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Home My WebLink About0133.095~ . • G) TO: nOM: .... ---;;..---,~ '.-. ' -"". ;"'- -" --~-.. : •. ~ -,.,' ~-:<, ,,', '.>J.-';"_'-.v· "," City of Palo Alto City Manager's Report ------------------------------ HONORABLE CITY COL'NClL CITY MANAGER AGENDA DATE: February 6, 1995 CMR: 133:95 PUBUC HEAlUNG TO APPROVE OR. DISAl'PROVE A SECU1UTY IN1EREST GR.ANTED BY CABLE COMML'NICA· TlONS COOPERA TlVE OF PALO ALTO, INC. TO TCI CABL& VISION OF CALIFORNIA, INC. On January 17. 1995. !he City Council approved Cable Co-op', petition (see CMR: 106:95) 10 sela pubic hearing 00 February 6, 1995, for !he pIIrpo5C of cfelermining whether it .hall gnnIlo Cable Co-op conseDl \0 an assignment 10 TCI of an irrevocable license 10 use, and • security interest in, • pcr1ioft of !he fiber optic ring being construcled by TCI and owned by Cable Co-op. REmMMENPATlQNS Slaff recommeDds ftlat (;11.)' Council granl its coment 1<> the irrevocable license to use and • se=it}' interest in, a portion of !he tiber optic ring \0 TCI subject \0 the following cooditioos : 1. The assignment provisions of !he TClfCable Co-op agreement .hall be modified \0 require Tello not cbarge any propose<J assignee of Coble Co-op • fee for acceptiil8 !he assignmelll of all righlS and obligations of Cable C<>-ep uDder me TClfOible Ce> op Agreemen!. 2. UDder the TClfCable Co-op agreement. TCI shall expressly agree ilia! it "ill not, directly or indirectly (ex""P! Ihrough Cable C<K>p), engage in providing CATV servkes in !he franchise service area without fin;t obW ning • CATV franchise from !he City acting 011 behalf of !he Joint Powers, unless it is the successoc and assign of Cable Co-op uDder !he franchise agreement. CIoIIlo 1}3:9S h&e I oU ~"='l~~I"""~~~--~C:--'-":~---""-,<,j;oI..""""'---'--'----.---,-~ "-' , :'-"---' '."""-i'.-. , . ,/,' -;; ~ \ l \ 3. Under the TClICable Co-op agroement. TO and Cable Co-op .hall jo<ndy and individually indemnify and bold harmless the City with respect I<> any liabiIily, loss <>< damage L-ising cut cf oc i1l conne<:oon with the coostru<:lioo, ope,...tion. lIl8intenance, repair, and removal 0( the fiber cpIk ring. 4. TO and Cable Co-op sball gnnt a,e Joint Powers, including the City, upon their request,. access I<> the portion 0( the tiber <>pIk ring owned by Cable Co-op and leased 10 TO at ""Y 6me in the future at no cbarge, a nominal charge ()C • 1T.ost favored customer charge as long as Cable Co-op or its successor. or assigns owns the fiber optic ring ",hick passes through the fraochise !Km'ke area. Under the terms 0( the Fram:hlse Agreement, eooncil must act upon Cable Co-q> 's petiCion withio slxIy days after the date 0( the bearing, cr by April 1, 1995. BACKGRmlND On August S, 1994, Cable Co-op entered into an agreement with TO, ~n6>..c w'Uch Tel is required '" construct • 96-strand fiber cpIk ring and &Ji interduct through the cable franchise service area at 110 cosl 10 Cable Co-q>. Tel bas leased 48 0( the 96 strands 10 TeG San Francisco Inc. (TCG), a competitive access p<ovider. Therefore, Cable Co-op will OW" the remaining 48 strands 0( the fiber optic ring. As compensation. TCI willie ... aD 48 strands cf the fiber cpIk ring cwned by Cable Co-op. Cable Co-op ,.,ru own and have sole usc of a sep.!1.te intmluct (ernpi)' conduit), which will be built along the path of the fiber optic ring. Cable Co-op iIso will be guaranteed a=s I<> programming at favorable rolCS by TO through the portion 0( the fiber cpIk ring leased by Tel. The fiber cpIk ring, which bas bee. completely constructe<!, travels from Redwood City 10 the oorI!I. thro>~sh Alhenoo (l'oscaIocu lo EI Camino. then <!oWl>. Fair Cab 10 Middle~ld), Menlo Park (along Middlefield}, and Palo Alto (Middlefield 10 Embarcadero, then 10 Alma) before entering Mountain V.ew 10 the south. A connection will be installed from Alma 10 the Cable Co-op headend on Park Boulevartl. The f.ber optic ring. measuring approximately 14 miles ill the franchise service area, is attached overhead (lashing 10 existing Cable Co-op cable) on utility poles, and W111 be conslrucled in the underground section 0( Middlefield in Palo Alto and on Park Boulevartl. On August 31, 1994, staff determined lIlat the irrevocable license and se.."UriIy interest in the fiber optic ring granted 10 Tel by Cable Co-op constituted the assignment or transfer of a right IX interest in the fnnchised cable system, wbk'h 'equired the consent 0( the C~ C<>unciI under Section 14 0( the Franchise Agreement. Soon thereafter, Cable Co-op sougbt "~ "'. . ' ~ . , ' -----:::,-"-'.-~ ~ '-'." hgelofl • ; ~" .. · .' ... , the appropriate regu1alo<y IpprovalJi from the City 10 connect unduground the fiber optic ring 10 It..: beade.'Id at Cable Co-<.p'. cable system facilities. The pennil bas not been issued, and Cable Co-<lp has lemporarily instaHed ov.rhead lines 10 tonne« the fiber <>ptie ring. Ultimately, an underground CO!IDWion 10 the headend will be: required. Thus, the fiber optic ring around the Bay ~..a is completed. Howe>'er, Cable C<Hlp's pla:li is not connected 10 it. . 00 Jan1lU)" 9,1995. Cable Co-<>p petitioned the City foe its consent 10 the =urn, in,terest, and on January 11, 1995, Council approved !he setting of. pu!>lie bearing on !he approval or disapproval of Ibe security interest foe February 6. 1995, by which lime staff is 10 address several issues and provide its recom"",ndaIion&. On Jinuary 24. 1995, staff mel with representatives of the kin! Powen from AtherIon, East Palo Allo. Menlo Pa.-t, San Mateo Count)' and Stanford 10 dISCUS' their roncerns about the TCJJCable Co-op relarioilship. Brad Andersoo and Larry Tye from Cable Co-op were present 10 field quesIions about the se<wilY inlereSl. which bas the following goals ill mind: I. The headeod of Cable C<Hlp and ocher headeods of other Cable operators in !he San Francisco Bay area will be interconnec!ed 10 permit the improved lransmissioll and recepIion of video programming. The typical 'over-the-air' inlUference .... ould be avoided by use of !he opIi<:al fiber. 2. In the future. Cahle Co-op will receive from TCI • variety of programming over the inlerconnectioo, including digitiud slgnals. thereby reducing ongoing headend capital expe...es while .ffooIing subscribers rugher quality signals at lower ccsts. 3. Callie Co-op woold be provided with an ex;ratemlorial 'highway' for voice and data communicatiol! servkes; only data communications servic<s ..... expressly covered by !he franchise agreement 4. & I fitsI ""'P in the upgrade of !he Cable franchise system, an ilItenlucl will be strong with the fiber optic cable to:-Cable C<Hlp'. use in the Mure. In answer IG the kin! Powers' concerns thaI the fiber <>ptie ring woold pernUl Tel 10 provide CATV services 10 the franchise area withoul obtaining & franchise, Mr. Anderson s!aled dial the fiber optic ring would pennil the lransmisskln and reception bat not the distribution of video sigr.ah in the franchise area. He further indicated thai the fiber optic ring bas beell IIctivated by using the existing Cable Co-op plant facilities, so thal the lransmission and reception. of video signals along the fiber <>ptie ring can now occur. Poae3ofl ·j" ~ •. .""'.-.'.j Ho"""""'", the ronnectioa 10 the Cable Co-op heade .... 1 will not be made. until the undergro'Jnd permit is issued. the conduit is laid and the fiber op6c cable is attached to it. Mr. An<!eIwn WIS asked .... hat options Cable Co-op had if the City Couocil did \lot approve the security interest. He stated !hat, if Tel would \lot agree 10 ",rminate its security interest by reaching agreement on an alternative soIutiof!. then TCI probably would rescind its agreeme1lt with Cable OHlp, and may enteT into • sale-leaseback arrangement w\th • COIIIpetitive access provider 5u<:h as TCG or Metropolitan Fiber Systems (MFS). The Joint POWer! recommended that the Cable Co-op request be appcoved. provided that (1) the rights and obligations of Cable Co-op under the TCllCable Co-op agreement are made binding on the successor of Cable Co-op. and TCI wiD DO( charge the successo< any fee 0< ccnside<a!ion fur the right 10 coolin"" """ of the coonectio.-. 10 the fiber op6c ring; (2) Cable Co-<lp ,ball remain the primary contact for customer service complaints, where the complain! can be attributed 10 the defective operation oc mainlena"ce of the fiber op6c ring. and shall be responsible fur ensuring \hat TCI fully maintains the fiber op6c ring; and (3) any additional fiber op6c cable in excess of the existing 96-strand fiber op6c cable and interducl shall not be attached 10 the existing cable in the pab!k: right-of-way. without the due DOIificaIioo. 10 and approval of cae" Joint Power .. """" lerrilory the fiber optic passes IhrousJt· POliCI IMPUC4TIOlSS The IpIlfIM! of the gran! of a security interest 10 TCI will cause • portion of the cable television system 10 be assumed by a party other Illan the cab;e operator. Cable Co-op. 10 the exleDl Cable Co-op', o"",""hip interest in the fiber optic ring can be coosidered an interest in the cable francItise television system. msrnssION I. fiber Qp!jc Ring as Part of the Cable S)'Stem SecIioo 14.1 of the Franchise Agreement requires Cable Co-op 10 obtain the City Council', appcoval of any assignment. !ran&fer. or lease of any risJtts in the cable television system. The term "system" is defined in sectiof! 1.48 of the Franchise Agreement 10 mean the broadband communications facility whicll is operaftd by Cable Co-op. The term . '.<" .. J ;'. , .. \~~i~.-',. , . -'.1 .. :·. ~. ,., " '. t .. , ~ ..... _-.r> , , - "broadband communica6ons facility·undo< sectioo 1.6 of !he franchise A&reement refers 10 a cable !)'Stem operating by means of coaxial cable and fiber optic ubIe u.<ed 10 r=lve IIIIf 10 distribute television signals 10 subscribers. Bee",'",!he fiber optic ring ,..;]l be the medium by wI!ich lelevision signals ,..;n be received onl J by Cable Co-<>p, .. 'Id Cable Co-<>p ,..;n 0WlI il$ portion of the fiber optic ring undo< the term. of the TCIICable Co-op agreement, !he fiber q>lk ring may be considered • po..<t of the able 1/:·1evision system OWDC<I by Cable Co-op. III sucll case, the security inJerest granted 10 Tel may be coosiderecI the grant of a right in the cable television system 10 Tel. JI the fiber opIie ring is coosidered an L,tegral part of the system, then Cable Co-op cannot be required 10 pay 10 ibe Cit)' any fee «her \han the franchise fee for the pri-roege of \ISing the fiber optic ring. Under the franchise Agreement, the City ca MOt charge Cable Co-op ."y fee foe the use of its property in the offering of CATV services in the cable service :areas. A:4y such fee would have 10 be mutually agreed 10 by Cable Co-op. However, TCI cannot physically cperate .... Qb\e operuor in the franchise ~ area, because the fiber optic ring ,..;n 001. be used 10 dislribUle the video signals 10 the cable ~ .rea subscribers. JI the fiber opIie ring cannot be considered an integral part of the system, then Cable Co-op'. m!ete&t in the fiber op6c ring must be coosidered 10 faIl ouWde the scope of the FI"2l1Chise Agreement III lllal case, it would be legally permissible fur !he Cit)' 10 col1ccI. from Cable Co-<>p a fee for the privilege of occupying the public right'of·w.y owned by the Cit)', even though Cable Co-op is the cable sYstem franchisee. The Cit)' is not prohibited by COirrent law from collecting fees fa.-the privilege of operating a lelccommanicafions fiber op6c cable fur purposes DOt associaJed with the cable television fraJIchise. Under Ibis view, Cable Co-op sbould be treated like any ()(her extraterritorial cable opentor ..,ho seeb the benefib of the public right-of-way for purposes not connecIed with !be operalion of a cable Iclevision system. To the exlen! !be fiber optic ring enables Cable Co-op 10 receive improved IcIevision signal qualit)' from extnderritocial sources, the ring takes on the characteristics of &II integral part of the system. The rights of TCI 10 use !he fiber vpIic ring are limi1ed ",ben those rights are viewed in dIe context of the CATV system, and the grant of .. seeuri!)' interest ift the fiber op6c ring 10 TC!: ,..;n no! result in the gran! of an ownersbip interest in Cable Co-op', CATV system. 2. PositHmina of TO H t Franchisee Nolbing under the Franchise Agreement prevent. TC!: from applying (ex a franchise within the ubIe service area. The OSlen5ible purpose of the TCllCab!e Co-<lp agreemeol is DOl 10 -, ... ;..\-" , . . , J'a&e S ofl .. . -"", " indirectly facililale TO'. role IS a.'1<lI!\ec cable servke area operator; rather, it i$ 10 enhance Tel', competi6v~ position IS • <:o-QWoer of !he Bay Area-wid< fibec optic ring. Approval ol the sccuriIy inIetest will DOt place Tel in • oupcrior position 10 purchase the cable franchise system, should Cab!.: Co-op 5ubsequendy determine to sen its franchise inIerest. Becanse the Cable Co-op franchise coold atU-act severV poIenlial cable opentors, Tel would III)( be iJl • superior pooition by virtue 0( its ~-<'UriIY interest to s .... .eessfuDy ""gOO ale Ihe right 10 ~ Cable Co-op IS Ihe cable servic" area franchisee. One should III)( ffi'erIook Ihe fact, however, Ibat Cable Co-op has had • long worldn, relationship wilh Tel, and Tel has 5hoWII inJecest in pun:basing Cable Co-op should it become available for saI.:. 3. Amendmeol to Franchise A"eement The security interest beld by TCI will secure TCI'. right to use Ibe fiber optic ring and III)( 10 se<:ure the repaymeol of a JiI>llllCial obligation 10 Cable Co-op. The ~le Co-op relaOOoship could be viewed, effectively, IS an imputed financing ammgemenl, 10 !he extent Cable Co-op will obIain Ihe inrerdUCI at "" cost in conoideration for ils &rant o(!be s=uil)' interest and Ihe Ii<:e_ 10 TCI. Because. strict infel»re1alioD ol the Franchise Asreemeol would aJnlemplate !hal ooIy security inleresls 10 secure !be repayment of Joens made 10 Cable Co-op shaII be expressly made a part ol Appendix J, and Ihe TCIICabte Co-op relBIionsbip does III)( cooremplale the repayment of any financial obligation, Ihe Franchlse AsreeIl1Clll is CO( required 10 be amencled 10 pennjt Tel 10 bold • aecurily interest in !he fiber optic ring owned by Cab!.: Co-op. 4. Main)e!lancC ObIjP6ons The Frar.cl!ise Agreell1<'nl conIains various provisioru which coolemplate thal only Cable Co-op will bear !be sole and primary responsibility foe operating and maintaining Ill. sysl<.m. To !he extent thallhe fibe~ optic ring can be considered. part of the system, !bell the sr,curity interest in TCI and the concomitant obligation of Tel 10 maintain !be system ,.,oold serve 10 dilute Cable Co-op'. responsibili~ uodec the Franchise Agreement. Such • condition is III)( necessarily • disadvantage, becau.<e TCI. IS the constructor o(!be ring, is in • bttier pooitioc 10 maimain !he ring 00 behalf of Cable 0Hlp. The coocet"II that Cable C<Hlp should III)( be permitted to delegate its obIigalion 10 maintain \he fiber optic ring can be dispe&d by Tel and Cable 0Hlp "nller lIl';r agreement 10 indemnify and bold harmless !he City for any liability, loss 0< damage occasioned by Tel'. maintenance oe failure 10 properly maintain \he portioo oflhe ~ optic ring lying .. ithln !be cable &erVice area, where such mainteIW>C" oe failure 10 oWntain may give rise 10 • claim by • subscriber. 1 · :,;, , t . -. ""->f- , 1 , ' .--0:, '. ,'.-. -"'" . fi If the oecuri!y interest gnnled 10 Tel is not approved, and, as a consequence, ownenhlp of the portion of the fiber optic ring reverts 10 Tel, then, in ordu 10 maintain !hat ring in the cable ~ area, TO would be required 10 obt";n the aprropriatc permits from eacI! of the Join! Powera and pay appropriate permitting fees and applicable encroachmelll fees 10 be as ... sed by any kina Powers member, or promptly remove the fiber optic ring from the jurisdicIions of the Join! Powers members. The obIigatioft 10 pay the fees would arise at the lime the TCIICable C<Klp agreemelll is tecminaled, Based on the S.2 miles (of !he IOta! of 9.6 miles) of fiber optic cable passing through the cable seMce area iJI Palo Alto, and an assumed minimallkense fee of $1.00 per linear foot per yeu, the estimaIed revenue could be $27,456 aMua1!y plus one-lime City ~ fees of $5000. Leasins or granting easements for te1ecommunicatiocs usc is a oew field. NG study bas been performed 10 dcftnnine the actual C<lS! of licensing public right-of-way space ('" lelecommanica!ioos uses. The City woold sur ley oIher local jurisdictions in the coo,"" of delermining the appropriate cl!atge. The oIhet Joint Powers mcmben, Athenon and Menlo ParIr. would independently cltarge fees, if anI, according 10 Ibeir OWll laws, rules and regulations. The irnpositioft of an encroaclunenl fee lIpOCI a cable operator which maintains persooal property in a CATV franchise area iA whiclllt is not the cable operator is not prohibi,,,,, by law. If Tel leases cabIo from a competitive access provider, such as MFS, TCG, 0< Pacific Bell, 10 gain access through the Joint Powers servio: area, the .. Tel may claim !hat it is exempt from any etIClOOICI!ment fee charged by a Join! Powers member, if the encroachment fee is in the nature of a franclJise fee. 6. Impart l4zon the City" fiber O¢c UtlljlY ~ If the City, eIc.::ts 10 establish a communicalions fiber optic utility which will require rele<:ommurUcalions ac<>iss 10 points outsid>: the City', jurisdiction, the City or • party who is au1horized 10 operate as the City-wide ~ommunicalions licensee 0< franchisee could seek 10 IIOgotiate with Tel, the lessee of the 48 strands owned by Cable Co-op, or from any oIhet party. including Teo, the lessee of the other 48 51rands owned by Tel, Pacific Bell, Sprint. or MFS. Under n:commendatioft number 4, the City cooId be assunod of meeting ru. prospective. lelecommunkations in!e£conne<;tion ne<!ds now by ob!aining I firm wriueB commit=nI from TCI and Cable Co-op 10 make their portion of the fiber optic ring available 10 the City or \he City'. commurucations lk,ensee or franchisee. Direct Page'''. -. . . negollalioos ....ow.s Occur wilh TO; bowever. Cable Co-q> may be required !o eoosent 1<1 the sublease arrangement -.greed 10 by TCi. FISCAJ·1MPACT "The approval of the se<>rriIy inlerCsi will DOl rcsull in Ibe payment of any fcc, tax. or 011... IOnn of revCIlIJC. oIhec dwtll:e paymcDl of permit application fees by CableCo-<lp. To the exlellt !bat future additional programming obtained as pat! of \he TCl/CabIe Ox>p agreement results ill tie ... of service uDder the Franchise A~ment, there is the potential rot die Joint Powers and the Cily 10 receive an increase ill franchise revenues_ The action bercb)' requested does not constilUle a project under California Em.-ironmenlal QualitJ Act; therefore, no environmental assessment is required. CMlt:l06:9S Request from Cable Communications Cooperative of Palo Alto Inc. (Cable Co-op) for • public hearing 011 the approru (1C" cfiSapprOVal of \he TCllCable Co-op AgreomcnL CC, Brad Anderson, General Manager Cable Co-op John Kelley, President of Board Cable Co-op JoiDI Powen Cable WorIdng Group ,.,.loCl .. ;" > '. \. , . ~. ·-,0 :--, .' ATTACHMENT A City of Palo Alto City Manager's Report --------- TO.: HONORABLE CITY COUNCIL FROM: CITY MANAGER AGENDA DATE: January 17. 1995 DEPARTMENT: INFORMATION RESOURCES CMR:I06:95 SUBJECT: REQUEST FROM CABLE COMMUNICATIONS COOPERATIVE OF PALO ALTO. INC. (CABLE CO-Op) FOR A PUBUC HEARING ON 1lIE APPROVAL OR DISAPPROVAL OF THE TCliCABLE co-op AGRE&\.1ENT RF.QUFS[ Cable Co-op has petitioned the Cily by Jetter (see A ttac~ ment A) for its app<OV>l of III agreement willt TCI Cable\1sion of California Inc, (rCI), under wruch Cable C<HlP will pariiclpale iu a major proj«! 10 connect most of !he cable systems in seven of !he bay area co,mbes via • fiber optk ring. Cable Co-op will be nefit from !he conslruction of !be fiber q>Iic ring, Cable Co-op will OWlil its portion of the ring ia the franchised areas and 1ease it back 10 TeI by granting TCI an irrevocable license 10 use ar'" I secur.!)' in!eresl in lIl.at po<tion Oc!he ring. The Amended and Modif!ed Franchise Agreement requlres Cable Co-op 10 obtain Council approval of any lSsignment or transfer of interesl in the cable sYstem. Staff, there~, requesls thot the Cily Council schedule a public hearing on the petition in accordance with the terms of Ibe Francruse Agreement a. .. J direct stofflo compile supporting information i. onIer 1b0l Council may review and evaluate the petition and staff recommendatio&. RECOMMENDATIONS Staff recommends thal Cily Council lake ocoon on such petition by set>Jng • public hearing 00 Febrwlry 6. 1m, to.: tI'.e purpose of determining wbether it shall grant its consent 10 Cable Co-op's assignment 10 TCI of an irrevocable license 10 use and a sec.,nty interes! ill a portiOll of the fiber optic ring being construcled by TCI "ml owned by Cable Co-op, POuey IMPUCAl1QNS The first policy issue is whether • lhird party like TCf ,hould be pennitted 10 take • property inlerest in !he cable television system owned and operated by Cable Co-op, The granting 10 TCI extr.territorial cable television operator of a. irrevocable license 10 nse ond I'a&' 1013 .::., , . ( . , '.~ -. ~, ." the SCC1lrity interest in the fiber optk: ring portion owned by Cable Co-op constitutes Iong lerm valuable property inleresls in the franchiscd cable lelevisioa ,ystem. The .se<:urily in!erest is an impl!ted financing deYke, becau sc Cable Co-op i. permiTted to obWn the cor.slnl<:tion, inst.n.tion, maintenance, and ownership oftroe fiber and an interduct (conduit) wilbout pay;.o8 for such costs. The CiIy'. rights nnder Ille FllIl'Chise Agreement are directly affected by lit •• agreemelll Under Section 14.1 of the Franchise Agreement, any assignment, lrans!"r. pledge, mortgage> cc inlerest in Ill. franchised Cable TV system without the Council', awcoval is null and void. The second po'.icy issue is whether Ibe financing arrangement nnder the TClICable Co-op agreement may be permissible in !he absence of an amendment 10 the F~hise Agreement ~use the finar.cing method set forth in !he TClICable Co-op agreement is not expccssly con!emplated in Appeoo.. J and sections 2.5.08 and 14. the Franchise Agreement may have to be amended 10 penrut TCI 10 take sueb interest in Cable Co-op', system_ The third policy issue is whe,her Cable Co-op should be permitted 10 delegate its system main!enance OOligations 10. Ihird party like TeI. Under the TClIC"bl. Co-<>p ag<eement, Tet is giveu the primary responsibility for mainllllning tlle new fib.-..... Inasmuch as several provisions of the Franchise AgJeement impose !he maintenance OO!igaoo., OIl Cable Co-op, there is some question as \0 whether Cable Co-op can validly transfer its primary mainli:nance obIigatioos 10 a third party like TeI. even if TCI is characterized as 1II_ agent of Cable Co-op. EXECUIlV'E SUMMARY On August S, 1994. Cable Co-op entered inlo an agreement with TCI 10 construct. fiber op6c ring and inlerduct tIIrough their cable franchise service area 01 no cOS! \0 Cable Co-<>p. Cable Co-op ",ill own its pon;oo of Ibe fiber optic ring and lease it b.ck \0 TCI. As rompensation. Tel will be permittd 10 pse 96 strands of the fiber op6c ring_ Cable Co-op will OWD and have sole use of an interduct (empty cODduil) being buill along the palh of !he fiber op6c ring and have guaranleed acee" !o programming over !he fiber op6c cable at favorable rates. TCI r.que.led an irrevocable license and security inlerest in ,!he constructed fiber op6c cable. On Angus! 31, 1994, staff shared wi~ Cable Co-op an internal mem<> ""hiel. outlined a number of concerns ",il1> the agreement. St>ff fett thaI the TCllCabl. Co-op agTeement would bave!O be presented 10 the City Council for approval as outlined in Section 14 of the CMIUIl6:9S hi·lotl . , ., t , ~ .. ' Franchise As=men!. Cable Co-op referred the !ener 10 its legal counsel. Cooley Godwanl, foc review and !ben beglll the permitting and construction pracess with !be City. O1Ilanuary 9, 1m, Cable Co-op petitiooed !be City 10 begin tI-.e opproval process u set fot1It ill Sectioo 14 of the Franchi$< Agreement. On December 30, 1994, Public Wads staff issued a curreru status of the permi! review of t1>e fiber optic conduit installation and listed the remaitling documenl> needed for final review of the permit. AI the February 6, 1m public hearing. staff will provide reccmmendal:ions 10 the City Council regarding litis request. »SeAL IMPACT If the TCIICable Co-op "greemen( is not approved, TCI will be required 10 request access 10 !be strvi« area through the DOnTl al permitting process and may be required 10 pay the applicable perrnaneru enc.yachmenl fees. EN\'XRONMENTAL ASSf'SSill,JIo'I SIaff'. recommendatioo Iltat a public hearing be held on Cable Co-op', petition does not consri!uIe • project under the California Environmental Qualil)' Act, ind, lheref~. DO eDvirO'QIDCnta! assessment is required~ ATIACHMENTS AltllChrnent A: Petition of Approval of TCII'Cable Co-op As=meol Attachment S: Section 14 ()( the Amended .nd MooLf\ed Franchise Agreement PREPARED BY: Pianall Neff DEPARTMENT HEAD REVJEW: ~=!IJ Direclor, Informacion Resources CITY MA.1I!AGER APPROVAL: cc: Brad Anderson. General Manager, Coble C<>-<>p John Kelley, President, Cable Co-op Board "0> • .,; . Bernard M. strojny Assistant city Manager city of palo Alto 250 Hamilton Ave. Palo Alto. CA 94301 Dear Mr. strojny: January g... 1995 Please consider this letter as a petition pursuant to section 14 of our franchise tor approval o~ a s~curity i~terest by Tel Cablevislon of California~ Inc. in a limited amount of fiber optic cable built witbin our franchise a.rea. The purpose of this fiber optic cable is to allow Cable Co-op to participate in a series ~f fiber optic rings encircling the Bay area. ¥~st cable systems in seven ar~a counties will be interconnected. Viacom and TC~, as the area's ewo largest cable operators are leading this project. . In keeping with the dictetes of the Franchise Agreement, Cable Co-op will own the portion of the fiber ring that passes through the franchise area and viII lease the use of that tiber back to Tel. The advantages to Cable C~-op from this agreement are two-fold. First# cs compensation to cable Co-op, Tel will simultaneously construct, at. its sole expense., an interduct. (an empty conduit} along the path of the fiber cable to be o."'!1ed by cable Co-op for Cable Co-op's exclusive use. This will result in considerable cost savings when Cable co-op upgr~des its c.able system. in the fut.ure. In additlon l Cable Co""op will be ent.itl~d to aCCESS vi dee programminq transmitted via the tiber ring at favorable rates~ EVentually ... more than ninety channels lIay be transported on the!ie. .tiber rings with improved, interference free signal quality for transmission of local ~oadcast stations. We seQ this as increasing member .. satisfaction and a key to succe.ss in competing with the latest qeneratioo of satellite dishes. The Tel agreement is only for a fiber ~ic cable that passes through the franchise area and associated facilities. It does not place. TCI in position to ever cffer any sez-wices to any home or business, except Cable Co-op .. '-.. ', -). ~~ It. , -.Ii ~ •• ~~,~:,; I j - l .' >--~" ii"~~ ,:~)~.-,-~ ... :~~.:~'> ·~r··: .. <"/:·· ." --i< ~ --", ,. 'The agreement l~ludes a security interest in favor or Tel in the fiber optic cable installed by Tel and associated tllcilities~ This sec-toIr!ty interest only becomes significant if. Cable co-op goes bar!lcrupt and atte",pts to liquIdate its aS$e~s or-Cable Co-op rejects the license qrant, to Tel. If .ither event ~ere to happen, ~I ~ould only hav .. ownership rishts to a l1.mite'" amount of Uber optic cable and associated facilities. At r~ ti",e and in no event "oul'" Tel obtain any operating rights vithin the franehlse area or bave any ownersbip or operating rights . to an~ aspect, of cable co-op's syste~. nanli: you for your help in facilitatinq this petition. "e look forward to continuing to wcrk with you, the rest of City staff. and tbe Council to keep cable Co-op " state-of-the-art cable system cf which we are all proud. Please call .e at 856-3553 ext. 3100 if you have any questions. Ce: Ariel Calonne (Palo Alto) Ron Ander5en (Palo Alto) Dianah Neff (Palo Alto) Gloria y~ (Palo Alto) Tony Xlein (Cooley Godward) Dale Bennett (TCI) Sincerely, rvl./1 ~,--. ~ Brad Anderson CEQ/General Manager ". II ,_;',f ·,-.,;Sf;:~ . . Att.acnlllet:!.t I Section 14 of the Amended end ModifIed Francbise Agreement mises, ~bereby said receiver~or trustee or the Company, in said capacity, assumes al} oblig:atior.s and aqrees to be bound tully by each and every provisio.n of this Restated Aqreement~ 13.3 The notIce requIred by Section 13 .. 1 hereof shall .1st'" be-provided if t."'le company receives notice that any of the aets or events specifie.d therein are pertoI'lDed by or regarding any Per5~n who holds a controlling Interest in the Company. 13.4 N~thi~ in this section 13 sball be interprete4 so . as to conflIct with the provIsions of Appendix J to this Agre.e.ment .. SECTION l' - -RESTRICTI m.s !.G'INS? ASS IGNM':ENJ' AN)) OTHER TRANSFERS 14.1 Except 85 provided in Appendix J to this Agree~ent and in the financial pl~n referred to in Section 2.5.08 hereof and in this· Section le. includIng any ertenslons or moditications oL the matters set forth ther-ein, neither this Restated Agreement, nor any riqhts or Obliqations of the company pursuant to this Rest~~ed Aqreem.ent or in the System shall be assiqned, transferred, plec5qeo, leased., sublet, or :DOrtgaged in. any lIanner, in whole or in part, to any Person., nor shall title thereto, either legal or equitable, or any-right or Interest therein, ~ss to or vest in any Person, nor sh_all any c:hanqa in Control of t.he Company occur, either by act of the COmpany, by operation of law, or otherwise, without the prior COflsent ef the city council. Any such ac-tion complete4 without the prior consent of the City Council shall be null and void; provided that., nothing herein shall restrict the free transfer of partner ship interests or stock of the Com~ny i~ such transfers do not cha.nqe the: control of the Company. ami no consent s~al1 be. required for such transfers. In the event that the Company shall desire to ~ransfer or assIgn t~e franchise or any of the rights, privileses, or immunities contaln~ therEin, th~ City shall have the right of first refusal to assume such transfer or ~ssiqnment, on the same terms ~r~ conditions proposed for such transfers I provide~ such option is exercised vitbin ninety (90) days of receipt by the City of written notice together with the terms and conditions in sufficient detail to enable the City to exercise its reas~nable jUdgment wi~~ respect ~o this option. 14.2 The company shall promptly notify the City Hanager~ of any pr~ed action requirir~ the consent of the City Council pursuant to section 14.1 bereof. by submitting to the City Manager. vitb ~ copy to the city Attorr,ey, a petition requesting the 'approval of the city Cour~il. ~e petition sb~ll fully deseribe the proposed action and sball be accompanied by a justi tication for the action and such addi~!onal supporting informatIon as the City council, th~ City Kanag'er ... or the City Attorney may require in or~er to rev lev and evaluate the proposed action~ Upon review of ~~e petition~ the City Manager sh~ll submit the petition~ within fifteen (15) -days from receipt of the petition, to th~ city council t0gether with a rec~mmer~ation for action on the petiti~n. \ .. .-~ II __ 14.3 Tne city Council sball schedule a public he~ring on "the petition, vithin thirty (30) d~ys after receipt of the petition for consent," an4 5holl act on so14 petition vithin sixty (60) days thereafter. Tor the purpose of determining whether it shall qrant its consent, the City Councll ~ay inquire into' (i) the qualifica tions of each Person involved in any action described in Section 14.1 bereof~ (Ii) all matters relevant to whether said Person vill adhere to all applicable pr<>visions of this Franchi.e, and (Hi) all other relevant aatters. The Company sball provIde all requested ass!l5tance to the City council in c:onnectio-n with any such inquiry and. as appropriate, shall secure the cooperation and assistance or all Persons inv=lved in said actlon~ 14 .. & As a condition to the. qranting ct an.y consent required by section 14.1 hereof, the City COUncil may. (i) upon & reasonable determination that the Company did not execute this F.eat.ted Agreement under a good faith belief that it would itself <:any out tha obliq.tions of the f'ranchise pursoant to this AqreemEnt, require the Company or any Affiliated Person to pay to the. Cit.y part or &.11 of the profits earned or to be: earne4. in connection with. upon the completion of". or as a result Qt, any or the actions described in section 14~1 hereOf with respect to any of saId actIons which occur within three (3) y~ars after the eftective date of this J.greement". provided. that &&1.4 p't'Ofits shall not. inclu4e any termination payzents :made to a s)"stem ma..,,-,ager or ~atorl if any, pursuant to a written agreemant in existence as of the date of Closinq, an4 (H) require that uch Person involved in any action described in Section 1'~1 bereof shall ex~;u~e an agreement... in a ton. -and containing _ such conditions as :may be reasonably specUied by the City CO'.u><:il. providinq that said Person 1li5':ume.S. and aqrees to be bound by all applicable provisions of this Restatea Agreeme.nt. Tbe __ ~_xecu'tion Clf said llgreement by said Person shall in r.o way relieve the c~pany, or any other 'transferor involved in a:llY action describe!S in seeti.on 14.1 hereof, Qf ita Obliqations pursuant to this Rest~te~ Agreement ~ithout the consent of the city ccuncil. ~ 1 •• 5 NothilXJ in t.his section l( shall be cIee.UJed to prohibit .any assiqnll!ent. ple~e, le.ase, sublease, Jlortqage, or other transfer of all ~r any part of the System... or any right or interest therein ... for tinar.cir~ purposes ... provided tha~ each such assignment, ple~e; lease... sublease, mortgage, or other transfer sball be (i) describe~ in Appendix J to this Restated Agreement or otherwise disclose to City as provided in Appendix J; (ii) set forth in the financing plan refe.rred to in Sections 2.5.0B ar,d 14 hereot l including any e.xtensions or modifications therein; and (iii) SUbject to the rights of the City pursu~nt to this Restated Agreement or applicable la~. Nothing i~ this Section 14 shall ~e deemed to affect the r.1qht of the CoItlpany to lease channe:lsf" portions of Channels, equipme.nt, and other Dlaterials to other persons. S4 "-~----.-