HomeMy WebLinkAbout0106.095\
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TO! HONORABLE CITY COUNCIL
FROM: CITY MANAGER
AGENDA
DATE: January 17. 1995
DEPARTMENT: III/FORMATION
RESOURCES
CMR:I06:9S
SlJBJECT: REQUES'I FROM CABLE COMMl!l'I'lCATIONS COOPERATIVE OF
PALO ALTO, INC. (CABLE CO-Op) FOR A PUBLIC HEARING ON
TIlE APPROVAL OR DISAPPROVAL OF THE TCIJCABLE co-oP
AGREL'>1ENT
RFQUEST
Cable Co-op has petitioned the City by letter <see Attachmer.l A) foe ils approval ol an
agreement with Tel Cablevisioo of Californ1. Inc. (TCI). ulKkr which Cable C.o-op will
Jl"rlkip.te in. • major project 10 connect most of the cable systems in. scveB of the bay area
counCies via • fiber <>ptic ring. Coble. Orop wil1 benefit from the construction of the fibe<
9jltic ring. Cable Co-op will OWIl jls poction of the ring in !he franchised areas and lease
it back lO TCI by granting TCI an irrevocable li<:ense to "se and • security interest in. that
portion of !he ring. The Amended and Modified Franchise Agreemeru requires Cob~ Co-op
10 obtain Council app<oval of any assignment oc transfer of interest in Il-.e cable system.
Staff, lherefoce. requeSls chat !he City Council schedule a public hearing on I!le petition in
accotdance with !he terms of the Franchise Agreemen; and direct staff to compile supporting
information in order that Coonol may rev;e.... and evaluate the petition and staff
recommendation.
RECOMMENDATIONS
Staff recommends that City Council talce action on such petition by setting a public hearing
on Februa.-y 6, 1m. foe the purpose of &\ermining whetf1er it shan grant its consent lO
Coble Co-op's assignmenll<> Tel of an irrevOC1ible Ii<:ense 10 use and I securily interest in
• portioo of the fiber optic ring being construcred by Tel and 0 .. ,000 by Coble Co-op.
POliCy IMPYCATlQNS
The first polk:)' issue is wbether a thlrd party like TCI should be penniUed to take •
property interest in the cable !elevision system owned and operated by Cable Co-op. The
granting lO TCf extraterritorial cable television operator of an irrevocable &ense I<> use and
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(2)
Ihe securn, interest i~ the fiber <J!>lk ring portiOlI OWll<'d by Cable Co-op coostilUte.long-.
term yalUBble property in!e",s\s in the franchised cable television .ystem. The security
i<>laest is an imputed linarocing device, bec.luse Cable Co-op is permitted 10 obtain t1!e
CO<ISlruC6on. insWlatioo, maintenance, a"d o .. 'nership oI"the fiber and an inrerducl (conduit)
withoot paying.for such costs.
The City's rigblll Dnder the Franchise Agreement are di"'cd)' affected by Ibis agree.."'lellt.
Under Section 14.1 01 the Franchise Agreement, any assignment. transfer, pledge,
III(l(!gage, or interest i. the franchised Cable TV system witllout the Council'. approval is
nuD .. ..s Void .
. The second policy issue ;. whether the financing arr. ngement under the TCI/Cable Co-op
agreement may be permissible in the absence of an amendment \(J the Franchise Agreement.
Beca;rse the finaJ1cing meL'>od SCI forth in the TeliCable Co-op agreement is IlOl expressly
contemplated i. Appendix J and secLons 2.S.08 and 14, the Franchlse Agreement may have
10 be amended 10 perm;t Tel 10 take such interest in Cable Co-op'. system.
The \bird pollcJ hsue is whether Cable Co-op sbouM be permitted 10 delegate its system
maintenance obligations 10 a thire! party like TCI. Under the TClICable Co-op igreement,
TCI is given fro<: primary respor.sibility for mainrai ni ng the new fiber_Inasmuch as several
proYisions of the Franchise A~,eement impo<e the maintenance obIiga!ion on Cable Co-op.
llrere is some questioo as 10 whetlr.". Cable Co-op can validly transfer its primary
maintenance obligations 10 a third party like TCI, even if TCI is characterized as aD agen!
of Cable Co-op.
EXECUI'IyE S1!MM.4.RY
0. August 5, 1994, Cable Co-op entered into an agreement "itlr TCI 10 construct. fiber
optlc ring and interducl through their cable franchise service area at 00 cost 10 Cable Co-op.
Cable Co-op will own it! portion of the fiber optlc ring and lease it back I<> TCI. As
compensatioo, Tel will be permitled 10 ~se 96 .!rands of the fiber optic ring. Cable Co-op
will ow. and have sole use of aD interduct {empty conduit) being built !!long the path of the
fiber <J!>lk ring and have .;:uoranteed access 10 programming over the fiber op6c cable al
favorable rates. TCI req"ested ali in'evocable license and security interest in the construc!ed
fiber optic cable.
On Augu&l 31, 1994, staff shared with Cab!o Co-op an internal memo which outlined •
number of roucems with the agreement. Staff fell t1rat the TellC,ble Co-op agreement
would h""ela be presented 10 the Cily Council foe awuval as outlined in Section 14 of the
he·JoU
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Franchise Ap-eement. C:.ble Co-op referred !he !etler 10 its legal coonsel. Coole, Godword.
roc review and !he. began the permitting and construction process with the City •.
o. 1an~ 9. 1995. Coble C<H>p petitioned the City 10 begin the _PPrOVaJ process u set
fonh in Section [4 oflhe Franchise Agreernenl. On Decernber 30. 1994. Public Worb
sWf issued a cum: nt statu. of the permit review oflhe fiber optic conduit installation and
listed !he remaining documents needed foc final review of Ihe permit •
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At Ihe Fd>ruary 6. I m public hearing, staff will provide r~omme ndations 10 the City
C(Jun.."il regarding this request.
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If!he TClICoble Co-op .greerne",;' not approved, TCI will be requLred to request access
10 !he service :ma through the oonnal permitting process and rnay be required 10 pay the
applicable permanent ~ncroacbment fee s.
ENYJRONMENfAL ASSESSMENT
S!aff'1 ~ndation llIat a pubrlC bearing be held OD Cable Co-op'. petition does IKJ(
constitute a project under the California Environmental Quality Act. ,,00. therefore. DO
environmental assessment is required.
A'trACHME!I.TS
Attachment A: Petition of Approval of TCIiC.ble Co-op Agr""menl
. Attacbm::nt B:Sectioo 14 of the Amended ~d Modified Franchise Agreement
PREPARED BY: Di.nab Neff
DEPARTMENT HEAD REVIEW: ~~fIj
Direc'.o<. Infonnatioo Resources
CITY MANAGER AFFROY AL:
cc: Brad Anderson. General Manager, Coble Co-op
Jolin Kelley. President, Cable Co-op Board
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Bernard K. St~ojfty
Assistant city Manaqer
city of palo Alto
250 RAmilton Ave.
Palo Alto, CA 94301
Deax Kr. Stroj ny:
January 9, 1995
Please consider this letter as a petition pursuant to
sectIon 14 of our franchise tor approval of a security
interest by Tel C&blevision of California, Inc~ in a
limited amount of tiber optic cable built within our
fz-a.nchise area. The purpose of t.his tiber opt.ic ,cable. is
to allow Cable Co-op to participate in a series of fiber
optic rill9s encirc:ling the Bay area. Most cable systems
in seven area counties will be interco~~ected. Viacom and
TCI. as the area's two larqest cable operatc~s are leading
this project ..
In k,eepinq with the dictates of t.he Fraocbise Agree-ment"
Cable Co-OP vill own the portion of the fiber ring that
passes through the franchise area and viII lease the use
of that fiber back to Tel. The advantages to Cable Co-op
fr,om. this agreosaent are two-fold~ Fir-st., as cc-mper.satior"
to cable CO-OP. Tel vill simultaneously constru~t., at its
sole expense ... an interduct. (an ~lIlpty conduit) along the
path of the fibe~ cable to be owned by Cable Co-op for
Cable CO-OP's exclosive use. This will result in
considerable cost savinqs when Cable Co-op upgrades its
cable system in the future. In addition~ Cable Co-op will
be entitled to access video proqramminq transmitted via
the tiber ring at favorable rates. EVentually. mo~e than
ninety cbannels lItay be transported on these fiber rings
with improved .. interference free signal quality to-r
~ransmission of local broadcast stations. We see this as
increasing member satisfaction and a key to success in
ccmpetin9 with the latest generation of satellite dishes.
The Tel agreement is only for a fiber op~ic cable that
passes through tbe franchise area and associated
facilities. It does not place Tel in positIon to ever
offer any services to any home or business.. eKcept Cable
Co-op.
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The aqre~ent includes a security interest in fav~r or Tel
in the fiber optic ca~le installed by Tel and associ.te~
facilities. This security interest only becomes
significant if Cable CQ-OP ~s bankrupt .~ atte~ts tQ
liquidate its assets or Cable Co-op rejects the lic~nse
grant to 't'CI. If either event were to happen, 't'CI would
only have ownership rigbt. to • li.ited ~t of fiber
optic cable and a$sociated facilities. At no time and in
no event would 't'Cl Qbt&in any operating rights within the
franchise Area or have any ovner~ip or ~r&ting rights
to any aspect of Cable co-cp's system.
'l'llai<k you for your heLp in fa.cilitatinq this petiti"". We
look ~~rward to continuing to work vith you, the rest of
-City sta.'ff, and the. C~il to keep cable Co-OIl a
state-of-the-art cable system of Whicb we are a11.proud~
Please call me at 856-3553 ext. 3100 if you have any
questions.
ceo Ariel Calonne {Palo Alto}
Ron Andersen (Palo Alto)
. oi_nab lIeff (Palo Alto)
Glorla Young [Palo Alto)
Tony Klein (Cooley God>rardJ
Dale Bel>nett (Tel)
S inCAerely,
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Brad Anderson
CEO/Ge.neral Kana ter
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At tacbme.ct I
Seet!v~ l' of the Amendea and Modified Francbfse Agreement
mises, wbe,eby said receiver or trustee
or the Company. in sal~ capacity, assumes
all ob119ations and agrees to be bound
fully by each and e~ery provIsion of this
~estated Agreement.
1].3 Tbe notIce re~~ired by Section 13.1 hereof sball
a150 be provided if the Company receive$ notice that any of the
acts or event. specIfied ther~in arE perfo~ed by or reqsrding any
P4raon who bolds • C~~trolll~ Interest in the Company.
13.4 Nothi~ In this Section 13 shall te interpreted so
as t~ ~flict with tbe provisions of Appendix J to this Aqre-e.ment ..
SECTION 14 --RESTRICTIONS AGAINST !!i5JGHJmlT ANp OTHER
TPN1SFiRS
14.1 Except as provided in App6r.~ix J to this Agreement
and in the financial plan referred to in,Sec~lon 2~5~OS he-reof ar~
in this Section 1.~ Inclodinq any c~te~alons ~r modifications of
the lIIattera Sltt: f'orth therein, neither this Rastated AgreelDent, nor
any riqhts or Obl19ations of the Company pursuant to this Restated
Acjree.aent or in the System shall be assigned, t.ransferred, pledged ..
leased:, sublet, or :IIOrtqaged in any manner, in \lhole or in pert, to
any Person, nor shall title tb~r~to, either legal or equitable .. or
'-'illy right. or int~rest the.rein r pass to or vest in any Person., nor
sh.all any cbo.n'ife in Control of the Company occur. either lly act of
the Company, by operation of law, or otherwise,. without the. prIor
consent of the City CooneU. MY sUC"b action COllIpleted without tbe
pl'ior QO<Is.mt of the City ccuneil "hall be null and. void, provided
that, nothing berein shall restzict_the free transfer ot partner
ship interests or stock or the Company if £ucb transfers 40 not
cbant;le the Control of' ,the COIflpany, and no consent shall be requlre~
for sach transfers. In the event that the Company shall desire to
transfer or 8ssign the franchIse or any of the ~iqht& .. privileges l
or immunities cOntained therein. the City shall have the right of
first refusal to assume such trar.sfer or a5siq~~ent, on the same
terms and conditions proposed for such tran$fers~ provided such
option is e~erclsed within ninety (gO) days of receipt by the City
of, writ:ten notIce togetbe.r with the terms .r.r.d conditioru= in
SUfficient detail to enable the City tG exercise its reasonable
jlldgment with respec~ to this option ..
14.2 The Company shall promptly notify the City Manager
of any proposed action requiring the consent of the city Council
pursuant to Section 14.1 hereof, by submitting to the Cit.y Manaqer,
with a copy tr> t.he City Attorney, a petit.ion requesting the
approval of the City council. The petition shall f~lly describe
the proposed action and shall be accompanied tly a justificatior .. fer
the action end such_ additional supportIng information as the City
Council. the City Manaqe.r, or the Cit.y Attorney may require in
order to review and eva1uate the proposed action. Upon review of
the petition, the City Kar.ager shall submi1: the petition~ within
fifteen (IS} days from receipt of the petition, to-tbe city Council
together-with it recotD_mendation tor action on the petition~
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14.3 '!'he City council shall schedule a public hurl"9 Oil
the petition. .... ithin thirty (lO) days .tter receipt of the petition
for consent. and shall act on said petition vithin sixty (60) days
tbereafter. For the purpose of determining vhether it 5hall 9~ant
it. consent. the City Council may inquire into: (i) tl>:. qualifica
tion. of each Person involved in ~ny action des~ribed in Section
14.1 hereof. (If) all •• tters relevant ·to ... bether •• id Person yi11
adhere to all applicabl. provisions of this Frar~hise. and (iii)
all other relevant matters. The company shall provide-all
requested .a,istance to the City council In connection vith any
such Jnqulry end l as .approprI.te .. shall secure the cooperation. and
asslatanc. of all P~rsons Involvad in 5aid a~tion.
14.4 As • c:onditian to the qrantinq ar any consent
required by Section 14.1 hereof. the City Council may. (I) ~pon
a re •• on.able deterainotion that the co~pany did not execute this
Restat.d Aqreement gnder a qood f.ith belief that it would itself
carry out the obligations Of the Franchi.e pursuant to thb
Agreement, require the Company or any A~(iliote~ Person to pay to
the City part. or all of the profits earned or to be earned in
connection with., l.lpon the completion of, or liS a result cf, any of
the actions deSk'::ribed in Sec.tion 1.~ 1 he-reof with respect to any of
sa14 2.ct:lons whleb occur wit.'~.1n three (3) y.ara after the effective
date of t:hf.. Agreement, provided th~t saieS profits shall not
inclUde any te..ra.inat.!on paYlllent& »ade to a .Y'.teJI zanager or
operator. 1f any, pursuant to a written aqreeDent in existence as
of the date of Closinq. ond (ii) r.~Jire that eaCh Person Involve~
in any action described in Section 14.1 b~reof .hall execute an
aqr ..... ent. in a fora and contalninq such con4itlons as llay be
rea .. onal:lly specified by the Cit.y Cou.ncil, providing Ula-t. said
P~S9n assumes and agrees to be boUnd by all applicable provisIons
of this Restated Aqree~ent. The executIon of said a~reement by
sald: Person shall In DO way relieve the Company,. Qr any othe.F
transferor Involved in any action described in SectIon 14.1 hereof,
of its obli9ations ~4r.uant to this ~est&ted Agreement without the
consent of the city Cvunc:il.
14. S )/<>thing in this Section 14 sholl be deemed to
prohibit any asslqrunent, pledge.,. lease, &ublease" lIortgaqe" or
ot,}\;er transfer of all or any part of the Systelll" or any rIght or
interest tberein.,. tor financing ~rpcses, provided that each such
assignment, ple~e" lease" sublease, mortgAge, or other transfer
shall be (1) described in Appendix J to this Restated Agreement or
ot.herwise disclose to City as provided in Appendix -J; (it) set
forth i~ tbe financing plan referred to in Sections 2~5~OS IL~ 14
hereof, including: aoy extensions or modifications therein; and
(iii) Subject to the rights of the City pursuant to this Restated
A9reement or applicable law. Nothing in this Section 1C shall be
deemed to affect t.he right of the Company to lease Chan..~e.lst
portions of Channels., equipment, and other lIater-ials to other
per$ons~
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