legal battles"referenced
by the Senate Report. In In Re Application of Dakota Telecommunications Group, d/b/a
Dakota Telecom, Inc., for a Cable Television Franchise in Marshall, Minnesota(hereinafter
"Dakota Telecom"), the incumbent franchise, Bresnan Communications ("Bresnan"),
6 S. Rep. No. 102-92, June 28, 1991, reprinted in 1992 U.S. Code Cong. &Admin. News 1133, 1141, 1146,
1151; H. Conf. Rep. No. 102-862, reprinted in 1992 U.S. Code Cong. &Admin. News 1231, 1259.
8
2867164v1
challenged the City of Marshall's ('Marshall") grant of a competing franchise to Dakota
Telecommunications Group. Bresnan argued, among other things, that Marshall acted
"arbitrarily and capriciously" when it granted the competing franchise and that Marshall
violated Bresnan's due process rights.
The Court of Appeals rejected Bresnan's arguments and generally determined that an
incumbent franchisee may not challenge the general fitness of a competing franchise. In
its opinion, it noted that Minnesota's cable statutes were "enacted to encourage such
competition." The opinion further recognized that:
Although[Minnesota's]Cab/e Act. . . intends to further the public's interest
by only awarding franchises to responsible cable operators, it does not
support an incumbent franchisee's attempt to secure a monopoly by
challenging the fitness of new, competing franchises.
9
2867164v1
PROCEDURE FOLLOWED BY CITY
CenturyLink requested that the City institute the required proceedings to consider the
award of a cable communications franchise to CenturyLink. After consultation with Moss
& Barnett, a detailed procedure was prepared to comply with applicable state and federal
laws regarding the processing of CenturyLink's request.
The City Council authorized publication of a Notice of Intent to Franchise a Cable
Communications System. The notice was published once each week for two successive
weeks in the City's local newspaper of general circulation. The Notice was first published
in the Shakopee Valley News on April 16, 2015, and was thereafter published on April 23,
2015. Copies of the Notice of Intent to Franchise are available upon request from the
City Clerk's office.
The Notice of Intent to Franchise referenced the City's Request for Proposals - Official
Application Form that was made available on request at the office of the City Clerk.
Copies of the Notice of Intent to Franchise and Official Application Form were sent to
CenturyLink as well as the incumbent cable operator, Comcast. A copy of the Official
Application Form is available upon request from the City Clerk's office.
Pursuant to Minnesota Statutes Section 238.081 the City established a deadline for
submitting applications on May 15, 2015, at least twenty (20) days following the first date
of publication.
The City published a Notice of a Public Hearing to receive input on CenturyLink's
application. The Public Hearing is scheduled for June 16, 2015 at 7:00 p.m. All interested
parties will have an opportunity to comment.
10
2867164v1
INFORMATION REVIEWED
Below is a listing of all information received and reviewed by Moss & Barnett. Each
document listed below was reviewed and considered in the preparation of this report,
and are hereby incorporated into this report by reference. The information contained
within these documents is part of the City's record on which the City's decision is based.
1. Notice by the City of its Intent to Franchise a Cable Communication System
published on April 16, 2015 and April 23, 2015.
2. The City's Request for Proposals-Official Application form.
3. Official Application submitted to City from CenturyLink.
4. Supplement information was requested from CenturyLink in response to
questions raised by Moss & Barnett (see Financial Qualifications section for
complete list of financial information reviewed).
5. Letter to City from Comcast dated June 16, 2015 regarding CenturyLink's
Video Franchise Application (attached hereto as Exhibit A).
11
2867164v1
CENTURYLINK'S LEGAL QUALIFICATIONS
The legal qualifications standard relates primarily to an analysis of whether CenturyLink
is duly organized and authorized to provide cable services within the City.
We have reviewed and received the following information with respect to Qwest
Broadband Services, Inc. as of the dates listed below and in the attached Exhibits:
• Delaware Incorporation/Good Standing. The Delaware Division of
Corporations' Entity Details shows that Qwest Broadband Services, Inc. was
incorporated on May 10, 1999 and is in good standing as of May 13, 2015. See
attached Entity Details from the Delaware Division of Corporations attached hereto
as Exhibit B.
• Minnesota Foreign Registration. Qwest Broadband Services, Inc. is
registered as a foreign corporation in the State of Minnesota and is active and in
good standing. Minnesota Business and Lien System, Office of the Minnesota
Secretary of State Business Record Details dated May 13, 2015 attached hereto as
Exhibit C.
• Minnesota UCC/Tax Lien/Judgment Search. Qwest Broadband Services,
Inc. is not subject to any UCC filing/tax lien/judgment in the State of Minnesota.
Minnesota Business and Lien System, Office of the Minnesota Secretary of State
UCC/tax lien filing record search and judgment record search attached hereto as
Exhibit D.
• Civil Actions. Qwest Broadband Services, Inc. has been a party to a number
of civil cases, including all of the cases listed on the PACER Case Locator summary
for periods from formation to May 13, 2015. Qwest Broadband Services, Inc. was
also a party in a bankruptcy matter that was dismissed on January 29, 2002.
Qwest Broadband Services, Inc. is party to an active patent infringement case
entitled United Access Technologies, LLC v. CenturyTel Broadband Services, LLC,
et al. in the State of Delaware. PACER Case Locator Summary and the active Case
Summary attached hereto as Exhibit E.
12
2867164v1
CENTURYLINK'S TECHNICAL QUALIFICATIONS
The technical qualification standard relates to the technical expertise and experience of
CenturyLink to provide cable services. This report offers no opinion related to the
technology used by CenturyLink to offer cable services.
CenturyLink is offering its Prism service in approximately fifty-eight (58) cities, within ten
(10) states, including: Alabama, Arizona, Colorado, Florida, Iowa, Missouri, Nebraska,
Nevada, North Carolina and Wisconsin. Currently, CenturyLink provides its Prism service
to approximately 240,000 customers.
In May 2015, we interviewed seven (7) cities in four (4) states where CenturyLink
provides its Prism service in order to ascertain the following:
1. The nature and quality of the relationship between CenturyLink and the city;
2. Whether CenturyLink worked well with the city in resolving cable service problems;
3. Whether subscribers appear to be satisfied with the services they receive from
CenturyLink; and
4. The extent that CenturyLink supports public, educational and governmental access
programming.
The city official from each community listed below was contacted and asked the following
questions. A summary of the interviews is provided below.
City, State City Ofcial, Title
Gulf Shores, AL Mike Holly, IT Director
Glendale, AZ Mark Gibson, Construction Eno ineerin. Manager
Colorado Springs, CO Kathy Lake, Information Technology
Denver, CO Julie Martinez, Director Media Services
Eagle, CO Jon Stavney, Town Manager
Omaha, NE Buster Brown, City Clerk
Papillion, NE Eliza Butler, City Clerk and Karla Rupiper, City Attorney
SUMMARY OF INTERVIEWS
1. Approximately when (month/year) did your City award CenturyLink a cable
franchise?
Responses ranged from August 2012 to present.
13
2867164v1
2. What percentage of the City (approximately) did CenturyLink first provide cable
service to?
All cities responded that the details are outlined in the franchise, but some recalled
15-20% initially.
3. Has CenturyLink expanded its service area to provide cable service to more
subscribers since the grant of the franchise?
All replied they were either unsure or yes, expansion has occurred since the city
granted the franchise to CenturyLink.
4. Does the CenturyLink franchise require complete build out or a certain percentage
of build out within a set period of time?
All responses were a certain percentage with details outlined in the franchise.
5. What percentage of the City may be unable to subscribe to cable service from
CenturyLink?
Most cities were uncertain of this %; however, one city replied 100% of city was
served within 18 months.
6. Have there been any amendments to the Franchise granted to CenturyLink? If so,
what was the reason for the franchise amendment?
The majority of the responses were no. Most of these cities just recently granted
franchises to CenturyLink.
7. Is there a local office for CenturyLink in your city? If not, how far away is the
nearest CenturyLink office?
Most cities replied "Yes'and that it is required under the franchise to have a local
office in the city. One city replied "No -however, the dosest office is a 10 minute
drive."
8. Does the City have public, educational and governmental access channels? If yes,
how many?
Most replied "Yes", one replied "No"and one replied "Unsure'.
# of PEG channels responses ranged from 1-7
9. Does CenturyLink make the City's PEG access channels available on its cable
system?
14
2867164v1
All cities with PEG channels replied "Yes':
10. Did the City have to spend any money on equipment or facilities to make its PEG
channels available to CenturyLink?
All cities with PEG channels replied"No'. One city reported replacing all equipment
with upfront dollars provided by CentutyLink.
11. Have there been any issues or concerns with the manner in which PEG channels
are cablecast by CenturyLink? Are there any differences in the way subscribers obtain
PEG channels on CenturyLink's system versus the cable system operated by the
incumbent operator?
No known issues reported.
No differences reported.
12. Does CenturyLink provide PEG financial support? If yes, how much?
Responses included amounts of$.20/sub/mo to$1.05/sub/mo. One city reported
up to $1.80 upon advanced notice and another reported a % (unsure of number).
13. Does CenturyLink provide any other type of PEG financial support—such as upfront
grants, in-kind services, particular equipment, etc.?
Responses included upfront dollars, a one-time payment, a reasonable amount of
on demand programming per state statute and one reported no financial support
for PEG.
14. Has the City received any complaints about CenturyLink's cable service? If so,
what types of complaints are most often reported to the City?
The majority of the cities interviewed received no customer complaints regarding
CentutyLink. One city has a separate customer service ordinance applicable to
cable operators, and another city reported some complaints were received when
CenturyLink rolled out its Prism service but they seem to have had ample staff on
board to resolve the issues.
15. Does the City receive any complaints about the construction of the CenturyLink
cable plant in the right-of-way or placement of above ground cable facilities in the right-
of-way?
15
2867164v1
The majority of the cities interviewed receive no complaints regarding ROW issues
One city reported complaints related to phone and Internet services.
16. Does CenturyLink satisfactorily resolve subscriber complaints?
Responses were "Yes"and that CenturyLink has plenty of staff.
17. Does CenturyLink pay its franchise fees to the City on time? Any issues regarding
franchise fee payments by CenturyLink?
All cities reported that franchise fees were paid on time.
18. How would you describe the City's relationship with CenturyLink? Are there any
specific problems or concerns?
Responses received were: "good working relationship' "no problems or
concerns',' and "good relationship."
19. Do you think the City would seek to require any different franchise obligations on
CenturyLink now that the City has experience observing CenturyLink's cable service in
the City?
One city replied that they will add security fund language to the next franchise.
Several cities replied that they are unsure as they recently renewed or signed the
franchise.
20. Any other issues, concerns or compliments you would like to offer regarding
CenturyLink's cable service offering in your City?
One City replied they would like the copper technology replaced with fiber to all
residents.
16
2867164v1
CENTURYLINK'S FINANCIAL QUALIFICATIONS
I. SCOPE OF REVIEW
Qwest Broadband Services, Inc. d/b/a CenturyLink, (''QBSI"), a Delaware corporation, is
an applicant for a competitive cable franchise agreement (hereinafter referred to as the
"Franchise Agreement") for the City. CenturyLink, Inc. ("CenturyLink"), a Louisiana
corporation, indirectly wholly owns QBSI. QBSI operates cable television systems that
provide cable services throughout the United States. QBSI has requested the City's
approval of a competitive cable franchise agreement. At the request of the City, Moss &
Barnett has reviewed selected financial information that was provided by QBSI and
CenturyLink or publicly available to assess the financial qualifications of QBSI to obtain
and operate a competitive cable franchise.
The financial information that was provided or available through other public sources and
to which our review has been limited, consists solely of the following financial information
(hereinafter referred to collectively as the "Financial Statements"):
1. Application of Qwest Broadband Services, Inc. d/b/a CenturyLink for a
Competitive Cable Franchise dated May 13, 2015, along with such other exhibits
as provided therewith (the "Application");
2. Form 10-K for CenturyLink, Inc. filed with the Securities and Exchange
Commission on February 24, 2015, for the fiscal year ended December 31, 2014;
3. Form 10-Q for CenturyLink, Inc. filed with the Securities and Exchange
Commission on May 6, 2015 for the three-month period ended March 31, 2015;
4. The audited financial statements of CenturyLink, Inc. and subsidiaries as of
December 31, 2014 and 2013, including Consolidated Balance Sheets as of
December 31, 2014 and 2013, Consolidated Statements of Operations,
Comprehensive (Loss) Income, Cash Flows and Stockholder Equity for the years
ended December 31, 2014, 2013 and 2012, and the Independent Auditors' Report
of KPMG LLP dated February 24, 2015; and
5. Such other information as we requested and that was provided by QBSI
and CenturyLink relating to the Application.
Our procedure is limited to providing a summary of our analysis of the Financial
Statements in order to facilitate the City's assessment of the financial capabilities of QBSI
to operate a cable system in the City.
II. OVERVIEW OF QWEST BROADBAND SERVICES, INC.
Since 2008, Qwest Broadband Services, Inc., a Delaware corporation, has been providing
cable video services and currently provides full video services under the PrismTM platform
17
2867164v1
to 14 markets in the United States,' including in the States of Arizona, Colorado, Florida,
Nebraska, Nevada, and North Carolina.8 QBSI's affiliates provide a broad range of other
communication services including broadband, hosting and colocation, VoIP, Ethernet,
Internet services, and voice services to residential and commercial customers in various
markets in the United States.9 QBSI was formed on May 10, 1999 and is a wholly owned
subsidiary of CenturyTel Broadband Services LLC, a Delaware limited liability company,
which is wholly owned by CenturyLink, Inc.10 As of December 31, 2014, QBSI passed
approximately 2.4 million potential customers and served approximately 240,000 cable
customers." CenturyLink employs approximately 3,000 employees in Minnesota with
about 200 of the 500 network technicians trained in providing services to QBSI's PrismTM
cable television platform.12 QBSI's operational management team has practical
experience in the cable industry.13
Cable providers and telecommunication companies operate in a competitive environment
and the financial performance of cable television operators, like QBSI, is subject to many
factors, including, but not limited to, the general business conditions, programing costs,
incumbent operators, digital broadcast satellite service, technology advancements,
changes in consumer behavior, regulatory requirements, advertising costs, and customer
preferences, as well as competition from multiple sources, which provide and distribute
programming, information, news, entertainment and other telecommunication services.14
QBSI has a limited operating history and is dependent upon CenturyLink for all of its
funding and the financing of its operations.15 The cable business is inherently capital
intensive, requiring capital for the construction and maintenance of its communications
systems. Each of these factors could have a significant financial impact on QBSI and its
ability to operate a cable system in the City.
III. FINDINGS
Based upon the above information, we have analyzed the historical financial statements
of QBSI's parent entity, CenturyLink, Inc., in evaluating the financial capabilities of QBSI.
QBSI declined to provide us with its stand-alone financial statements or projected
financial information for its future operations and the cost to integrate PrismTM into its
existing infrastructure in the City. We specifically requested that QBSI provide
information on QBSI's capital expenditures and cash flow budget, but QBSI declined to
Application at p. 14.
8 Application — Exhibit D.
9 Form 10-K for CenturyLink, Inc. filed with the Securities and Exchange Commission on February 24, 2015
for the fiscal year ended December 31, 2014 ("Form 10-K") at p. 6.
10 Application — Exhibit E.
11 Application at p.14.
12 Application at p. 1.
13 Application at pp. 14-17.
14 Form 10-K at pp. 17-27.
15 Application at p. 18.
18
2867164v1
provide that information to us.16 With respect to our request for projected financial
information, QBSI stated "...it does not provide forward looking information at the
individual market level because it could lead to incorrect or inappropriate assumptions or
conclusions...". 17 CenturyLink's historical audited financial statements do not separately
provide the financial information for QBSI.
As such, we are reporting our Findings hereunder based upon CenturyLink's historical
financial information.
1. Analysis of Financial Statements.
Federal law and FCC regulations provide franchising authorities, such as the City,
with limited guidance concerning the evaluation of the financial qualifications of
an applicant for a cable franchise. In evaluating the financial capabilities of a cable
operator, we believe it is appropriate to consider the performance of an applicant
based on the applicant's historical performance and its projected or budgeted
financial information along with its financial capabilities (for funding and financing
its entire operation). We were not provided with this information for QBSI. As
such, we believe a general review of CenturyLink's financial information may
provide some insight into the general financial operations of CenturyLink with
respect to the Application, but we note that there are many unanswered questions
regarding QBSI's operations going forward.18
As noted above, CenturyLink's and its subsidiaries' operations include both cable
television video services and non-cable television services. According to
CenturyLink's Financial Statements, QBSI's customers represent a small portion of
CenturyLink's overall customers.19 The CenturyLink financial information discussed
below includes all of the CenturyLink operations, including the non-cable television
video services. We have analyzed CenturyLink's Financial Statements as of March
31, 2015 and as of December 31, 2014 and 2013 in providing the information in
this Section.
2. Specific Financial Statement Data and Analysis.
a. Assets. CenturyLink had (i) current assets of $3,468 million, $3,576
million, and $3,907 million; (ii) working capital of a negative $111 million,
a negative $342 million, and a negative $502 million; and (iii) total assets
of $49,520 million, $50,147 million, and $51,787 million as of March 31,
16 Correspondence to author from Patrick Haggerty, Director of State Regulatory and Legislative Affairs of
CenturyLink, received on June 10, 2015 ("Correspondence") at p. 2.
17 Id.
18 Correspondence at pp. 1-2.
19 Form 10-Q for CenturyLink, Inc. filed with the Securities and Exchange Commission on May 6, 2015 for
the three month period ending March 31, 2015 ("Form 10-Q") at p. 21 and Application at p. 1.
19
2867164v1
2015 and December 31, 2014 and 2013, respectively.20 Working capital,
which is the excess of current assets over current liabilities, is a short-term
analytical tool used to assess the ability of a particular entity to meet its
current financial obligations in the ordinary course of business. The working
capital trend shows a slight decrease in the negative working capital from
December 31, 2013 to March 31, 2015, which suggests that CenturyLink's
cash flow may be getting stronger. CenturyLink's current ratio (current
assets divided by current liabilities) as of March 31, 2015, of 0.97/1.0 is
near the generally recognized standard of 1:1 for a sustainable business
operation.21 As of March 31, 2015, CenturyLink had $155 million of cash
on its balance sheet.22 Approximately one-third of its cash is held off shore
and is subject to restrictions on usage.23 As noted above, QBSI did not
provide us with any budget of cash flow or cost with respect to its expansion
of the Prism'' service or any of its other potential cash capital needs. As
such, it is difficult to predict what amount of free cash on hand is needed
to bring the PrismTM system online in the City (and other cities in which
QBSI is rolling out its video service). We also note that approximately fifty-
five percent (55%) of CenturyLink's assets are comprised of its intangible
Goodwill.24
b. Liabilities CenturyLink's Financial Statements report (i) current
liabilities of $3,579 million, $3,918 million and $4,409 million; (ii) long-term
debt of $20,254 million, $20,121 million and $20,181 million; and (iii)
deferred obligations of $10,922 million, $11,085 million and $10,006 million
as of March 31, 2015 and December 31, 2014 and 2013, respectively.25
According to CenturyLink, it has $1.7 billion available on its $2 billion
revolving credit facility as of March 31, 2015 (which matures on December
31, 2019).26 CenturyLink's credit facilities include affirmative and negative
covenants, that if violated, could result in a cascade of defaults under its
debt obligations and an immediate cash and/or financing needs.27
According to the Financial Statements, CenturyLink is not in default of these
requirements at the current time.28 CenturyLink has in excess of$2.5 billion
of debt maturing in the next 3 years which if not paid or refinanced could
have a significant impact on the financial viability of CenturyLink.29 Any
additional debt, including by drawing on its available revolving credit facility,
20 Form 10-K at p. 69 and Form 10-Q at p. 5.
21 Form 10-Q at p.5.
22 Form 10-Q at p. 30.
23 Form 10-Q at p. 30.
24 Id
25 Form 10-K at p. 69 and Form 10-Q at p. 5.
26 Form 10-Q at pp. 30 and 32.
27 Form 10-Q at p. 32.
28 Id.
29 Form 10-K at p. 82.
20
2867164v1
will require CenturyLink to generate additional cash flow, including through
its operations, to fund its debt service.
c. Income and Expense. CenturyLink's Statements of Operations report
(i) revenue of $4,451 million, $18,031 million and $18,095 million; (ii)
operating expenses of $3,802 million, $15,621 million and $16,642 million;
and (iii) net income (loss) of $192 million, $772 million and ($239) million
for the three-month period ending March 31, 2015 and the years ending
December 31, 2014 and 2013, respectively.30 CenturyLink is reporting net
income in 2015 and 2014.31 The ability to generate cash is important for
CenturyLink due to its leveraged operations. With the expansion of Prism',
CenturyLink may be required to incur significant expenditures for the
assimilation of its video services into its existing platform along with
additional programing costs to obtain and maintain its programming in the
future. Over the last 3 years, CenturyLink has been able to generate cash
flow from operations to cover its investing and financing activities.32
IV. SUMMARY
We are not aware of any state or federal standards by which to assess the financial
qualifications of a competitive cable operator seeking an initial franchise in the City. The
FCC has provided a minimal standard to consider when assessing the qualifications of a
prospective transferee when a cable system is sold or control of the franchise changes.
This FCC financial qualification standard is found in FCC Form 394. Using the FCC Form
394 to establish an absolute minimum standard of financial qualifications that a proposed
applicant must demonstrate in order to be qualified to obtain and operate a cable system,
QBSI has the burden of demonstrating to the City's satisfaction that QBSI has "sufficient
net liquid assets on hand or available from committed resources" to obtain and operate
the system in the City, together with its existing operations, for three (3) months. This
minimum standard is not easy to apply to a company that is in aggressive growth mode
and expanding its operations.
Based solely on CenturyLink's (QBSI's indirect parent entity) financial information that we
reviewed, CenturyLink appears to have sufficient funding to finance, operate and bring
its cable system online in the City. Based on the foregoing and limited strictly to the
financial information analyzed in conducting this review, we do not believe that QBSI's
request for application for a Competitive Cable Franchise in the City can reasonably be
denied based solely on a lack of financial qualifications of QBSI and CenturyLink. Due to
the many uncertainties and lack of information regarding the proposed funding and future
operations, there is not enough information that has been made available to make any
conclusions regarding the financial qualifications of QBSI to operate a system serving the
30Form 10-K at p. 68 and Form 10-Q at p. 4.
31 Id
32 Form 10-K at p. 70 and Form 10-Q at p. 6.
21
2867164v1
City. The determination as stated above is based solely upon the CenturyLink Financial
Statements.
In the event the City elects to proceed with approving the issuance of a competitive cable
franchise, the assessment of QBSI's, and its parent entity CenturyLink's, financial
qualifications should not be construed in any way to constitute an opinion as to the
financial capability or stability of QBSI or CenturyLink to (i) operate under a competitive
Franchise Agreement, and (ii) operate its other operations. The sufficiency of the
procedures used in making an assessment of QBSI's and CenturyLink's financial
qualifications and its capability to operate a competitive system in the City is solely the
responsibility of the City. Consequently, we make no representation regarding the
sufficiency of the procedures used either for the purpose for which this analysis of
financial capabilities and qualifications was requested or for any other purpose.
Lastly, in order to ensure compliance with its obligations to operate the cable system in
the City and since we have based all of our analysis on CenturyLink's Financial
Statements, the parent entity, the City may seek to require a corporate parent guaranty
as part of issuing a competitive Franchise Agreement to QBSI in a form as set forth in
Exhibit F or as otherwise mutually agreeable to QBSI and the City.
22
2867164v1
RECOMMENDATIONS
Based on our review of CenturyLink's legal, technical and financial qualifications, we
believe that the City cannot reasonably withhold approval of CenturyLink's request for a
cable communications franchise. We recommend the City consider adoption of the
attached resolution which will establish findings of fact regarding CenturyLink's
qualifications.
If the City adopts the resolution attached as Exhibit G, the City will then be in a position
to consider the grant of a franchise to CenturyLink at a future City Council meeting,
assuming mutually acceptable franchise terms can be reached with CenturyLink.
23
2867164v1
EXHIBIT A
COMCAST LETTER
got
COMCAST
VIA ELECTRONIC MAIL
June 16,2015
Mr.John Peterson
Telecommunications Coordinator
City of Shakopee
129 Holmes St.South
Shakopee,MN 55379
Re: CenturyLink Video Franchise Application
Dear Mr.Peterson:
On April 16,the City of Shakopee("the City")issued a Notice of Intent to Franchise(herein the
"Notice"). The Notice states that the City will hold a public hearing on June 16, 2015,
regarding all applications that they receive. It is our understanding that this public hearing is to
establish the record for the City's vote regarding whether they will commence franchise
negotiation discussions, and under what terms, with the applicants based on the applicants'
response to the Notice. I am writing to provide you with Corncast's position in regard to the
process going forward and limited record in front of you today.
At the outset, let me state clearly that Comcast welcomes a fair and robust competitive
marketplace made up of responsible competitors, and we do not oppose the granting of an
equitable cable franchise to CenturyLink. Consumers can choose from numerous video options
today, including Comcast,DirectTV, DISH Network, and"over the top"-services like Netflix,
Amazon,Apple TV and Hulu. This fiercely competitive landscape is challenging,but it brings
out the best in each company—at least when competitors face a level playing field that treats
similar providers in a similar manner.
I. Comcast's Interest in This Proceeding.
Comcast has made substantial financial investments in its cable system over the years to serve
Shakopee with a state-of-the-art network. In order to provide cable services and locate its cable
system within public rights-of-way, Comcast has operated under a cable franchise renewed by
the Citiy in August of 2004. The Franchise Agreement has required much of Comcast,
including notably:
• A requirement that Comcast offer cable service to customers throughout the City of
Shakopee, specifically to every residential dwelling unit within 125 feet of Comcast's
feeder cable and to any new development with a density equivalent to thirty(30)homes
per mile(Comcast Franchise Section 9.1);
• A customer service location within twelve (12) miles of the City's northern border
B-1
2867164v1
Mr.John Peterson
June 16,2015
Page 2 of 3
(Comcast Franchise Section 13 (A));and
a Courtesy cable services to public schools and municipal buildings (Comcast Franchise
Section 6.2(A)and Exhibit A).
CenturyLink's franchise application either rejects or is silent regarding whether and to what
extent it will agree to many of the franchise obligations that have been required of Comcast.
11. Level Playing Field Requirements and the FCC's 621 Order.
Minnesota's extensive cable franchising statutory scheme is clear that: "No municipality shall
grant an additional franchise for cable service for an area included in an existing franchise on
terms and conditions more favorable or less burdensome than those in the existing franchise
pertaining to: (1)the area served;(2)public, educational,or governmental access requirements;
or(3)franchise fees." Minn. Stat. § 238.08,subd. 1(b).
Since "applicant is still finalizing its initial footprint for the deployment of cable services" in
Shakopee, the applicant did not provide any information regarding the area it is proposing to
serve. Comcast, therefore cannot comment on if CenturyLink's franchise proposal is "more
favorable or less burdensome"than Comcast's franchise obligations. It is concerning, however,
that it does not appear that CenturyLink's buildout commitment will be consistent with the
Minnesota Cable Act. Even more concerning is that CenturyLink hasn't accepted even the
minimal obligations that it has made in its own applications. For example, in the application
submitted to the City of Minneapolis, CenturyLink proposed an initial 30% buildout; in the
actual franchise,however,CenturyLink committed to building only 15%of the City.
We want to be very clear that the FCC's 621 Orders that CenturyLink relies upon in its
response does not preempt Minnesota's Cable Act. As recently as January 2015 the FCC
explained again:
We clarify that those rulings were intended to apply only to the local franchising process,
and not to franchising laws or decisions at the state leve1.1
It is inaccurate to say that the City must choose between following state law and policy or
following federal law and policy — the two coexist. The FCC expressly allows build out
requirements in franchise agreements so long as they are "reasonable." What constitutes
"reasonable"is left to the franchising authority to determine.
While we have not yet seen an actual draft CenturyLink franchise, we expect it to contain a
reasonable full-service requirement—consistent with Minnesota law and the FCC's 621 Order—
1 Implementation of Section 621(a)(1)of the Cable Communications Policy Act of 1984 as amended by the Cable
Television Consumer Protection and Competition Act of 1992,Order on Reconsideration,at para.?(rel.Jan 21,
2015).
B-2
2867164v1
Mr.John Peterson
June 16,2015
Page 3 of 3
so that, eventually, all neighborhoods in Shakopee would have the same availability of service
and access to cable competition,and so that all providers bear similar obligations.
Imposing reasonable, binding, and enforceable requirements to serve the entirety of Shakopee
will protect competitive and consumer equity and prevent selective service deployment. It will
equalize the investment that all providers will be required to make in return for access to the
public rights of way. It will ensure that competition develops according to which provider can
best serve subscribers and not according to which provider enjoys the most advantageous
regulatory requirements.
IV.Conclusion.
Again, Comcast does not oppose CenturyLink's entry into the local market. We are concerned
that competing providers who make use of the same rights-of-way as Comcast, and who are
subject to the same federal law, the same state law and the same local regulatory authority,
should be held to the same reasonable level of due diligence and procedure, as well as City-
wide service requirement standards, similar to what Comcast has been held to.
There are many factual and legal questions raised by CenturyLink's franchise application.
Comcast has important interests at stake in this proceeding and requests that the City establish a
fair,orderly,and open process that allows for meaningful public review and input.
Again, thank you for the opportunity to share our views with you on this important issue.Please
do not hesitate to contact me if you have any questions, or if you need any additional
information.
Sine• y
. �
f4/. m
Vice Preside t Government Affairs
B-3
2867164v1
EXHIBIT B
ENTITY DETAILS FROM THE
DELAWARE DIVISION OF CORPORATIONS
Entity Details
1non:rotationDate/ 05/10/1999
filr;tuiuptxr: 3040574 Formation Date: (mm/ddlyyyy)
Entity Nome: QWEST BROADBAND SERVICES,INC.
Entity Find: CORPORATION ntety Type; GENERAL
Residency; DOMESTIC State: DE
Status: G000 Status Date: 05/10/1999
STANDING
TAX INFORMATION
iact AnnUr?I Report.field!: 2014 Tax Due: $0.00
Annual Tait Assessment: $175.00 Total Authotrted Shares: 100
REGISTERED AGENT INFORMATION
Name: THE CORPORATION TRUST COMPANY
Address: CORPORATION TRUST CENTER 1209 ORANGE ST
City: WILMINGTON County: NEW CASTLE
State: DE Postal Code: 19801
Phone: (302)658-7581
FILING HISTORY(Last 5 Filinosi
No.of Filing Date Effective
Seq OotumVnt_C904 12g_cr 041.npanes (mm/dd/yyyy) �_linq Time Date
(mn dd/YYYY)
1 0240 Amendment; 1 07/07/2000 17:00 07/07/2000
Domestic
Former Name: U S WEST BROADBAND SERVICES,INC.
2 0250S Merger;Survivor 2 02/28/2000 13:00 03/01/2000
3 0250$ Merger;Survivor 2 12/29/1999 16.30 12/31/1999
4 0240 Amendment; 1 06/01/1999 16:30 06/01/1999
Domestic
Former Name: US WEST CABLE VENTURES,INC.
5 01025 ICnocorp Delaware Stock 2 05/10/1999 12:30 05/10/1999
B-1
2867164v1
EXHIBIT C
MINNESOTA SECRETARY OF STATE BUSINESS RECORD DETAILS
Vlinnesota Business and Lien System, Office of the Minnesota Secretary of State
TransacUOr
3usiness Record Details >}
Minnesota Business Name
QINEST BROADBAND SERVICES, INC.
Business Type MN Statute
Business Corporation(Foreign) 303
File Number Home Jurisdiction
98066 Delaware
Filing Date Status
07/1311999 Active/In Goad Standing
Renewal Due Date Registered Office Address
12/3112015 100 S 5th Str#1075
Mpts, MN 55402
USA
Registered Agent(s) Chief Executive Officer
C T Corporation System Inc Glen F. Post, III
100 CenturyLink Drive
Monroe, LA 71203
USA
Filing History
Filing History
Select the item(s) you would like to order: Order Selected Copies
Filing Date Filing Effective Date
07/13(1999 Original Filing - Business Corporation (Foreign)
C-1
2867164v1
07/13/1999 Business Corporation (Foreign) Busfiess Name
09/29/2000 Business Corporation (Foreign) Business Name
04110/2007 Registered Office end/or Agent(Global) - Business
Corporation (Foreign)
Copyright 20151Secretary of State of Minnesota I All rights reserved
C-2
2867164v1
EXHIBIT D
MINNESOTA SECRETARY OF STATE
UCC/TAX LIEN FILING RECORD SEARCH AND JUDGMENT RECORD
Minnesota Business and Lien System, Office of the Minnesota Secretary of State Transactor
JCC / Tax Lien Filing Record Search »
Debtor Name Search Results
No results matching search criteria.
)ata current through 5/8120/5 5-00 PM
rhis search was performed on 5/13/2015 with the following search parameters:
SEARCH: UCC Debtor Name
SAME: Qwest Broadband
•
NCLUDE LAPSED FILINGS: No
:ITY: None Specified
)ATE RANGE: None Specified
Copyright 2015 I Secretary of Stale of Minnesota I All rights reserved
D-1
2867164v1
Minnesota Business and Lien System, Office of the Minnesota Secretary of State
Transactor
JCC / Tax Lien Filing Record Search ›)
Debtor Name Search Results
No results matching search criteria
Data current through 5/8/2015 5:00 PM
("his search was performed on 5/13/2015 with the following search parameters:
;EARCH: Tax Lien Debtor Name
'JAME:()west Broadband Services
:ITY: None Specified
)ATE RANGE: None Specified
Copyright 2015 I Secretary of State of Minnesota I All rights reserved
Judgment Records Search Results
ski,:10
Mai Content Logout My Accra,nt Searai Menu Now J:xinmenl Seam'',Rehr
Jlr Ak 1.I.Jr:.1.S Sees- f:....arch Help
Record Count: 0
Exact Name:on Party Starch Mode:Business Name Business Name:Oiliest Broadband Seri/vasShow Inactive and Satisfied
Judgments:on Sort By:Filed Cale
Case No./Location Enter ed:C oc k elect Debtor(s) Creditor(s) Details
No judgments matched your search criteria.
D-2
2867164v1
EXHIBIT E
PACER CASE LOCATOR SUMMARY
AND THE ACTIVE CASE SUMMARY
ilr PACERAM Court Types Parry Starch
Wed May 13• ;d 152015
Case Locator
User: -1bC6617
Chant 46607.7
Search: Al Conn Types Party Search Alamo Qwest B•oariband Seruces Courts Pape 1
Bankruptcy Results
Debt
Party Name V realm Carle preitillkuj Ceaposnion
Geese Boxelliand Services Inc Nett ',awokegi31.....xi-Crl 493 119722:21X11 03415.2332 Dismrssad or Sewed Wretaul Entry or Judprrien:
0142042032
Vlitirid and Owes,Advanced technologies Inc
Civil Results
Perry Name 11, Lora Case Noy Osexithrd Dilegissasi
2 OW4011BrOadband Servkee,mc {Oat caeca 3 2030.cv-OCt42 090 0110)2000 07.2//12001
Aware Broadband Si at a v City ni BOUICilY
Owest arnadband Sorv1ces.nc.:(10) cede* 1 2C(9.cv-92648 190 12107/20N 0210112913
Grastrencr v.Owest Corperalion al al
r(West Broadband Services inc dtI codca 1 Z003-cv446,40 370 DB4044036 0212717013
Vevnon el al v.1>rreA Communications Irremabanal Inc.at al
5 Owes.'Broadbenri Services Inc.On/ dedceZ 1 vL 04t1572011
tinted rkr.e81.TOC/r13ItYiel LLC v CenluryTet&awn:land Sermea LLC el al
Creast Broadband liarvicas hoc(CO cook.* 2007-cv-32 0402/2407 09.21,12313
kcnald A 1(412 Tad-in:hop Licensing L P tam Warner Cable.00
7 Qwest Broadband Services Inc MI wievdce 2.2006-cv-C11516 370 le05/201e 07..terX109
✓ernon l at y avrest Carnrnunr-eriere Internenanei Inc et al
Oneal BreoStiancl Senrirdes lac Ice! cadke Lea:A11.9391§ 93130003," 12/212314
In re Kali retie Peatsietieg Pasco'I tironce
,Wrest Broecicand Servicas Inc oft) cabliat 2 20074614616 031147037 12/230314
In re Katt Preeractree Cal Ynxessang Patent LeIgaban
re&mete OfOttObreld S.vvicee Inc.Idttl dedce :W066-cv.03545 E30 0.343 I 42006 04:11,17007
nomad.4 Karr Terdinialopy l kerbing.L.P.v Time Warner Cade Inc.Cl el
, eiwest Broadband 5crv.coa Inc On) tecOve 2200?. crr-Cr213a 6i0 02r2007 06,21/2013
▪anald A KIM tecflnotay LeaningI.Pr Time Warner Cie*Inc
12°west Omar/ewe Scenes Inc.,cc) dad* 1 T336-cy-130546 830 CQ01i7005 04./172037
Renaki A.Kali Teclinalapv ucensm,L.P.v. Velure.-Cade Inc el at
13 0.4,41 argli0b6114 SO;V.1746 4'13-xporaied mei azdce I.cv.00,19:1 360 06.27.2011 C192o12
Gratincei.at at ORIPAI C011110.. .'11k.16 CCMPtIry LLC Cl a"
Appellate Results
eltDatittngV Cavil Casa NOS Data Flied Data Ckrsed
'd Qwest Braalband Services,Inc.041 10018 01-I09 3990 Oar/1*001 053,213,7001
Qwest Broadband v.City of Boucle,
'1 C4vtrel Broldband Services.Inc.(ocr) 10cae 12.100.4 4130 03:207012 O81412013
Cr'esvener v Cineol Coca .el al
re Cremst Brevackiarid Servieert.inc.OW lOcee 13-0731 1 Cr11112013. 393(2013
Merlon,et al v Dwont Communicate...4.at al
Repaint tiSrl artirl 10 Id 1.1'1041211RM.
Uvier m
Merit 466677
Ditsulpilan Aa Dear Types Nay%vane
Nene?Ivied Need:end Sernix-5 Al:curls Pape I
Paige 1 e.E0 10)
E-1
2867164v1
1:11-ev-00,139-LPS United Access Technologies 1,LC v. CentuiyTel Broadband Services LLC et at
Leonard P. Stark,presiding
Date filed: 04/15/2011
Date of last filing: 05/06/2015
Case Summary
Office: Wilmington Filed: 04/15/2011
Jury Demand: Plaintiff Demand:
Nature of Suit:830 Cause: 35:271 Patent Infringement
Jurisdiction: Federal Question Disposition:
County: XX US,Outside State Terminated:
Origin: 4 Reopened:03/25/2015
Lead Case: None
Related Case: None Other Court Case: 14-1347n
Defendant Custody Status:
Flags: MEDIATION-C.113,PATENT
Plaintiff: United Access represented Stamatios Stamoulis Phone:(302)999-1540
Technologies LLC by Email:stamoulis@swdelaw.com
Plaintiff: United Access represented Richard Charles Phone:302-999-1540
Technologies LLC by Wcinblatt Email:weinblatt@swdelaw.com
Defendant: CenturyTel represented Gary William Lipkin Phone:(302)657-4903
Broadband Services LLC by Fax: (302)657-4901
Email:glipkin@eckertscamans.com
Defendant: CenturyTel represented Matt Neiderman Phone:(302)657-4920
Broadband Services LLC by (Designation Email:mneiderman@,duanemorris.com
Retained)
Defendant: CenturyTel represented Benjamin A. Smyth Phone:302-984-6300
Broadband Services LLC by Email:bsmyth@mcearter.com
Defendant: Qwest represented Gary William Lipkin Phone:(302)657-4903
Corporation by Fax: (302)657-4901
Email:gl ipkin@eckertseamans.com
Defendant: Qwest represented Matt Neiderman Phone:(302)657-4920
Corporation by (Designation Email:mneidermanpduanemorris.com
Retained)
Defendant: Qwest represented Benjamin A.Smyth Phone:302-984-6300
Corporation by Email:bsmyth@mccarter.com
Counter Claimant: Qwest represented Matt Neiderman Phone:(302)657-4920
Corporation by (Designation Email:mneiderman(a?duanemorris.com
Retained)
Counter Claimant: Qwest represented Benjamin A.Smyth Phone:302-984-6300
Corporation by Email:bsmythimeearter.com
Counter Claimant: represented Matt Neiderman Phone:(302)657-4920
Century Tel Broadband by (Designation Email:mneiderinan@duanernorris.com
Services LLC Retained)
Counter Claimant: represented Benjamin A. Smyth Phone:302-984-6300
CenturyTel Broadband by Email:bsmyth@mccarter.com
Services LLC
E-2
2867164v1
Counter Defendant: represented Stamatios Stamoulis Phone:(302)999-1540
United Access by Email:stamoulis@swdelaw.com
Technologies LLC
Counter Defendant; represented Richard Charles Phone:302-999-1540
United Access by Weinblatt Email:weinblattipwdelaw,com
Technologies LLC
PACER Service Center
Transaction Receipt
05113/2015 11:15:5fi
PACER
b0066:25925440 Client Cud e: 466873
Login:
earch
Deseeirtinn: Case Summary criterin: LPS
Billable Pages; I
1 0 10
E-3
2867164v1
EXHIBIT F
CORPORATE PARENT GUARANTY
F-1
2867164v1
CORPORATE PARENT GUARANTY
THIS AGREEMENT is made this day of , 201 (this "Agreement"),
by and among CenturyLink, Inc., a Louisiana corporation (the "Guarantor"), the City of
, Minnesota ("Franchising Authority"), and Qwest Broadband
Services, Inc., a Delaware corporation ("Company").
WITNESSETH
WHEREAS, on , 20 the Franchising Authority adopted
Ordinance No. granting a Competitive Cable Television Franchise to the
Company (the "Franchise"), pursuant to which the Franchising Authority has granted the
rights to own, operate, and maintain a competitive cable television system in the City
("System"); and
WHEREAS, pursuant to Resolution No. , dated
2015, Franchising Authority conditioned its consent to the issuance of a Competitive Cable
Franchise Agreement on the issuance by Guarantor of a corporate parent guaranty
guaranteeing certain obligations of the Company under the Franchise; and
WHEREAS, the Company is indirectly wholly owned by Guarantor, as the parent entity
of a consolidated group which includes the Company.
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 issuance of a Competitive Cable Franchise
Agreement, 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
1
2867164v1
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.
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.
GUARANTOR:
CenturyLink, Inc.
By:
Its:
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was subscribed and sworn to before me this day of
20 , by , the
of .
2
2867164v1
EXHIBIT G
PROPOSED RESOLUTION
G-1
2867164v1
CITY OF SHAKOPEE, MINNESOTA
RESOLUTION NO.
Regarding Findings of Fact with Respect to the Proposal of
Qwest Broadband Services, Inc. d/b/a CenturyLink, Inc.
for a Cable Communications Franchise
RECITALS:
1. Qwest Broadband Services, Inc., d/b/a CenturyLink, Inc. ("CenturyLink")
requested that the City of Shakopee, Minnesota ("City") commence proceedings
to consider the award of a cable communications franchise to CenturyLink.
2. Minnesota Statutes Section 238.08(a) mandates that a city require a franchise for
any cable communication system providing service within the city.
3. Federal law at 47 U.S.C. Section 541(a) provides that a city"may not unreasonably
refuse to award an additional competitive franchise."
4. The City retained the law firm of Moss & Barnett, a Professional Association, to
assist the City in conducting the procedure required under Minnesota Statutes
Section 238.081 and reviewing any applications submitted to the City.
5. The City followed the franchise procedure required by Minnesota Statutes Section
238.081 by publishing once each week (April 16, 2015 and April 23, 2015) for two
successive weeks in the Shakopee Valley News a Notice of Intent to Franchise a
Cable Communications System.
6. The Notice stated all eight (8) criteria outlined in Minnesota Statutes Section
238.081, Subd. 2.
7. In addition to the published Notice, the City provided copies of the Notice of Intent
and the Official Application Form to CenturyLink and to the City's existing cable
operator, Comcast of Arkansas/Florida/Louisiana/Minnesota/Mississippi/
Tennessee, Inc. ("Comcast").
8. The City's Official Application Form required that proposals for a cable
communications franchise contain responses to each of the items identified in
Minnesota Statute Section 238.081, Subd. 4.
9. The City's closing date for submission of applications was set for May 15, 2015
which complied with the statutory minimum of twenty (20) days from the date of
first publication.
1
2867164v1
10. Upon the deadline for submitting applications, May 15, 2015, the City received
only one (1) application, from CenturyLink.
11. The City Council determined to call a Public Hearing to consider the application
received from CenturyLink at its regularly scheduled June 16, 2015 meeting.
12. Prior to the Public Hearing the incumbent franchised cable operator serving the
City, Comcast, submitted a letter to the City setting forth Comcast's position
regarding CenturyLink's application.
13. All interested parties were provided an opportunity to speak to the City Council
and to present information regarding this matter.
14. The City carefully reviewed all information and documentation presented to it
regarding CenturyLink's proposal and qualifications to operate a cable
communications system within the City.
15. Based on information and documentation made available to the City and the report
dated June 10, 2015 prepared by Moss & Barnett with respect to CenturyLink's
application, the City Council has reached conclusions regarding CenturyLink's legal,
technical and financial qualifications.
NOW THEREFORE, the City of Shakopee, Minnesota hereby resolves as follows:
1. The City hereby finds that CenturyLink's application of May 13, 2015 complies with
the requirements of Minnesota Statute Section 238.081.
2. The City finds that CenturyLink possesses the requisite legal, technical and
financial qualifications to operate a cable communications system within the City.
3. City staff is authorized to negotiate with CenturyLink to attempt to reach mutually
acceptable terms for a cable television franchise to be introduced to the City
Council for consideration and action.
4. The City finds that its actions are appropriate and reasonable in light of the
mandates contained in Chapter 238 of Minnesota Statutes and applicable
provisions of federal law including 47 U.S.C. Section 541(a).
2
2867164v1
PASSED AND ADOPTED this 16 day of June, 2015
CITY OF SHAKOPEE, MINNESOTA
Its:
ATTEST:
Its:
3
2867164v1
RESOLUTION NO. 7600
A Resolution Regarding Findings of Fact with Respect to the Proposal of
Qwest Broadband Services, Inc. d/b/a CenturyLink, Inc.
for a Cable Communications Franchise
WHEREAS,
1. Qwest Broadband Services, Inc., d/b/a CenturyLink, Inc. ("CenturyLink") requested that the City
of Shakopee, Minnesota ("City") commence proceedings to consider the award of a cable
communications franchise to CenturyLink.
2. Minnesota Statutes Section 238.08(a) mandates that a city require a franchise for any cable
communication system providing service within the city.
3. Federal law at 47 U.S.C.Section 541(a)provides that a city"may not unreasonably refuse to award
an additional competitive franchise."
4. The City retained the law firm of Moss & Barnett, a Professional Association, to assist the City in
conducting the procedure required under Minnesota Statutes Section 238.081 and reviewing any
applications submitted to the City.
5. The City followed the franchise procedure required by Minnesota Statutes Section 238.081 by
publishing once each week (April 16, 2015 and April 23, 2015) for two successive weeks in the
Shakopee Valley News a Notice of Intent to Franchise a Cable Communications System.
6. The Notice stated all eight (8) criteria outlined in Minnesota Statutes Section 238.081, Subd. 2.
7. In addition to the published Notice,the City provided copies of the Notice of Intent and the Official
Application Form to CenturyLink and to the City's existing cable operator, Comcast of
Arkansas/Florida/Louisiana/Minnesota/Mississippi/Tennessee, Inc. ("Comcast").
8. The City's Official Application Form required that proposals for a cable communications franchise
contain responses to each of the items identified in Minnesota Statute Section 238.081, Subd. 4.
9. The City's closing date for submission of applications was set for May 15, 2015 which complied
with the statutory minimum of twenty(20) days from the date of first publication.
10. Upon the deadline for submitting applications, May 15, 2015, the City received only one (1)
application, from CenturyLink.
11. The City Council determined to call a Public Hearing to consider the application received from
CenturyLink at its regularly scheduled June 16, 2015 meeting.
1
2916679v1
12. Prior to the Public Hearing the incumbent franchised cable operator serving the City, Comcast,
submitted a letter to the City setting forth Comcast's position regarding CenturyLink's application.
13. All interested parties were provided an opportunity to speak to the City Council and to present
information regarding this matter.
14. The City carefully reviewed all information and documentation presented to it regarding
CenturyLink's proposal and qualifications to operate a cable communications system within the
City.
15. Based on information and documentation made available to the City and the report dated June
29, 2015 prepared by Moss & Barnett with respect to CenturyLink's application, the City Council
has reached conclusions regarding CenturyLink's legal,technical and financial qualifications.
NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SHAKOPEE, MINNESOTA,that:
1. The City hereby finds that CenturyLink's application of May 13, 2015 complies with the
requirements of Minnesota Statute Section 238.081.
2. The City finds that CenturyLink possesses the requisite legal,technical and financial qualifications
to operate a cable communications system within the City.
3. City staff is authorized to negotiate with CenturyLink to attempt to reach mutually acceptable
terms for a cable television franchise to be introduced to the City Council for consideration and
action.
4. The City finds that its actions are appropriate and reasonable in light of the mandates contained
in Chapter 238 of Minnesota Statutes and applicable provisions of federal law including 47 U.S.C.
Section 541(a).
Adopted in adjourned regular session of the City Council of the City of Shakopee, Minnesota this
eighteenth day of August, 2015.
Mayor of the City of Shakopee
ATTEST:
Acting City Clerk
2
2916679v1