CR 11-103 Resolution Extending Cabel Franchise Agreement•
November 3, 2011
Proposed Action
RESOLUTION EXTENDING
CABLE FRANCHISE AGREEMENT
Council Report 2011-103
Staff recommends adoption of the following motion: Move to Approve Resolution 2011-059
Extending the Current Cable Franchise with Comcast.
This motion extends the term of the Franchise from January 2, 2012 through and including April 16,
2012.
Overview
The current cable franchise with Comcast expires on January 1, 2012. The five cities that form the
Southwest Suburban Cable Commission (SWSCC) have been in negotiations on a new franchise with
Comcast for most of this year.
A cable franchise is required for a cable company to operate in Minnesota. The franchise deals with
subjects such as construction standards and maintenance; system performance; customer service; and
public, education and government (PEG) access.
• The SWSCC and Comcast are close to settling on the details of the new franchise. However, because
of the length of these negotiations, each City will have to agree to extend the current franchise into
2012. This will give both parties time to resolve all the issues, draft the new franchise agreement, and
have it approved by the City Councils of all five cities.
The Southwest Suburban Cable Commission (SWSCC) met on October 26, 2011 and voted
unanimously to recommend that its member cities approve the franchise extension.
Supportin,a Information
• Franchise Renewal Report
• Resolution 2011-059, Approving the extension of the Franchise
Ymnes Genellie
Assistant City Manager
r1
U
• CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION NO. 2011-059
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HOPKINS, MINNESOTA
GRANTING COMCAST OF ARKANSAS / FLORIDA / LOUISIANA / MINNESOTA /
MISSISSIPPI / TENNESSEE, INC.
A FRANCHISE EXTENSION TO APRIL 16, 2012
WHEREAS, effective January 1, 1997, the City of Hopkins, Minnesota ("City") granted a Cable
Television Franchise Agreement ("Franchise") to Time Warner Cable, Inc.; and
WHEREAS, the Franchise is currently held by Comcast of Arkansas / Florida / Louisiana /
Minnesota / Mississippi / Tennessee, Inc. ("Comcast"); and
WHEREAS, pursuant to Section 47 U.S.C. §546(a) Comcast provided notification to the City of
• Comcast's intent to seek renewal of the Franchise; and
WHEREAS, pursuant to Section 47 U.S.C. § 546(a) the City properly commenced franchise
renewal proceedings; and
WHEREAS, the City and Comcast, pursuant to 47 U.S.C. §546(h), are currently conducting
informal franchise renewal negotiations in an attempt to reach a mutually acceptable terms for
franchise renewal; and
WHEREAS, the City and Comcast are interested in continuing informal renewal negotiations
and desire to extend the current Franchise term from January 2, 2012 to April 16, 2012; and
WHEREAS, both the City and Comcast desire to expressly reserve all of their respective
rights under state and federal law; and
WHEREAS, the City and Comcast continue to be governed by the formal renewal process
• pursuant to 47 U.S.C. §546(a -g) and nothing contained herein shall in anyway diminish either
1869648v1
party's rights under the formal renewal process.
NOW, THEREFORE, the City Council of the City of Hopkins, Minnesota hereby resolves as
follows:
1. The Franchise is hereby amended by extending the term of the Franchise from
January 2, 2012 through and including April 16, 2012.
2. Except as specifically modified hereby, the Franchise shall remain in full force
and effect.
3. The City and Comcast hereby agree that neither waives any rights either may
have under the Franchise or applicable law.
4. This Resolution shall become effective upon the occurrence of both of the
following conditions: (1) The Resolution being passed and adopted by the City Council
• of the City of Hopkins; and (2) Comcast's acceptance of this Resolution.
Adopted by the City Council of Hopkins, Minnesota, this 15th day of November. 2011.
0
CITY OF HOPKINS, MINNESOTA
ME
Its:
ATTEST:
City Clerk
1869648vl 2
n
U
•
ACCEPTANCE
Comcast of Arkansas / Florida / Louisiana / Minnesota / Mississippi / Tennessee, Inc.
hereby acknowledges the City of Hopkins, Minnesota Resolution No. and hereby
accepts the terms, provisions and recitals of the Resolution and agrees to be bound by the
Franchise to the extent consistent with applicable laws.
DATED: COMCAST OF ARKANSAS/FLORIDA/
LOUISIANA/MINNESOTA/
MISSISSIPPI / TENNESSEE, INC.
Sworn to before me this
day of ,
Notary Public
1869648v1
0
Its:
P'C'1\01A
BVv Lance
of\ati�on teaxf\I 000 xof\
'C�pNS: cast ne9 omm�ss�Oneet�n9 have
p�N1EN SP1 the GSkk\eouthwe aGO
have be ne9°t�at\° \` and
S PIA QIp ee E 9 N°\`yes ana d BC\an \\e ocGv u �\PCnent' p�G Stu
\n
�� GpMMCo�m\ssioa and St Steve � e�chd\scu � e k� PSG eq
SSP e \as Go\e`er tha`�' has b en \ \ay a
S\ace th ,,nett patty t.a nch\se
,jr
- \\a 9
Leve°\dorsist�n9 k e el \lb\�c and ed
team, �h�\e ane\s, P
c\ G a cast leve
ve9u\a y E ch d G°m the
been on 0t iund\n9 s
n an ces
cap mm\ss�o pEc' ac e
pEG d osa\ eeV\ the C supe°� { tamed �n t a\ the
• your n r° d befiN capita as con Copos d\na, E
Back \ GoCnO�ss\\ ave tcansped �e9a�&n supe° vndet th 310,000
\n�t�a tea<�Ons h eXchan9 pEG capa\\ o{ 2010st tota\�n9 opkms ' \ {ee in�t\
a a\ ne9° ve been aCom9 . the F GoCnca o. and is a capita to a
Ps the in{O�oP°sa\s �a osik`on Ce9 b�,tted meats by $45,00 ch Gity the Gity \d b
d\eent p\ons \ci�tka panch\set capita\ ��• Rich\�eo� beha\f o�c eased Comcast dee lde�
Goh\m�s Sion s dra\ted up{C°n o,000 ea to c°\\ect i\ate�a\\y Gounc\\. ubsccibeC GoCnc'
GomCnks s\on Cequ�tonka , �$ Cequ\Ced may be u of the Get \J\a 019 ec s \ta\fee \r
mss Anne \d be Wh\ch vote eat . EG cap Cesu\tkn9
p°a C\e anGo castes e I monthbased on yap\ta\ pay �o \n\ba\ press stud\o
add\k\o� 1131 subs50 pec map 000 up{t°nded to
the\ e pub\�c a
t at $1. 3 be ad n pCa
m\rnu O°� coup t ash et\onl tta the Ede
ax C Cna\n in t pCo
eni�t\ed yes s°\e c to �`a\ bu\\et \3 opt car
\n G°'mcasbe Cequ�ced
no \oogecast 1� 2011 \n\t�a\ c st p,ov\de ast o�eved a cap w° Cbd i
to G Comcast Mach 14, 2011, s p oc P°sacequ se t) , Comcast W ou\d p
d aCch \s \n th G\ty s eaCs.
b e'Cna\\ , arab {�a 0 ��`atch\n est Cate °vee 3 y 5
\n anC . exon �g10,00 able inter
Go'�` Dunt ° reason
• the am eCs at a
subscC\b
,g5-N6g6v1
subscrib
months er per m
capital , this $. 50 °nth PEG
Paid to he
Cities. 0E oo e wo pd /support f
ee
C• Cor s. T hereafteer the
s c/us,V°r
O ast s Jul e $. 50 sly toe . ,' (est.
.
pr Mons o 2011 9 2011 ro os per subscr;bsrpuere Coed) twe/ve to
revision S March
n7 mo a i provi al month PFG f� thSlArteen
e up ron
called fn °f Comcas14, 201 IZed coma a redline e would be
wo pa is pro ast's d rs
a old bee Yment u PEG ac pOSal 0 acr,es draft o f
Cpp//cab/e . cO�ered pon the cess pro n July 9 s Suppo the Pro
/,)o
Inter by COM effecti posed 2011 rt pro posed fr,
behalfoft fully r cot calculatcast throe date o ftranchise /Steve Proposal
cons. nchise P
Parties,( each Ci vers the data rat ugh a per he franc sea nguage. mss pro e d with EG
used by resthe Cities
Pas '000
po per Subs pita/ grant ° greCornaterubscrber e, of $317-6.
his rev Syed cl a forth
er
pT hl s ProposalIes In th Soso/ COrrn a ��G ee that ast woo/dr/me PlushrOugh oto th Cities
it Proposal
th °ugho Ybackequ pmea/so Prov. s discretion to fused tO% Sn of o t to /atelY l Per en (1 o With
One which
issociateut the lcl ife nt to he C that Comc fund PEastG ac per mons lose the ate and co Once
eC;t na/ b� ClpOf me nh�afran hiseWesat no ha would trans f cess capital khis �� oetween the
►mc Y °n a time
were in all ex/Stings and Co er eXistln penditures ld be
ast me and n to b place g fiber Mcast / ' fu
77cas wOU/d re mate be as of retur woo/ ess St
to t (paid tain o r/a/S b milletsIss the eft n //nes d fu stud.
a�a//ab/e Un ��the C;ties /p and Control and ot/ b proms, date o ah the �e uainta;nd
C°recasts the Sams)te ms sXp rato f the f;beard for o d oY Cf th �asch/S� /in s and
gotiation Au ust 5 2011 and c°nd,t oats e 10 Year efiber w u/ ubscrbbeE? Ut pa/d for b
Ven by te/ p� n� for the Co r0 osa/ upon rsnefw hiss be retermained fee
,in roach on qu n�tni. the localbut r,ou/ Y •
g' toe
addresg he 20> > and Comcast franchiS� be
her thanG accss ring the s met face
F facility COcmpNets S issuesse mestingstO facs ° J
-C su�clenmcast woo/ e the exis !his new p op cast Prop
o/y 15 2011
des gn the
as easCe t°r he /oc fgureg Wi'ETden Prairie Proposal wOu nc dd n
an sp on ato far,- pub e
d wo ace able n o t rlitY t l/c a
ser old le to forth offir,e s educat; ° elin7i ccsSs
Ont/7ate Yet to ase this s er separ pace for °nal an nate the Studio
, and i be IS pace to ate /ngre an /ndiv d public studios and
corn n anyc rm/ned the CO smm.slegre dual to access pacaecbut
7e term as tha/saSe (co Quid not that 0 Is /On, or an secured a Comcast
m�ab k
Auld mI. franchise tract) not Connectre
�2p0O�Moicipates wo Signateaf the
nchise but IwotU'dd/st/actioned to th f a . c- h;s /era es about
/says it to h� Citi en °perati se but wou/da be
36 es to deter. cap/tai e n
whether he pastures
Yment •
0
4
of lease fees for the Eden Prairie space would constitute a capital expense under the
Cities' accounting rules. This may be important as it would dictate whether the
Commission/Cities could use the PEG capital fees to pay the lease cost or whether
these lease fees would have to be paid for out of the franchise fees/general revenue
fund.
3. The Cities would be responsible for managing the playback for public, educational
and governmental access. But, Comcast would be open to a "transition period" for
some time period presumably less than 12 months during which the Commission and
Comcast could facilitate a smooth transition and to allow for the reconfiguration of the
Eden Prairie space.
4. Comcast emphasized that this proposal to utilize a portion of their facility has
advantages because it already has significant fiber connections flowing to it and a
direct connection to the headend which would not be the case if the Commission or
school districts created a separate playback facility at another location. Any
additional fiber that would be required to connect the school districts to the
reconfigured Eden Prairie facility would be completed by Comcast but the cost
associated with such construction would be included in any pass through Comcast
were entitled to collect to recover its costs associated with this proposal.
5. Comcast would maintain its offer to provide the Cities with an upfront grant in the
amount of $310,000 which, together with the additional anticipated fiber construction
and additional playback equipment, would total approximately $450,000 capital costs.
The City would be obliged to finance the difference between $310,000 and $450,000,
or wait until it had recovered enough from the pass through mechanism (see below)
to pay for the difference. The $450,000 is an estimate at this point; the actual final
cost has yet to be determined.
6. Comcast would recoup its 310,000 upfront capital investment, in addition to a prime
plus 1 percent interest rate, over the initial twenty-four to thirty six months of the
franchise term at a rate of approximately25 cents per subscriber per month.
Comcast emphasized that this is a preliminary number and the number has not been
precisely calculated.
7. Once the initial recovery period is completed and Comcast has fully recovered its
upfront capital investment, the Commission would then be entitled to continue to
receive the 25 cents for the remaining term of the franchise. This money would
presumably be used by the City to handle additional equipment, equipment
replacement, fiber construction, appropriate capitalized lease payments, and/or
capital expenses related to any PEG programming.
8. Comcast emphasized that it is not attempting to "systematically back the Commission
down" by offering this alternative proposal and emphasized that if the Commission
did not want to pursue leasing the reconfigured Eden Prairie facility, Comcast would,
as an alternative to the Cities, maintain its original offer of $.50 per subscriber per
month. The upfront capital payments ($310,000) are available under both
alternatives, and would, in both cases, be recovered as an offset to the pass through
amounts.
1854686v1 37
The Commission's negotiation reviewed Comcast's proposals. The key issues •
identified by the Commission were:
1. capital funding for government access,
2. capital funding for public and educational access,
3. playback for public and educational access channels,
4. where will the playback facilities be located,
5. operational support requirements for educational and public access playback,
6. what level of operational support will be required, and
7. what entity will provide/pay for such operational support.
Status of negotiations as of October 19, 2011
The Commission and Comcast held a meeting on September 13, 2011 to review PEG
funding options. Present at the meeting were: Lance Leupold, Emmitt Coleman, Steve
Holmes, Steve Devich, Patty Latham and Brian Grogan.
Over the course of the meeting multiple proposals were discussed regarding PEG funding
and various options available to the parties should informal negotiations prove
unsuccessful. As the meeting concluded a tentative proposal took shape which is
summarized below. There are a number of OPEN issues and details to this proposal and
the description below is not meant to be exhaustive of all of the issues discussed or all of
the issues that will need to be addressed in a cable franchise. •
Upon the effective date of the renewed franchise ("Effective Date") Comcast shall
have no further obligation to maintain the public access studio in Eden Prairie.
a. Comcast will maintain all public access and educational access playback
equipment and playback staff at its Eden Prairie facility for 12 months from the
Effective Date.
2. Comcast will maintain four PEG channels available for Commission use beginning on
the Effective Date and for the first 12 months of the renewed franchise. Twelve
months after the Effective Date of the renewed franchise the Commission shall be
entitled to only three analog PEG channels.
a. OPEN - Commission interested in option of moving the 4th PEG channel to a
digital channel — still freeing up analog capacity for Comcast but maintaining
option for PEG programming on a digital channel.
b. OPEN — issues related to HD carriage of PEG channels in the future — as set
forth in the Commission's draft franchise.
3. Upon the Effective Date Comcast will collect and remit to the Commission $.60 per
subscriber per month in support of PEG capital ("PEG Fee").
a. OPEN — No resolution was achieved regarding an annual CPI adjustment for 40
the $.60 PEG fee or other periodic adjustment to reflect the time value of
1854686v1 38
money. Comcast currently has an implicit CPI built into the existing franchise
— Comcast is permitted to adjust the current $.25 PEG support fee based on
costs incurred year to year for the Eden Prairie studio and has adjusted such
rates over the 15 year term.
b. During the 12 months following the Effective Date Comcast shall retain $.13 of
the $.60 PEG Fee to reimburse Comcast for the costs associated with
maintaining operational staff, equipment and space at the Eden Prairie facility
to handle the public and educational playback obligations for the 12 month
transition period. This will result in the Commission receiving a $.47 PEG Fee
for the first 12 months of the franchise. Thereafter the PEG Fee will revert to
the $.60 level for the remainder of the 10 year franchise term.
4. Upon the Effective Date Comcast will remit to the Commission a $200,000
technology fee. This technology fee will not be restricted in any manner and the
Commission will have the ability to use it for any purpose in the same manner as a
franchise fee payment.
a. Comcast retains the authority to recover the $200,000 technology fee as an
additional line item on subscribers' bills.
5. Comcast will maintain all existing fiber paths in place today to facilitate PEG
origination/return capacity in the five cities. Comcast proposes to add language to
clarify that it will not be responsible for fiber "replacement" but will handle all
maintenance on the existing fiber. Comcast does not anticipate this will result in any
expenditures by the Commission over the 10 year franchise term as the fiber is not
likely to require replacement.
6. Comcast will allow necessary interconnection with any newly constructed City and
school fiber at no additional cost to the City or Commission. This may be
accomplished through a patch panel or other similar facility and each party will be
responsible for the fiber on their respective sides of the demarcation point.
7. Comcast will transfer all existing PEG equipment, racks, lights, facilities, etc.
currently in use at the Eden Prairie facility to the Commission. Timing for the
equipment transfer was not discussed although it is anticipated that the equipment
transfer for the studio equipment will occur within 60 days following close of the
public access studio and the equipment transfer for playback will occur shortly after
the 12 month transition period is completed.
8. Any ancillary equipment operated by Comcast for the benefit of PEG on its fiber
paths or cable system, whether referred to switchers, routers or other equipment, will
be maintained by Comcast for the term of the franchise. Comcast raised the issue
regarding the "replacement" of this equipment although there was apparent
agreement that Comcast would be responsible for everything on its side of the
demarcation point and the City/Commission would be responsible for all other
production/playback equipment. Final agreement on wording was not achieved.
9. The Commission desires that Comcast agree via a side letter that if the Commission
1854686v1 39
were to lease a facility to house playback equipment Comcast would agree not to
challenge the lease support payments as an operational expenditure. Comcast
generally agreed with the concept but desired to review this matter with Comcast's
legal counsel to determine if it was able to make this written commitment. The
Commission maintains that it does not want to be forced to construct a facility to
house playback solely to avoid a challenge from Comcast that a lease cost would be
considered an operational expenditure, as opposed to a capital expenditure.
•
•
18546860 40