III.7. Order Public Hearing on Transfer of Control of Cable Television System
November 18, 2014 Council Report 2014-091
Order Public Hearing on Transfer of Control of
Cable Television System
Proposed Action
Staff recommends that the Council approve the following motion: Order a Public Hearing on
December 16, 2014 to consider the proposed transfer of control of the cable television franchise from
Comcast to Midwest Cable.
Overview
The purpose of this public hearing will be to consider the application for the transfer of the cable
system from Comcast of Minnesota, Inc., the existing cable television franchisee, to Midwest Cable,
Inc., a newly formed entity that will hold the cable system. The hearing will focus on the application
submitted and the qualifications of Midwest Cable, Inc. and whether the proposed transfer may have
an adverse impact on cable subscribers. The proposed transfer of control requires approval under our
franchise and Minnesota Law.
The Southwest Suburban Cable Commission will meet on December 3, 2014. At that meeting, the
Commission will make a recommendation to its member cities regarding whether the transfer should
be approved.
Primary Issues to Consider
Is a public hearing necessary?
Supporting Information
Background of the Cable Franchise Transfer
___________________________
James Genellie
Assistant City Manager
Financial Impact: $ NoneBudgeted: Y/N Source:
Related Documents (CIP, ERP, etc.):
Notes:
Council Report 2014-091
Page 2
Is a public hearing necessary?
A public hearing is not required. The City Council could simply approve a resolution approving the
transfer. This would be an appropriate course of action if the Council feels that it does not require any
additional information about the transfer's effect on local subscribers.
If, on the other hand, the City Council determines that it wants more information and/or it wishes to
allow residents an opportunity to learn more about this transfer then it should hold a public hearing.
The Southwest Suburban Cable Commission's attorney, Brian Grogan, will be preparing a report on the
transfer for all the cities that he represents that are served by Comcast. This report could be presented
to the Council by Mr. Grogan who would then be able to answer questions.
The public would also have an opportunity to find out more about the transfer.
Alternatives
1.Schedule a public hearing about the transfer.
2.Authorize staff to prepare a resolution consenting to the transfer of the cable franchise to
Midwest Cable.
3.Take no action, which would also result in consenting to the change of control
Staff recommends Alternative #1.
Background of the Cable Franchise Transfer.
Comcast is planning on spinning off the Twin Cities cable franchises to a new publicly
traded company currently referred to as “Midwest Cable” (soon to be known as
GreatLand Connections). This entire matter began when Comcast determined earlier
this year to purchase all of the subscribers of Time Warner cable (TWC). As a result of
the pending acquisition of TWC, Comcast stands to acquire more cable subscribers that
it is legally permitted to control under federal law. Comcast has therefore committed to
the FCC to voluntarily divest itself of a portion of the subscribers assuming the TWC
transaction is completed.
Leading up to Comcast announcement to acquire TWC, Charter Communications was
very interested in acquiring TWC but came up short in the bidding process.
Nevertheless, Charter remains interested in growing its subscriber base. Since
Comcast is required under law to reduce its cable subscriber base if the TWC
transaction is completed, many speculated that Comcast and Charter would cut a deal.
Comcast and Charter announced a deal in April that will exchange subscribers to
solidify certain regional clusters to benefit each of the operator’s efficiencies. For
example, Comcast will now control all of Los Angles. Second, Comcast had to shed
subscribers and it appears that the Twin Cities market was selected, among others, to
accomplish that objective so that Comcast can close its acquisition of TWC.
The reason for the creation of GreatLand appears to relate to Charter not currently
being in a position to take on the entire debt burden of all of the subscribers from
Comcast. GreatLand will be a new publicly traded company with no operating history.
GreatLand will have a new Board of Directors and new management, not controlled by
Comcast or Charter. Although Charter will have the right to appoint some directors.
Further, Charter will apparently serve as the system manager of GreatLand under a
separate management agreement to be entered into with GreatLand. There is
significant speculation that after a period of time Charter will move to acquire a
controlling interest in GreatLand.
What this means for the Twin Cities market is that if all of these various transactions
receive the required approvals and close, there will be a new cable operator serving the
vast majority of the Twin Cities – including the five Southwest Commission member
cities. There is very little information about the proposed transferee, GreatLand, in
terms of its legal, technical or financial qualifications. However, assuming Charter
manages GreatLand through a separate agreement, one can assume that Charter’s
existing physical presence in the state of Minnesota will result in certain efficiencies for
Charter. Charter currently operates Cable systems in Duluth, St. Cloud, Mankato,
Rochester, Winona and a number of other Twin Cities suburban communities.
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Every Minnesota city currently served by Comcast received an FCC form 394. This is
basically a “transfer application” where Comcast will be seeking approval from every city
or Commission in Minnesota to transfer the local cable franchise to the newly created
GreatLand Connections. The transfer process is governed by our existing cable
franchise, state and federal law.
The original 120 deadline for action on FCC Form 394 was due to expire on October 15,
2014. That deadline was extended by Comcast until December 15, 2014 to allow the
jurisdictions additional time to review information that Comcast admitted they had not
yet provided. As a result of the further delay contemplated by Comcast and GreatLand
to provide the financial information and the Charter Services Agreement (“CSA”) at the
end of October, the new deadline is now January 15, 2015.
Comcast provided financial information regarding the transaction through a Securities
and Exchange Commission filing on October 31, 2014. In addition, the CSA between
GreatLand and Charter was also completed in late October. This is a significant issue
as the CSA will outline the exact responsibilities that Charter will be performing in your
community as opposed to GreatLand.
During the request for information process, some local franchising authorities raised
questions about the impact of the proposed Transaction on customer email transitions,
customer phone numbers, customer equipment, and customer billing. Comcast, in a
recent letter to franchising authorities provided the following information:
Customer E-Mail Transition
. Throughout the migration, customers will maintain
uninterrupted access to their emails. Post-closing, customers will continue to use their
Comcast email account until they migrate to a GreatLand email account. Comcast
customers will not indefinitely retain their existing “@comcast.net” email address after
migrating to the GreatLand service, as Comcast owns that domain. However, emails
sent to the customer’s former “@comcast.net” email address will be automatically
forwarded to the customer’s new GreatLand email address for an ample period of time
that is mutually agreeable to both companies and is sufficient for customers to shift
painlessly from their “@comcast.net” address.
Phone Number Continuity
. The Transaction will not require any change in customer
phone numbers. Existing Comcast telephone customers will be able to keep their
current phone numbers permanently.
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Customer Equipment
. Customers will be able to continue to use their current premises
equipment after the Transaction closes. GreatLand will rely initially on Comcast for
transition services to support the X1 platform. GreatLand ultimately will deploy the
Spectrum product suite developed by Charter. Customers who already have X1
equipment should be able to continue using that equipment even after GreatLand
transitions to the Spectrum offering.
Customer Billing
. Customers will begin to see bills (at the same time of the month)
from GreatLand and not Comcast. Approximately 15% of the customers pay on-line
directly from their bank (whether via recurring payments or one-time). These customers
are the only customers that will be required to do anything to adjust their billing
arrangements as they will be required to update their on-line banking information to
direct payments to GreatLand rather than to Comcast. This would not occur for several
months after close, and GreatLand will pro-actively notify customers of the change –
targeting customers who pay in this fashion with messaging.
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