Res 2016-04 FofF for Proposal of QWest for Cable Franchise
CITY OF FRIDLEY, MINNESOTA
RESOLUTION NO. 2016-04
RESOLUTION REGARDING FINDINGS OF FACT WITH RESPECT TO THE
PROPOSAL OF QWEST BROADBAND SERVICES, INC. D/B/A CENTURYLINK, INC
FOR A CABLE COMMUNICATIONS FRANCHISE.
RECITALS:
1.Qwest Broadband Services, Inc., d/b/a CenturyLink, Inc. (“CenturyLink”) requested that
the City of Fridley, Minnesota (“City”) commence proceedings to consider the award of a
ations franchise to CenturyLink.
cable communic
2.Minnesota Statutes Section 238.08(a) mandates that a city require a franchise for any
cable communication system providing service within the city.
3.Federal law at 47 U.S.C. Section 541(a) provides that a city “may not unreasonably
refuse to award an additional competitive franchise.”
4.The City retained the law firm of Moss & Barnett, a Professional Association, to assist
the City in conducting the procedure required under Minnesota Statutes Section 238.081
and reviewing any applications submitted to the City.
5.The City followed the franchise procedure required by Minnesota Statutes Section
238.081 by publishing once each week (November 6 and November 13, 2015) for two
successive weeks in the Fridley Sun Focus a Notice of Intent to Franchise a Cable
Communications System.
6.The Notice stated all eight (8) criteria outlined in Minnesota Statutes Section 238.081,
Subd. 2.
7.In addition to the published Notice, the City provided copies of the Notice of Intent and
the Official Application Form to CenturyLink and to the City’s existing cable operator,
Comcast of Arkansas/Florida/Louisiana/Minnesota/Mississippi/ Tennessee, Inc.
(“Comcast”).
8.The City’s Official Application Form required that proposals for a cable communications
franchise contain responses to each of the items identified in Minnesota Statute Section
238.081, Subd. 4.
9.The City’s closing date for submission of applications was set for December 2, 2015
which complied with the statutory minimum of twenty (20) days from the date of first
publication.
10.Upon the deadline for submitting applications, December 2, 2015, the City received only
one (1) application, from CenturyLink.
11.The City Council determined to call a Public Hearing to consider the application received
from CenturyLink at its regularly scheduled December 28, 2015 meeting.
12.All interested parties were provided an opportunity to speak to the City Council and to
present information regarding this matter.
13.The City carefully reviewed all information and documentation presented to it regarding
CenturyLink’s proposal and qualifications to operate a cable communications system
within the City.
14.Based on information and documentation made available to the City and the report dated
January 18, 2016 prepared by Moss & Barnett with respect to CenturyLink’s application,
as shown in Exhibit 1, the City Council has reached conclusions regarding CenturyLink’s
legal, technical and financial qualifications.
NOW THEREFORE,
the City of Fridley, Minnesota hereby resolves as follows:
1.The City hereby finds that CenturyLink’s application of December 2, 2015 complies with
the requirements of Minnesota Statute Section 238.081.
2.The City finds that CenturyLink possesses the requisite legal, technical and financial
qualifications to operate a cable communications system within the City.
3.City staff is authorized to negotiate with CenturyLink to attempt to reach mutually
acceptable terms for a cable television franchise to be introduced to the City Council for
consideration and action.
4.The City finds that its actions are appropriate and reasonable in light of the mandates
contained in Chapter 238 of Minnesota Statutes and applicable provisions of federal law
including 47 U.S.C. Section 541(a).
PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF FRIDLEY THIS
25TH DAY OF JANUARY 2016.
_________________________________
SCOTT J. LUND, MAYOR
ATTEST:
DEBRA A. SKOGEN, CITY CLERK
Exhibit 1
Report to the
City of Fridley, Minnesota
Regarding Qwest Broadband Services, Inc.,
d/b/a CenturyLink - Proposal for a
Cable Communication Franchise
January 18, 2016
Prepared by:
Brian T. Grogan, Esq.
Yuri B. Berndt, Esq.
150 South Fifth Street, Suite 1200 Minneapolis, MN 55402
(P) 612-877-5000 (F) 612-877-5999 (W) lawmoss.com
TABLE OF CONTENTS
INTRODUCTION ................................................................................................. 1
STATUTORY REQUIREMENTS ............................................................................ 2
PROCEDURE FOLLOWED BY CITY ...................................................................... 9
INFORMATION REVIEWED .............................................................................. 10
...................................................... 11
............................................. 12
.............................................. 16
RECOMMENDATIONS ....................................................................................... 22
EXHIBIT A ENTITY DETAILS FROM THE DELAWARE DIVISION OF
CORPORATIONS
EXHIBIT B MINNESOTA SECRETARY OF STATE BUSINESS RECORD DETAILS
EXHIBIT C MINNESOTA SECRETARY OF STATE UCC/TAX LIEN FILING
RECORD SEARCH AND JUDGMENT RECORD SEARCH
EXHIBIT D PACER CASE LOCATOR SUMMARY AND THE ACTIVE CASE
SUMMARY
EXHIBIT E CORPORATE PARENT GUARANTY
EXHIBIT F PROPOSED RESOLUTION
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INTRODUCTION
Qwest Broadband Services, Inc., d/b/a CenturyLink (hereinafter referred to as
requested the issuance of a cable communications franchise from
City of Fridleyprovide cable services in the City.
The City contacted Moss & Barnett seeking input regarding the appropriate procedure
to be followed to consider the award of a cable communications f
CenturyLink or any other applicant. Moss & Barnett reviewed state and federal
statutory requirements with City representatives and developed a comprehensive
franchise procedure to comply with applicable laws. This report will include a summary
s and recommendations.
In accordance with Minnesota Statutes Section 238.081, the City published a Notice of
Intent to Franchise and requested applications for a franchise from
applicants. Applicants were instructed to obtain from the City a Request
Official Application Form. Prior to the deadline for submitting
received only one (1) application - from CenturyLink.
Pursuant to Minnesota Statutes Section 238.081, the City held a public hearing to
receive input from interested parties regarding CenturyLink
This report will review relevant statutory requirements that the City must follow in
processing a request for a cable communications franchise. Ther
review CenturyLinkto provide cable
services in the City and address whether CenturyLink
statutory requirements. Finally, this report will provide recommendations for the City
CenturyLink
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STATUTORY REQUIREMENTS
A.Federal Regulatory Scheme: Competition Among Cable Television
Providers and the Federal Cable Act
The Cable Communications Policy Act of 1984, as amended by the C
Protection and Competition Act of 1992 and the Telecommunications Act of 199
(hereinafter , contains many provisions
relevant to the application before the City. According to the Ce of its
primary purposes is to:
Furthermore, 47 U.S.C. Section 541(a)(1) provides that a franchising authority may
award one or more franchises within its jurisdiction. To that e:
2
Any applicant whose application for a second franchise has been
decision of a franchising authority is not without recourse. The applicant may appeal
an adverse decision pursuant to the provisions of Section 635 of the Cable Act.
The Cable Act also provides that a city may require certain assu
prospective franchisee. Subsection 4 of 47 U.S.C. Section 541(a) provides that:
a.
b.
c.
1
47 U.S.C. Section 521(b).
2
47 U.S.C. Section 541(a)(1) (emphasis added).
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When Congress passed the 1992 amendments to the Cable Act, Congress suggested
that it favors competition in the delivery of cable communicatio
report that accompanied the amendments concluded that:
B. Federal Communications Commission Observations on Competition in
the Cable Television Industry
The F annual competition reports in
-to-
in the delivery of cable services. Benefits enjoyed by consumers as a
result of the increased competition include:
e.
The FCC completed rulemaking proceedings on competition in the vi
4
what is now known as the FCC 621 Order. The Sixth
5
Circuit affirmed the FCC 621 Order in 2008. In the 621 Order the FCC summarized the
evidentiary record in the following manner:
3
(emphasis added). S. Rep. No. 102-92, June 28, 1991, reprinted in 1992 U.S. Code Cong. & Admin.
News 1133, 1141, 1146, 1151; H.Conf. Rep. No. 102-862, reprinted in 1992 U.S. Code Cong. & Admin.
News 1231, 1259.
4
See
, 22 FCC Rcd 5101 (Mar. 5, 2007).
5
529 F.3d 763 (6th Cir. 2008).
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C. Minnesota Statutory and Judicial Treatment of Competition in the
Cable Television Industry
Minnesota Statutes
In addition to the requirements contained in the Cable Act, Minn
statutory provisions that must be carefully followed by the City
award of a franchise. In particular, Minnesota Statutes Chapter
, states that a municipality must require a franchise or
extension permit of any cable communications system providing se
municipality. Further, Minnesota Statutes Section 238.081, ,
provides a precise procedure to be followed by a municipality when requesting
applications for a cable communications franchise.
The text of Section 238.08 and Section 238.081 is set forth below to provide the City
with the exact requirements of state law on this matter.
Minnesota Statute Section 238.08, , provides in
pertinent part:
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* * * *
Minnesota Statute Section 238.081, , provides in pertinent
part:
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* * * *
In addition to the above referenced state statutes, Minnesota StSection 238.084
identifies the required contents of a franchise ordinance. Give
existing cable franchise with Comcast of Arkansas/ Florida/ Louisiana/ Minnesota/
Mississippi/ Tennessee, Inc. Comcast
requirements of Section 238.084, the City may, if it so determines, grant substantially
the same ordinance to CenturyLink if the City finds that CenturyLink is a qualified
applicant.
In this proceeding the applicant, CenturyLink, was provided a copy of the Comcast
Franchise. The reason for using substantially the same franchisas the base document
to begin negotiations is to ensure that any and all entities providing cable
communications service within the City are generally regulated in a similar manner.
Both the Comcast Franchise and Minnesota Statutes Section 238.08 include provisions
requiring some form of level playing field obligation which the City must consider before
the award of a second, competitive cable franchise.
Specifically, the Comcast Franchise at Section 405A.04(9) contains a requirement that
permits the City to grant competitive franchises:
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D.
Television
Franchises
In its report accompanying the 1992 amendments to the federal Ca
States Senate observed that:
6
.
referenced by the Senate Report. In
Dakota Telecom
) grant of a
competing franchise to Dakota Telecommunications Group. Bresnan
process rights.
incumbent franchisee may not challenge the general fitness of a
to encourage such
6
S. Rep. No. 102-92, June 28, 1991, reprinted in 1992 U.S. Code Cong. & Admin. Ne
1146, 1151; H. Conf. Rep. No. 102-862, reprinted in 1992 U.S. Code Cong. & Admin. News 1231, 1259.
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PROCEDURE FOLLOWED BY CITY
CenturyLink requested that the City institute the required proceedings to co
award of a cable communications franchise to CenturyLink. After consultation with
Moss & Barnett, a detailed procedure was prepared to comply with
federal laws regarding the processing of CenturyLink
The City Council authorized publication of a Notice of Intent to se a Cable
Communications System. The notice was published once each week
weeks in the newspaper of general circulation. The Notice was first
published in the Fridley Sun Focus on November 6, 2015, and was thereafter published
on November 13, 2015. Copies of the Notice of Intent to Franchise are available upon
.
- Official
Application Form that was made available on request at the office of the City Clerk.
Copies of the Notice of Intent to Franchise and Official Applica
CenturyLink as well as the incumbent cable operator, Comcast. A copy of the Official
Application Form is available .
Pursuant to Minnesota Statutes Section 238.081 the City established a deadline for
submitting applications on December 2, 2015, at least twenty (20) days following the
first date of publication.
The City published a Notice of a Public Hearing to receive input on CenturyLink
application. The Public Hearing was held on December 28, 2015 at 7:00 p.m. All
interested parties had an opportunity to comment.
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INFORMATION REVIEWED
Below is a listing of all information received and reviewed by MEach
document listed below was reviewed and considered in the preparation of this report,
and are hereby incorporated into this report by reference. The information contained
1.Notice by the City of its Intent to Franchise a Cable Communication
System published on November 6 and 13, 2015.
2.Request for Proposals-Official Application form.
3.Official Application submitted to the City by CenturyLink.
4.Supplement information provided by CenturyLink in response to qu
raised by Moss & Barnett (see Financial Qualifications section f
list of financial information reviewed).
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CENTURYLINK
The legal qualifications standard relates primarily to an analysCenturyLink
is duly organized and authorized to provide cable services within the City.
We have reviewed and received the following information with respect to Qwest
Broadband Services, Inc. as of the dates listed below and in the attached Exhibits:
Delaware Incorporation/Good Standing. The Delaware Division of
nc. was
incorporated on May 10, 1999 and is in good standing as of January 5, 2016.
See attached Entity Details from the Delaware Division of Corporations
attached hereto as Exhibit A.
Minnesota Foreign Registration. Qwest Broadband Services, Inc. is registered
as a foreign corporation in the State of Minnesota and is active
standing. Minnesota Business and Lien System, Office of the Min
Secretary of State Business Record Details dated January 5, 2016 attached
hereto as Exhibit B.
Minnesota Tax Lien/Judgment Search. Qwest Broadband Services, Inc. is not
subject to any tax lien/judgment in the State of Minnesota. Min
Business and Lien System, Office of the Minnesota Secretary of State tax lien
filing record search and judgment record search attached hereto as Exhibit C.
Civil Actions. Qwest Broadband Services, Inc. has been a party to a nu
of civil cases, including all of the cases listed on the PACER C
summary for periods from formation to January 5, 2016. Qwest Broadband
Services, Inc. is a party in a bankruptcy matter that was filed on May 27,
2015 (the Case Summary is included hereto as Exhibit D).
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CENTURYLINK
The technical qualification standard relates to the technical ex
CenturyLink to provide cable services. This report offers no opinion related to the
technology used by CenturyLink to offer cable services.
CenturyLink is offering its Prism service in approximately seventy-six (76) cities, within
fourteen (14) states, including: Alabama, Arizona, Colorado, Florida, Iowa, Minnesota,
Missouri, Nebraska, Nevada, North Carolina, Oregon, Utah, Washington and Wisconsin.
Currently, CenturyLink provides its Prism service to approximate69,000 customers.
In May 2015, we interviewed seven (7) cities in four (4) states where CenturyLink
provides its Prism service in order to ascertain the following:
1.The nature and quality of the relationship between CenturyLink a
2.Whether CenturyLink worked well with the city in resolving cable
problems;
3.Whether subscribers appear to be satisfied with the services the
CenturyLink; and
4.The extent that CenturyLink supports public, educational and governmental
access programming.
The city official from each community listed below was contacted and asked the
following questions. A summary of the interviews is provided below.
Gulf Shores, AL Mike Holly, IT Director
Glendale, AZ Mark Gibson, Construction Engineering Manager
Colorado Springs, CO Kathy Lake, Information Technology
Denver, CO Julie Martinez, Director Media Services
Eagle, CO Jon Stavney, Town Manager
Omaha, NE Buster Brown, City Clerk
Papillion, NE Eliza Butler, City Clerk and Karla Rupiper, City Attorney
SUMMARY OF INTERVIEWS
1. Approximately when (month/year) did your City award CenturyLink
franchise?
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2. What percentage of the City (approximately) did CenturyLink firs
service to?
3. Has CenturyLink expanded its service area to provide cable servi
subscribers since the grant of the franchise?
4. Does the CenturyLink franchise require complete build out or a c
percentage of build out within a set period of time?
5. What percentage of the City may be unable to subscribe to cable
CenturyLink?
6. Have there been any amendments to the Franchise granted to CenturyLink? If
so, what was the reason for the franchise amendment?
7. Is there a local office for CenturyLink in your city? If not, how far away is the
nearest CenturyLink office?
8. Does the City have public, educational and governmental access c
yes, how many?
9. ccess channels available on its cable
system?
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10. Did the City have to spend any money on equipment or facilities
channels available to CenturyLink?
11. Have there been any issues or concerns with the manner in which
are cablecast by CenturyLink? Are there any differences in the way subscribers obtain
incumbent operator?
12. Does CenturyLink provide PEG financial support? If yes, how muc
13. Does CenturyLink provide any other type of PEG financial support such as
upfront grants, in-kind services, particular equipment, etc.?
14. If so,
what types of complaints are most often reported to the City?
15. Does the City receive any complaints about the construction of t
cable plant in the right-of-way or placement of above ground cable facilities in the right-
of-way?
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16. Does CenturyLink satisfactorily resolve subscriber complaints?
17. Does CenturyLink pay its franchise fees to the City on time? An
regarding franchise fee payments by CenturyLink?
18.
specific problems or concerns?
19. Do you think the City would seek to require any different franch
the City?
20. Any other issues, concerns or compliments you would like to offeg
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FINANCIAL QUALIFICATIONS
I.SCOPE OF REVIEW
Qwest Broadband Services, Inc. d/b/a CenturyLink,
an applicant for a competitive cable franchise agreement (herein
City
corporation, indirectly wholly owns QBSI. QBSI operates cable television systems that
approval of a competitive cable franchise agreement. At the req
& Barnett has reviewed selected financial information that was provided by QBSI and
CenturyLink or publicly available to assess the financial qualif
and operate a competitive cable franchise.
The financial information that was provided or available throughrces
and to which our review has been limited, consists solely of the
1.Application of Qwest Broadband Services, Inc. d/b/a CenturyLink
Competitive Cable Franchise dated December 2, 2015, along with such other
2.Form 10-K for CenturyLink, Inc. filed with the Securities and Exchange
Commission on February 24, 2015, for the fiscal year ended December 31, 2014;
3.Form 10-Q for CenturyLink, Inc. filed with the Securities and Exchange
Commission on November 5, 2015 for the nine-month period ended
September 30, 2015;
4.The audited financial statements of CenturyLink, Inc. and subsid
of December 31, 2014 and 2013, including Consolidated Balance Sheets as of
December 31, 2014 and 2013, Consolidated Statements of Operations,
Comprehensive (Loss) Income, Cash Flows and Stockholder Equity f
ended December 31, 2014, 2013 and 2012, and the Independent
Report of KPMG LLP dated February 24, 2015; and
5.Such other information as we requested and that was provided by
and CenturyLink relating to the Application.
Our procedure is limited to providing a summary of our analysis
QBSI to operate a cable system in the City.
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II.OVERVIEW OF QWEST BROADBAND SERVICES, INC.
Since 2008, Qwest Broadband Services, Inc., a Delaware corporati
providing cable video services and currently provides full video se
7
8 markets in the United States, including in the States of Arizona,
8
Colorado, Florida, Nebraska, Nevada, and North Carolina. QBSI began providing the
Prism platform services to customer in the City of Minneapolis, Minnesota on June 1,
9
2015.
including broadband, hosting and colocation, VoIP, Ethernet, Int
voice services to residential and commercial customers in various
10
States. QBSI was formed on May 10, 1999 and is a wholly owned subsidiary
CenturyTel Broadband Services LLC, a Delaware limited liability
11
wholly owned by CenturyLink, Inc. As of the date of the Application, QBSI passed
approximately 2.6 million potential customers and served approximately 258,000 cable
12
customers. CenturyLink employs approximately 3,000 employees in Minnesota w
about 200 of the
13
14
experience in the cable industry.
Cable providers and telecommunication companies operate in a com
environment and the financial performance of cable television op
subject to many factors, including, but not limited to, the gene
programing costs, incumbent operators, digital broadcast satellihnology
advancements, changes in consumer behavior, regulatory requireme
costs, and customer preferences, as well as competition from mul
provide and distribute programming, information, news, entertain
15
telecommunication services. QBSI has a limited operating history and is dependent
16
upon CenturyLink for all of its funding and the financing of its The cable
business is inherently capital intensive, requiring capital for
maintenance of its communications systems. Each of these factors
significant financial impact on QBSI and its ability to operate
7
Application at p. 14.
8
Application Exhibit D.
9
Id.
10
Form 10-K for CenturyLink, Inc. filed with the Securities and Exchange C
-
11
Application Exhibit E.
12
Application at p.14.
13
Application at p. 1.
14
Application at pp. 14-16.
15
Form 10-K at pp. 17-27.
16
Application at p. 17.
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III.FINDINGS
Based upon the above information, we have analyzed the historicaatements
QBSI. QBSI declined to provide us with its stand-alone financial statements or
projected financial information for its future operations and thrate
17
declined to provide that information to us. With respect to our request for projected
financial information, QBSI state-looking information at
the individual market level because it could lead to incorrect o
18
ments
do not separately provide the financial information for QBSI.
storical
financial information.
1.Analysis of Financial Statements.
Federal law and FCC regulations provide franchising authorities, such as the City,
with limited guidance concerning the evaluation of the financial
an applicant for a cable franchise. In evaluating the financial
cable operator, we believe it is appropriate to consider the performance of an
budgeted financial information along with its financial capabili
and financing its entire operation). We were not provided with this information
information may provide some insight into the general financial
CenturyLink with respect to the Application, but we note that th
19
unanswer
television video services and non-cable television services. According to
customers represent a small portion
20
The CenturyLink financial information
discussed below includes all of the CenturyLink operations, incl-
Financial
Statements as of September 30, 2015 and as of December 31, 2014 and 2013 in
providing the information in this Section.
17
Correspondence to the author from Patrick Haggerty, Director of State Regulatory and Legislative
Affairs, received on December 18, 2015
18
19
Correspondence at pp. 1-2.
20
Form 10-Q for CenturyLink, Inc. filed with the Securities and Exchange CNovember 5,
2015 for the nine month period ending September 30-5.
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2.Specific Financial Statement Data and Analysis.
a.. CenturyLink had (i) current assets of $3,350 million,
$3,576 million, and $3,907 million; (ii) working capital of a ne
$2,197 million, a negative $342 million, and a negative $502 million; a
(iii) total assets of $48,754 million, $50,147 million, and $51,787 million as
21
of September 30, 2015 and December 31, 2014 and 2013, respectively.
Working capital, which is the excess of current assets over curr
liabilities, is a short-term analytical tool used to assess the ability of a
particular entity to meet its current financial obligations in the ordinary
course of business. The working capital trend shows a significant increase
in the negative working capital from December 31, 2014 to September 30,
2015, largely due to the increase in the current portion of long-term debt.
This suggests that CenturyLink needs to obtain debt or equity fi
support its short-term debt obligations.
(current assets divided by current liabilities) as of September 30, 2015, of
0.60/1.0 is well below the generally recognized standard of 1:1 for a
22
sustainable business operation. As of September 30, 2015, CenturyLink
23
had $355 million of cash on its balance sheet. As noted above, QBSI did
not provide us with any budget of cash flow or cost with respect
ex
needs. As such, it is difficult to predict what amount of free
in which QBSI is rolling out its video service). We also note that
approximately fifty-six percent (56
24
comprised of its intangible Goodwill.
b.
liabilities of $5,547 million, $3,918 million and $4,409 million; (ii) long-
term debt of $18,504 million, $20,121 million and $20,181 million; and
(iii) deferred obligations of $10,453 million, $11,085 million and $10,006
million as of September 30, 2015 and December 31, 2014 and 2013,
25
respectively. According to CenturyLink, it has $2 billion available on its
revolving credit facility as of September 30, 2015 (which matures on
26
December 31, 2019).
and negative covenants that if violated, could result in a cascade of
defaults under its debt obligations and immediate cash and/or financing
27
needs. According to the Financial Statements, CenturyLink is not in
21
Form 10-K at p. 69 and Form 10-Q at p. 5.
22
Form 10-Q at p.5.
23
Form 10-Q at p. 30.
24
Form 10-Q at p. 5.
25
Form 10-K at p. 69 and Form 10-Q at p. 5.
26
Form 10-Q at p. 40.
27
.
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28
default of these requirements at the current time. CenturyLink has
approximately $2.9 billion of debt maturing in the next 3 years which, if
not paid or refinanced, could have a significant impact on the financial
29
viability of CenturyLink. Any additional debt, including by drawing on its
available revolving credit facility, will require CenturyLink to generate
additional cash flow, including through its operations, to fund
service. In order to bring the video system online in the City,
that no additional financing is needed and the QBSI operation wi
30
funded with
c.
report (i) revenue of $4,554 million, $18,031 million and $18,095 million;
(ii) operating expenses of $3,898 million, $15,621 million and $16,642
million; and (iii) net income (loss) of $205 million, $772 million and ($239)
million for the nine-month period ending September 30, 2015 and the
31
years ending December 31, 2014 and 2013, respectively. CenturyLink is
32
reporting net income in 2015 and 2014. The ability to generate cash is
important for CenturyLink due to its leveraged operations. With
expenditures for the assimilation of its video services into its
platform along with additional programing costs to obtain and maintain its
programming in the future. Over the last 3 years, CenturyLink h
able to generate cash flow from operations to cover its investin
33
financing activities.
IV.SUMMARY
We are not aware of any state or federal standards by which to assess the financial
qualifications of a competitive cable operator seeking an initia
The FCC has provided a minimal standard to consider when assessi
of a prospective transferee when a cable system is sold or control of the franchise
changes. This FCC financial qualification standard is found in
FCC Form 394 to establish an absolute minimum standard of financ
a proposed applicant must demonstrate in order to be qualified to obtain and operate a
obtain and operate the system in the City, together with its existing operations, for
three (3) months. This minimum standard is not easy to apply to
aggressive growth mode and expanding its operations.
28
Form 10-Q at p. 11.
29
Form 10-Q at p. 58.
30
Correspondence at p. 1.
31
Form 10-K at p. 68 and Form 10-Q at p. 3.
32
33
Form 10-K at p. 70 and Form 10-Q at p. 6.
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t entity) financial information that
we reviewed, CenturyLink appears to have sufficient funding to f
bring its cable system online in the City. Based on the foregoi
the financial information analyzed in conducting this review, we do not believe that
reasonably be denied based solely on a lack of financial qualifi
CenturyLink. Due to the many uncertainties and lack of information regarding the
proposed funding and future operations, there is not enough info
made available to make any conclusions regarding the financial q
operate a system serving the City. The determination as stated above is based solely
upon the CenturyLink Financial Statements.
In the event the City elects to proceed with approving the issua
,
qualifications should not be construed in any way to constitute
financial capability or stability of QBSI or CenturyLink to (i) operate under a competitive
Franchise Agreement, and (ii) operate its other operations. The sufficiency of the
qualifications and its capability to operate a competitive syste
responsibility of the City. Consequently, we make no representae
sufficiency of the procedures used either for the purpose for wh
financial capabilities and qualifications was requested or for a
Lastly, in order to ensure compliance with its obligations to opin
Statements, the parent entity, the City may seek to require a co
as part of issuing a competitive Franchise Agreement to QBSI in n
Exhibit E or as otherwise mutually agreeable to QBSI and the City.
In the alternative to
requiring a corporate parent guaranty, the City may seek to require adequate financial
security by imposing a construction bond/performance bond and security fund obligation
to ensure that QBSI has access to financial resources necessary to meet the
requirements of any franchise granted.
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RECOMMENDATIONS
Based on our review of CenturyLink, technical and financial qualifications, we
believe that the City cannot reasonably withhold approval of CenturyLink
cable communications franchise. We recommend the City consider adoption of the
attached resolution which will establish findings of fact regardCenturyLink
qualifications.
If the City adopts the resolution attached as Exhibit F, the City will then be in a position
to consider the grant of a franchise to CenturyLink at a future City Council meeting,
assuming mutually acceptable franchise terms can be reached with CenturyLink.
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EXHIBIT A
ENTITY DETAILS FROM THE
DELAWARE DIVISION OF CORPORATIONS
A-1
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EXHIBIT B
MINNESOTA SECRETARY OF STATE BUSINESS RECORD DETAILS
-
B1
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EXHIBIT C
MINNESOTA SECRETARY OF STATE
UCC/TAX LIEN FILING RECORD SEARCH AND JUDGMENT RECORD
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EXHIBIT D
PACER CASE LOCATOR SUMMARY
AND THE ACTIVE CASE SUMMARY
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EXHIBIT E
CORPORATE PARENT GUARANTY
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CORPORATE PARENT GUARANTY
THIS AGREEMENT is made this _____ day of __________, 2016
Fridley, Minnesota
WITNESSETH
WHEREAS, on __________________, 20__ the Franchising Authority adopted
Ordinance No. _____________ granting a Competitive Cable Televi
granted the rights to own, operate, and maintain a competitive cable televis
WHEREAS, pursuant to Resolution No. ______________, dated ________________,
2016, Franchising Authority conditioned its consent to the issuance mpetitive
Cable Franchise Agreement on the issuance by Guarantor of a corp
guaranty guaranteeing certain obligations of the Company under t
WHEREAS, the Company is indirectly wholly owned by Guarantor, as the pa
of a consolidated group which includes the Company.
NOW, THEREFORE, in consideration of the foregoing premises and for other good
valuable consideration, the receipt and sufficiency of which are
in consideration of the approval of the issuance of a Competitive Cable Franchise
Agreement, Guarantor hereby unconditionally and irrevocably agre
financial resources necessary for the observance, fulfillment an
obligations of the Company under the Franchise and also to be legally liable for
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performance of said obligations in case of default by or revocat
default of the Franchise.
This Agreement, unless terminated, substituted, or canceled, as
remain in full force and effect for the duration of the term of the Franchise.
Upon substitution of another Guarantor reasonably satisfactory t
Authority, this Agreement may be terminated, substituted, or can
days prior written notice from Guarantor to the Franchising Authority and the Company.
Such termination shall not affect liability incurred or accrued
to the effective date of such termination or cancellation.
GUARANTOR:
CenturyLink, Inc.
By:
Its:
STATE OF )
) ss.
COUNTY OF )
The foregoing instrument was subscribed and sworn to before me t_____ day
of _______________, 20___, by ______________________________, the
____________________ of ________________________________________.
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EXHIBIT F
PROPOSED RESOLUTION
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CITY OF FRIDLEY, MINNESOTA
RESOLUTION NO. __________
Regarding Findings of Fact with Respect to the Proposal of
Qwest Broadband Services, Inc. d/b/a CenturyLink, Inc.
for a Cable Communications Franchise
RECITALS:
1.Qwest Broadband Services, Inc.,
requested that the City of Fridley, Minnesota City commence proceedings to
consider the award of a cable communic
ations franchise to CenturyLink.
2.Minnesota Statutes Section 238.08(a) mandates that a city require a franchise
for any cable communication system providing service within the city.
3.Federal law at 47 U.S.C. Section
4.The City retained the law firm of Moss & Barnett, a Professional, to
assist the City in conducting the procedure required under Minne
Section 238.081 and reviewing any applications submitted to the City.
5.The City followed the franchise procedure required by Minnesota
Section 238.081 by publishing once each week (November 6 and November 13,
2015) for two successive weeks in the Fridley Sun Focus a Notice of Intent to
Franchise a Cable Communications System.
6.The Notice stated all eight (8) criteria outlined in Minnesota Statutes Section
238.081, Subd. 2.
7.In addition to the published Notice, the City provided copies of the Notice of
Intent and the Official Application Form to CenturyLink
cable operator, Comcast of Arkansas/Florida/Louisiana/Minnesota/Mississippi/
Tennessee, Inc. .
8.
communications franchise contain responses to each of the items
Minnesota Statute Section 238.081, Subd. 4.
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9.f applications was set for December 2,
2015 which complied with the statutory minimum of twenty (20) days from the
date of first publication.
10.Upon the deadline for submitting applications, December 2, 2015, the City
received only one (1) application, from CenturyLink.
11.The City Council determined to call a Public Hearing to consider
received from CenturyLink at its regularly scheduled December 28, 2015
meeting.
12.All interested parties were provided an opportunity to speak to the City Council
and to present information regarding this matter.
13.The City carefully reviewed all information and documentation pr
regarding CenturyLink
communications system within the City.
14.Based on information and documentation made available to the Citand the
report dated January 18, 2016 prepared by Moss & Barnett with respect to
CenturyLink
CenturyLinkand financial qualifications.
NOW THEREFORE, the City of Fridley, Minnesota hereby resolves as follows:
1.The City hereby finds that CenturyLinkDecember 2, 2015
complies with the requirements of Minnesota Statute Section 238.081.
2.The City finds that CenturyLink possesses the requisite legal, technical and
financial qualifications to operate a cable communications syste
3.City staff is authorized to negotiate with CenturyLink to attemp
mutually acceptable terms for a cable television franchise to be introduced to the
City Council for consideration and action.
4.The City finds that its actions are appropriate and reasonable i
mandates contained in Chapter 238 of Minnesota Statutes and appl
provisions of federal law including 47 U.S.C. Section 541(a).
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PASSED AND ADOPTED this _____ day of _______________, 2016.
CITY OF FRIDLEY, MINNESOTA
By:
Its:
ATTEST:
Its:
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