RES 2005-16 - 00013369RESOLUTION 2005 -16
RESOLUTION OF THE CITY OF FRIDLEY, MINNESOTA, DENYING RENEWAL OF
TIME WARNER, INC.'S CABLE TELEVISION FRANCHISE
RECITALS
1. The City of Fridley, Minnesota ( "City ") is duly authorized under state and federal
law to permit the provision of cable television services within its jurisdiction through the
issuance of a franchise for that purpose.
2. In the past, Time Warner, Inc., d /b /a Time Warner Cable ( "TWC "), or its
immediate authorized predecessors, has held a franchise for the purpose of providing cable
television services to residents of the City.
3. TWC is presently operating under a franchise granted by Ordinance No. 904
passed and adopted by the City on May 2, 1988 (the "Franchise ").
4. The term of the Franchise expired on or about May 16, 2003.
5. The Federal Cable Act establishes a process that a cable operator holding a valid
franchise may invoke for cable franchise renewals. If the process is invoked, the operator and
the City must follow the federal procedures. These "formal" procedures give the cable operator
the opportunity for a fair hearing on its renewal proposal. At the same time, the procedures
insure that the City can deny renewal if an operator has performed poorly in the past, or is not
qualified, or is not willing make a reasonable proposal to meet the community's needs and
interests for the future. Under the formal process, the City is given broad authority to define what
the needs and interests of the community are. It is then up to the franchise holder to submit a
proposal that is reasonable to meet the community's cable - related needs and interests, taking into
account the costs of meeting those needs and interests.
6. The formal renewal process under the Cable Act is a four -stage process. In the
first stage, the City must conduct a proceeding to identify future, cable - related needs and
interests of the community, and to review the past performance of the cable operator serving the
community. Once that proceeding is complete, the City may issue a request for formal renewal
proposals. In the third stage of the renewal process, the cable operator submits a renewal
proposal in response to the City's request for formal renewal proposals. If an operator submits a
timely and proper response, the City has four months to evaluate the proposal, and decide
whether to grant renewal based on the proposal, or to preliminarily deny renewal.
7. If renewal is preliminarily denied, and the cable operator requests it, the City must
commence an administrative proceeding. The four issues that are considered at that
administrative proceeding are whether: 1) the cable operator has substantially complied with the
material terms of the existing franchise and with applicable law; 2) the quality of the operator's
service, including signal quality, response to consumer complaints, and billing practices, but
without regard to the mix or quality of cable services or other services provided over the system,
Resolution No. 2005 -16 Page 2
has been reasonable in light of community needs; 3) the operator has the financial, legal, and
technical ability to provide the services, facilities, and equipment as set forth in the operator's
proposal; and 4) the operator's proposal is reasonable to meet the future cable - related
community needs and interests, taking into account the cost of meeting such needs and interests.
8. At completion of such an administrative proceeding, the City must issue a written
decision either granting or denying the operator's renewal proposal. A final decision by the City
to deny renewal may be based on an adverse finding on one or more of the issues specified in
recital #7 above.
9. The operator may appeal a final decision by the City to deny renewal in state or
federal court.
10. By letter dated November 18, 2003, following nearly three (3) years of informal
renewal negotiations, TWC requested that the parties proceed with renewal under the "formal"
process of the Cable Act pursuant to 47 U.S. C. § 546(a) -(g).
11. Based upon TWC's insistence on the formal renewal process, on August 16, 2004
the City Council concluded the two first stages of the formal renewal process when it adopted the
Formal Needs Assessment Report ( "Report"), and issued a Request for Formal Renewal
Proposal for a Cable Franchise ( "RFRP "), inviting TWC to submit a proposal describing the
cable - related facilities, equipment, and services that it would provide in Fridley over the term of
a new franchise. The Report and RFRP identified the cable - related needs and interests of the
City and also contained a Model Franchise for meeting certain of those needs and interests. The
RFRP required TWC to submit a response by November 30, 2004.
12. On November 30, 2004, TWC submitted to the City a Formal Proposal for
Renewal of Cable Television Franchise (the "Proposal ").
13. Pursuant to the Cable Act, the City must, by March 30, 2005, either renew the
Franchise under the terms of the Proposal or issue a preliminary assessment that the Franchise
should not be renewed.
14. Under the Cable Act, the City is not required to detail the grounds for its
preliminary decision. As a result, this Resolution does not list in detail all of the shortcomings of
TWC's Proposal nor any problems associated with TWC's past performance. Rather, it explains
some of the reasons why it is appropriate to preliminarily deny the Proposal. Given the statutory
deadline of March 30, 2005 and the City Council's meeting schedule, the City's only choice at
this point is to either accept TWC's Proposal as submitted or to issue a preliminary denial of
renewal.
15. The grounds for preliminary assessment of denial are as follows:
a. TWC's proposed language related to gross revenues seeks to change the
current status of defining "gross revenues" in a manner likely to reduce revenues to the
City by modifying the manner in which bad debt can be written off, as well as by
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Page 3
modification of the manner in which revenues are defined so as to potentially exclude
cable - related services that may expand in the future. TWC's proposed language also fails
to protect the City from any potential revenue losses that may be generated by product
bundling with services not currently provided for under the Franchise.
b. TWC proposes to change the existing performance bond and security fund
language in the Franchise, as well as to limit its access costs under the City's Right of
Way ordinance. TWC's proposed security language would create an unfair additional
financial risk to the City. TWC's Proposal right -of -way provisions would impose unfair
costs to the taxpayers, including those that are not customers of TWC, subsidizing
TWC's operations in the City.
C. TWC's Proposal fails to meet the requirement that the Grantee supply the
City with maps of its facilities within the City, which is of great importance to assure the
City, TWC and the public that there would be no disruption of service or costly repairs
necessitated by the disruption of those facilities or equipment when work is occurring
within the public right -of -way.
d. TWC's Proposal does not provide for the long -term construction, upgrade
or even maintenance of an adequate, much less state -of -the -art, institutional network,
which has been and continues to be a critical component of educational and local
governmental communications within the City.
e. TWC's Proposal inadequately addresses the stated need for public,
educational and governmental access capacity and support within the City. TWC's
Proposal offers an equipment grant that is nearly one quarter million dollars below the
determined need of the City. TWC's Proposal eliminates entirely TWC's current
obligations regarding the provision of public access for use by residents and subscribers
in Fridley.
f. TWC's Proposal would radically change the current local origination and
public access practices by shifting the entire cost, staffing, and a most of the equipment
component, to the City.
g. TWC proposes reducing the current four (4) PEG access channels
provided to the City to three (3) channels, despite the fact that the City has determined
the fourth channel is needed for use by public entities.
h. TWC's Proposal is for a ten (10) year franchise with a five (5) year,
automatic renewal if the system is "state -of -the -art." The transitional nature of
technology in this area makes anything beyond the City's ten (10) year term inadequate
and against the City's interest. TWC's proposal also completely ignores the right of the
City to base renewal of TWC's Franchise in ten (10) years on the then existing needs and
interests of the City, instead mandating an automatic renewal based solely on whether the
cable system is "state -of -the -art."
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i. TWC proposes to eliminate the current emergency system override that
public safety officials in the City have stated is a necessary public safety tool.
j. TWC's Proposal would require the City to abandon its current role as the
protector of consumers within the City. TWC contends that it should only have to follow
FCC standards, but those FCC standards expressly authorize the role of the City as the
guardians of their citizens' interests as consumers.
k. TWC's Proposal includes a provision that limits the ability of the City to
grant a second cable franchise to a potential competitor by requiring the City to adopt
"level playing field" language that is substantially more restrictive than that the City is
obligated to comply with under existing state law and would create barriers to
competition from other providers.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Fridley as follows:
1. Each and every recital set forth above is hereby incorporated as a finding and resolution
of the City.
2. By passage of this resolution, the City issues a preliminary assessment that the cable
franchise issued by Ordinance No. 904 should not be renewed.
PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF FRIDLEY THIS
14TH DAY OF MARCH, 2005.
,X�jo�k —
SCOTT fLUND — MAYOR
ATTEST:
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DEBRA A. SKOGE — CITY CLERK