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June 25, 2002
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SUBJECT: |
APPROVAL OF PROPOSED TRANSFER OF CONTROL OF THE CURRENT CABLE TELEVISION FRANCHISE FROM AT&T CORP. TO AT&T COMCAST CORPORATION |
REPORT IN BRIEF
On or about February 28, 2002, the City received the FCC Form 394, Application for Transfer of Control, (Attachment A) from AT&T Broadband formally requesting consent for Transfer of Control of the cable television franchise from AT&T Corp. to AT&T Comcast Corporation. The City Attorney assisted the Information Technology Department in the review of the FCC Form 394. There are several outstanding non-compliance issues identified in a Periodic Review conducted in 2000 that have not been resolved. As a result of staff’s review of the application, including additional information provided by AT&T Broadband and other local franchising authorities, staff recommends that Council adopt the proposed Resolution (Attachment B) conditionally approving the Transfer of Control to AT&T Comcast Corporation.
BACKGROUND
The City entered into a franchise agreement with TCI Cablevision of California, Inc. (TCI) for "the reconstruction, operation and maintenance of a cable television system in the City of Sunnyvale" pursuant to Ordinance No. 2346-90. The initial term of the franchise agreement is 15 years and commenced on December 14, 1990.
On or about September 15, 1998, TCI, as Transferor, and AT&T, as Transferee, filed a request for the City’s approval of the Change of Control of the Franchise. On November 10, 1998, the City Council approved Resolution No. 175-98 consenting to the Change of Control of the cable television franchise from TCI to AT&T Corp.
In 2000, the City retained the services of Municipal Services Associates, Inc. (MSA) to conduct a Cable Television Periodic Review of the City’s cable television franchise under Sections 17.02 and 17.02.01 of the cable television franchise agreement. The objectives of the review were to identify the level of compliance of TCI between January 1996 and December 1998 and focused on three areas: customer service standards, a franchise fee evaluation, and a technical evaluation of the cable system and signal testing. The Periodic Review Final Report dated March 19, 2001 identified non-compliance issues in each of the three areas. Since June 2001, the City and AT&T have held several meetings and conference calls and communicated with correspondence and electronic mails in an attempt to resolve the non-compliance issues. To date, there are still non-compliance issues to resolve.
On or about February 28, 2002, the City received the FCC Form 394, Application for Transfer of Control, from AT&T Broadband formally requesting consent for Transfer of Control of the cable television franchise from AT&T Corp. to AT&T Comcast Corporation. On March 22, 2002, the City requested additional information from AT&T Broadband to determine whether the FCC Form 394 Application was completed. The City received AT&T Broadband’s response dated April 3, 2002 to the City’s request (Attachment C) stating that the merger of AT&T Broadband Corp. and Comcast creating AT&T Comcast "will not result in a transfer of the franchise or a sale or transfer of the cable system. Franchisee will remain in place, will continue to own the cable system and will be fully bound by all existing lawful franchise agreement obligations."
EXISTING POLICY
Cable Television Franchise Agreement (12/14/90 – 12/13/2005)
City Charter Article XVI, Section 1601
Federal Communications Commission Rules and Regulations
DISCUSSION
Pursuant to the Federal Cable Act (47 U.S.C. Section 537) and FCC Rules (47 C.F.R. Section 76.502), local franchising authorities such as the City have 120 days (June 27, 2002) of receipt of a complete Request for Transfer of Control (FCC Form 394) to either grant or deny consent. If the City does not act within this 120-day period, under federal law, consent will be deemed granted.
Section XXII, Transfer of Ownership or Control, of the cable television franchise agreement outlines what the City shall consider in determining whether consent to the change in control will be given (Attachment C). In general, those considerations are: (1) legal and character reputations of officers, directors, employees and persons having a legal or equitable interest in 5% or more of its voting stock; (2) financial qualifications of the proposed transferee; and (3) substantial completion of construction of proposed system. Based on Application and information obtained from other local franchising authorities, staff has reviewed the proposed Transfer of Control and the legal and financial qualifications and believes that AT&T Comcast meets the necessary qualifications based on the standards of review identified in applicable local, state and federal laws. In addition, based on information provided by AT&T, the cable system within the City is 98% complete.
Because there are several non-compliance issues that still need to be resolved including underpayment of franchise fees and California Public Utilities Commission and City Code violations concerning the cable system, these conditions are stated in the proposed Resolution. MSA, the consultant who conducted the Periodic Review in 2000, completed a re-inspection of the system in early May 2002. Staff expects that follow-up report to state that there is still a high percentage of violations identified in the March 19, 2001 Final Report that have not been corrected by AT&T.
FISCAL IMPACT
The impact of the transfer of financial liabilities from AT&T Broadband and Comcast to AT&T Comcast Corporation is unknown. One of the conditions to approving the Consent to Transfer is that AT&T Comcast must continue to provide the standards for subscriber system maintenance, customer service, programming, and PEG (public, education and government) support pursuant to the terms of the cable television franchise agreement. If there are any changes in cable rates or programming, this may impact the revenues collected by AT&T and subsequently impact the 5% franchise fee paid to the City.
PUBLIC CONTACT
Public contact was made through posting of the Council agenda on the City’s official notice board, posting of the agenda and Report on the City’s web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the Report in the Sunnyvale Public Library and City Clerk’s Office. A complete copy of the FCC Form 394 is available in the Sunnyvale Public Library and City Clerk’s Office. A copy of the Report was also provided to AT&T Broadband.
ALTERNATIVES
Based on information provided by AT&T, other local franchising authorities and staff review, and courses of action allowable under federal regulations, three alternative courses of action are identified:
RECOMMENDATION
Staff recommends Alternative No. 2.
Prepared by:
Marilyn Crane
Manager, Information Technology Services
Reviewed by:
Shawn Hernandez
Director, Information Technology
Approved by:
Robert S. LaSala
City Manager
Attachments
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