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HomeMy WebLinkAboutItem 10 - AT&T ComcastMEMO TO: - •u MEETING DATE: SUBJECT: RECOMMENDATION: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL ROGER NELSON, CITY MANAGER/61V JUNE 18, 2002 AT&T BROADBAND FRANCHISE TRANSFER OF CONTROL TO AT&T COMCAST City Council consider approval of ordinance to accept the change of control for the existing franchise with TCI Cablevision of Illinois, Inc. an affiliate of AT&T Corporation to the parent company of AT&T Comcast Corporation. FUNDING SOURCE: The City will continue to receive franchise fees in accordance with the terms of our existing franchise, 5% of gross receipts. BACKGROUND: On March 8, 2002, the City received the Form 394 Application from AT&T Comcast Corporation requesting the city consent to the merger transaction in accordance with our franchise requirements. While the FCC has ruled that a Form 394 transaction limits a city's ability to deny the request to "financial, legal and technical concerns" of the new company, staff felt it was appropriate to fully review the terms of merger and its impact on the services offered to Grapevine citizens. In conjunction with a group of other cities, Staff retained Connie Cannady, C2 Consulting Services, to review the merger documents for potential 'transfer' issues as well as to review the respective cities' franchises with regard to customer service and revenue related issues. Of particular importance, was the cities' interest in standardizing customer service requirements among the group and addressing the issue of `bundled services' because of the potential impact to fee collections. Ms. Cannady reviewed the documents and concluded that the cities' rights to perform audits under existing franchise could be effected by the transfer of control. That question and a number of others were raised at a meeting held with Dick Kirby, General June 12, 2002 (9:17AM) Manager of the system in the DFW area and the cities' representatives. However, Mr. Kirby and AT&T Broadband have maintained the position (based on FCC rules) that the cities did not have legitimate 'legal, technical and financial' concerns related to the merger. AT&T representatives were particularly upset that cities were interested in including language relating to protecting audit rights and franchise fee revenue in the transfer document. However, through a compromise, the attached ordinance includes language in the acceptance of the transfer that, according to our City Attorney, can protect the cities' rights. The Staff, the Utilities Committee and the City Attorney have been briefed on this process and recommend approval of the ordinance. It should be noted that the Staff intends to pursue upgrading the customer service standards section of our existing agreement outside of the transfer process. MYL June 12, 2002 (9:17AM) 4ii] •f�jqfl QA MJJffqJJK•I AN ORDINANCE OF THE CITY OF GRAPEVINE PROVIDING CONDITIONAL APPROVAL OF CONSENT TO CHANGE OF CONTROL OF THE CABLE FRANCHISE, PROVIDING A SEVERABILITY CLAUSE, AND PROVIDING AN EFFECTIVE DATE. WHEREAS, TCI CABLEVISION OF ILLINOIS, INC. (hereinafter referred to as "Franchisee") is currently a franchisee for cable services in the City of Grapevine pursuant to Ordinance No. 97-62 (the "Franchise"); and WHEREAS, Franchisee is an indirect subsidiary of AT&T Corporation ("AT&T"), and AT&T has proposed a change of control of Franchisee from AT&T to AT&T Comcast Corporation ("AT&T Comcast"); and WHEREAS, Franchisee, AT&T, and AT&T Comcast have requested the City's consent to the change in control in accordance with Section 15 of the Franchise and have filed an FCC Form 394 with the City requesting such consent; and WHEREAS, the City has retained the services of C2 Consulting Services to review the FCC Form 394, with respect to the legal, financial, and technical capacity of AT&T Comcast to control Franchisee, and Franchisee's related ability to continue to adhere to the requirements and conditions of the Franchise; and WHEREAS, the City is willing to consent to the proposed change of control as detailed in the FCC Form 394, pursuant to the conditions set forth below. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS: Section 1. That all matters stated in the preamble are found to be true and correct and are incorporated herein as if copied in their entirety. Section 2. That AT&T Comcast agrees that Franchisee will abide by the lawful and applicable terms of the Franchise and its amendments, and all other ordinances of the City of Grapevine. Section 3. That Franchisee agrees that it will provide service pursuant to the lawful and applicable requirements of the Franchise and its amendments after the closing. Section 4. That subject to Franchisee's compliance with the provisions contained herein, the City of Grapevine accepts the change of control of the Franchisee to AT&T Comcast. Such acceptance does not preclude further investigation by the City of Grapevine of any potential franchise violations, including those occurring prior to the change of control. Franchisee agrees that with respect to any violation or non-compliance issues that are not extinguished prior to change of control, the City of Grapevine will have all rights to continue investigation of such matters following the close of the merger under the terms set forth in the franchise agreements. Although AT&T provided almost all of the answers, the City of Grapevine disagrees with AT&T's position that the requests for information are outside the appropriate scope of review for the change of control. Section 5. That any actions which have the effect of circumventing payment of any lawfully required ordinance fees and/or evasion of payment of the ordinance fees by non - collection or non -reporting of gross receipts, bartering, or any other means which evade the actual collection of revenues for businesses authorized by the Franchise are prohibited. Pursuant to the Texas Constitution, the City is prohibited from granting anything of value without compensation. The City has the right to audit all records relating to the calculation of the franchise fee. Section 6. That by granting this change of control, the City does not waive and specifically retains any right to regulate and receive compensation as allowed by law for all Cable Services offered over the Cable System. Upon request and if the City is lawfully allowed to make such a request, Franchisee shall inform the City of any uses of the Cable System by persons who are not Cable Operators. Section 7. That within thirty (30) days from the effective date of this ordinance, Franchisee shall hereby accept this Ordinance and agrees to be bound by all of its terms, conditions, and provisions, subject to applicable law by signing below. If Franchisee does not provide such agreement, this consent shall be null and voidable at the City's discretion. Section 8. If any section, paragraph, subdivision, clause, phrase, provision or word of this ordinance shall be judged invalid or unconstitutional, such judgments shall not affect the remainder of this ordinance. Section 9. That this Ordinance shall take effect immediately upon passage. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS on this the 18th day of June, 2002. ATTEST: ORD. NO. 2 TCI CABLEVISION OF I INC. 0 Its: 9727783661 9727783661 AT&T BROADBAND PAGE 02 2951 Kinwast Parkway Irving, TX 75063 April 5, 2002 By Facsimile & U. S Mail Ms. Constance T. Cannady President C2 Consulting Services, Inc. 7801 Pencross Dallas, TX 75248 Re: Consent to Change of Control Ordinance Dear Ms. Cannady- In your letter of May 29, 2002 you noted your disappointment that I did not understand the underlying purpose of your meeting with the cities your represent, and that your clients were concerned that their issue "clearly is within the realm of discussion of a Form 394 request". You also clarified the issue for my understanding as follows: "Each of the Cities has certain audit rights determine the payment has any contractual parent's ability to payments." of franchise fees. The or other relationships provide all relevant with respect to all information used to issue is whether the new indirect parent that will potentially limit the new information concerning franchise fee With respect to those local franchising authorities you represent, now that we have had additional time to consider your clarification and better understand your requirements, we would agree to include the following provision in our proposed ordinance provided with the Application: "AT&T Comcast acknowledges that the City has certain franchise fee audit rights pursuant to the franchise. AT&T Comcast assures that it does not have any contractual or other restrictions that will limit the ability of the Grantee to provide all relevant information concerning the payment of franchise fees as required by the franchise agreement between Grantee and the City." Please do not hesitate to call me with any questions regarding this proposal as we are eager to resolve this issue and conclude the 394 process. Also, as I indicated at our meeting and in subsequent correspondence, we remain interested in resolving any issues, which are an individual concern for your clients_ Recycled Paper 9727783661 06/06/2002 10:20 9727783661 AT&T BROADBAND PAGE 03 Page 2 of 2 Ms. Constance T. Cannady June 6, 2002 Dick Kirby t Executive Direct Franchising/Government Affairs Cc: Randy Moravec, City of Addison Shelli Siemer, City of Allen Rick Moore, City of Coppell Lynda Humble, City of Desoto Melissa Leal, City of Grapevine Pat Nicks, City of Irving Donna Huerta, City of Lewisville Debra Wallace, City of McKinney Mark Hindman, City of Mesquite Brian Davis, City of Richardson