HomeMy WebLinkAbout[12c] Cable FranchiseC.rrV OF ST. JOSH PH
MEETING DATE:
AGENDA ITEM:
July 21, 2011
Cable Franchise Transfer
SUBMITTED BY: Administration
BOARD /COMMISSION /COMMITTEE RECOMMENDATION:
Council Agenda Item 12 C
PREVIOUS COUNCIL ACTION: The Council has previously granted a cable franchise to US Cable and the terms
of the Franchise can be found in Ordinance 36. The current franchise agreement will expire in 2015. In addition
the City has a separate agreement with US Cable for fiber connectivity that also will expire in 2015.
BACKGROUND INFORMATION: Please see letter from the City Attorney regarding the transfer. The City of Cold
Spring and St. Joseph use the same law firm so we jointly had the agreement reviewed, sharing legal costs. The
City of Cold Spring will be approving the franchise without additional information or request for data. Steve
Johnson from US Cable will be at the Council meeting to answer any questions, as will the City Attorney.
BUDGET /FISCAL IMPACT:
ATTACHMENTS:
Legal fee for review of transfer
Request for Council Action
Legal opinion
REQUESTED COUNCIL ACTION: If the Council is satisfied with the information, a motion authoring the Mayor and
Administrator to execute the resolution authoring the transfer would be required. If additional information is
required that should be clarified so that the attorney can request meeting the deadline.
Rajkowski Hansmeier *.
1 1 7th Avenue North
P.O. Box 1433
St. Cloud, MN 56302
320.251.1055 July 18, 2011
800.445.9617 toll -free
320.251.5896 fax
www.rajhan.com Judy Weyrens
Administrator /Clerk
25 College Avenue North
P.O. Box 668
St. Joseph, MN 56374
RE: Transfer of Cable
Our File No. 00224 -30425
Dear Judy:
Susan M. Kadlec
skadlecArajhan.com
RECEIVED
JUL 19 2011
CITY OF
At your request I have reviewed the FCC Form 394 Disclosure regarding the
pending acquisition of U.S. Cable of Coastal- Texas, L.P. by Midcontinent
Communications. The two companies have requested consent by the City to the
transfer. U.S. Cable is required to obtain the City's consent to the transfer under
Minnesota Statutes Section 238.083 as well as Section 36.6 of the Cable
Franchise Ordinance. Both the statute and the ordinance provide that consent may
not be unreasonably withheld. The ordinance further provides that approval may
only be denied upon a finding that the successor does not have the ability or
capability to operate the franchise in accordance with the terms of the franchise.
U.S. Cable is not the sole cable franchisee for St. Joseph. This is material to this
discussion because the City is required to treat all franchisees in an equal manner.
Time Issues:
The letter enclosing the Form 394 Disclosure is dated June 24, 2011, with receipt
approximately June 27, 2011. Pursuant to federal regulations, the City has 30 days
from receipt to request additional information or question the accuracy of the
Form 394 Disclosure. By my calculations, the City has until July 27, 2011, to
request that Form 394 be supplemented. The request for information should be
specifically authorized by the City and should be submitted in writing to U.S.
Cable and Midcontinent.
The City has 120 days from receipt of Form 394 to act on the
Rajkowski Hansmeier;ti °.
Judy Weyrens
July 18, 2011
Page 2
request for consent to the transfer. If the City fails to act within 120 days, it is deemed a consent
to the transfer by Federal Statutes Section 47 U.S.C.A. 537. By my calculations, the 120 period
will run on October 24, 2011.
The companies seek to have consent and close the transaction on or before September 30, 2011.
Form 394 Disclosure:
The purchasing entity, Midcontinent Communications, is a general partnership entity owned by
Comcast Midcontinent, LLC, a subsidiary of Comcast Corporation, and Midcontinent
Communications Investor, LLC, a subsidiary of Midcontinent Media, Inc. The disclosure does
not reveal anything specific about Comcast's ownership or management role in the partnership.
The Chairman of the Board of Directors and the Officers of Midcontinent Communications
appear to be drawn largely from Midcontinent Media, Inc. Ownership interests have not been
specified. Owners identified as having at least a 5% interest are: Patrick McAdaragh, President
and CEO, Burnsville, MN; Steven Grosser, Chief Financial Officer, Plymouth, MN; Richard
Busch, Chief Operating Officer, Sioux Falls, SD, and Comcast Corporation, Philadelphia, PA.
Comcast is a publicly traded company which provides cable service in much of the Twin Cities
metro area as well as nationwide.
Midcontinent Communications was formed in 2000. It presently serves over 200 communities
with over 250,000 customers in North Dakota, South Dakota and Minnesota, with cable
television, telephone and broadband internet. The purchase of U.S Cable will add approximately
33,000 customers, primarily in Minnesota and Wisconsin. Postings regarding Midcontinent on
the internet are largely positive. Customers appeared to be satisfied with the internet and cable
service provided by Midcontinent as well as the customer service and technical support.
Midcontinent has provided an audited financial statement and has made the required affirmative
statement that it has sufficient net liquid assets on hand or available from committed resources to
consummate the transaction and operate the facilities for at least three months. I do not offer an
opinion as to whether Midcontinent has sufficient assets to operate the cable system within the
City's limits. A financial analyst could assist the City with that determination.
According to the disclosure, Midcontinent is not planning to change the current terms and
conditions of service or operation of the system.
Options to Consider:
The City should also consider whether to require Midcontinent to provide additional information
regarding the extent of Comcast's ownership interest and control of the partnership, and whether
Rajkowski Hansmeier
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Judy Weyrens
July 18, 2011
Page 3
to seek further analysis of Midcontinent's financial ability to run the system.
Because the City's consent is required for this transfer, the City has some leverage to negotiate
some concessions as a condition to giving consent. The conditions should be related directly to
the extension or provision of cable services within City limits. Some conditions the City should
consider:
(1) The Franchise Ordinance (Sections 36.17) does contain customer response standards.
The City should consider whether greater protections are needed.
(2) If extension of cable service to certain areas within the City has been problematic, the
City could negotiate a timeline for the extension of cable services to areas within City limits not
presently served with cable. The Cable Franchise Ordinance does not address this issue.
(3) A commitment to provide basic cable service to public and school buildings free of
charge - the ordinance is silent on this issue.
(4) Whether any part of the system is in need of upgrading in order to provide consistent
cable services in the City of St. Joseph.
(5) Reimbursing the City for its share of legal and administrative expenses incurred in
reviewing this transaction.
These suggestions are intended to be illustrative rather than an exhaustive list of the types of
conditions that could be considered. If the City has any questions regarding specific conditions
that can be requested, I would be happy to review those with you.
The Franchise Term will terminate on September 21, 2015. If the City opts not to address any
issues at this time, then the City will have the opportunity to revisit performance issues at that
time.
If you have any questions regarding the contents of this letter, please give me a call.
Sincerely,
RAJKOWSKI HANSMEIER LTD.
By
1,
us M. Kadlec