Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  05-002449

 

MEETING DATE:

12/13/05

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

All Districts

SUBMITTING Agency/Department:

Resources and Development Management Department   (Approved)

Department contact person(s):

Bob Wilson, (714) 834-2830 

 

 

Alicia Campbell, (714) 834-2866

 

 

Subject:  Denial of Transfer Cable Franchises

 

      ceo Concur

County Counsel Review

Clerk of the Board

Concur

N/A

Consent Calendar

 

 

3 Votes Board Majority

 

 

 

    Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

 

 

 

    Staffing Impact: No

# of Positions:

Sole Source: N/A

    Current Fiscal Year Revenue: N/A

    Funding Source: N/A

 

    Prior Board Action: N/A

 

RECOMMENDED ACTION(S)

 

 

1.  Deny, without prejudice, the request of Adelphia Communications Corporation to

     transfer a cable television franchise to Comcast Cable Holdings, LLC, for cable

     service in unincorporated areas adjacent to the cities of Yorba Linda, Anaheim, and

     La Habra.

 

2.  Deny, without prejudice, the request of Century-TCI California, L.P. to transfer a cable

     television franchise to Time Warner Cable, Inc., for cable service in unincorporated

     areas adjacent to the cities of Yorba Linda, Anaheim, and La Habra.

 

3.  Deny, without prejudice, the request of Comcast of Georgia, Inc., to transfer a

     cable television franchise to Time Warner Cable, Inc., for cable service in an

     unincorporated area adjacent to the City of Tustin.

 

4.  Deny, without prejudice, the request of Adelphia Cablevision of Newport Beach, LLC,

     to transfer a cable television franchise to Time Warner NY Cable, LLC, for cable

     service in the unincorporated areas of Sunset Beach and Santa Ana Heights, and in

     unincorporated areas adjacent to the cities of Buena Park and Placentia.

 

5.  Direct RDMD to return to the Board to request approval of Transfer Agreements when

     recommendations regarding renewal of expired franchises can be presented to the

     Board and at a time mutually agreeable to the negotiating parties.

 

 

 

SUMMARY:

 

The Resources and Development Management Department (RDMD) requests the denial of the transfer of cable television franchises currently held by Comcast Corporation and Adelphia Communications Corporation to Time Warner Cable, Inc.

 

 

BACKGROUND INFORMATION:

 

Reason for Board Action

 

The requests to approve the transfer of certain cable television franchises described below were received on June 14 and June 16, 2005. Federal Law (Communications Act of 1934, Section 617-47 U. S. C. 537) states that the County had 120 days to render a decision.  The closest Board meeting to this deadline was September 27, 2005.  Under law the transfers will be deemed granted unless the requesting parties and the County agree to an extension of time. In requests dated September 21, 2005, Time Warner and Comcast agreed to extend the time for a decision to December 6, 2005.  This was subsequently extended by both to December 13, 2005.

 

 

Background

 

On April 20, 2005, Adelphia Communications Corporation (Adelphia), Time Warner Cable, Inc. (Time Warner), and Comcast Corporation (Comcast) and certain of their subsidiaries entered into several agreements including the following agreements:

1.  “Asset purchase Agreement between Adelphia Communications Corporation and Time Warner NY Cable, LLC.”

2.  “Asset Purchase Agreement between Adelphia Communications Corporation and Comcast Corporation.”

3.  “Exchange Agreement dated as of April 20, 2005 by and among Comcast Corporation, Time Warner Cable, Inc., Time Warner NY Cable, LLC, and the Other Parties Named Herein.”

 

These agreements are a result of the proposed sale of the assets of Adelphia due to its declaration of bankruptcy. The purpose of the agreements is for Time Warner Cable and/or Comcast to acquire the cable television systems owned by Adelphia and for Time Warner or certain subsidiaries to exchange certain systems with Comcast nationwide. The result of these transactions locally would be that Time Warner will eventually acquire all Adelphia and Comcast cable systems in Orange County.

 

 

Adelphia and Time Warner Franchises in Orange County

 

The cable television franchises awarded by the County of Orange and controlled by Adelphia that are subject to these transactions are as follows:

 

1.  Century-TCI California, L.P., a subsidiary of Adelphia, serves the unincorporated area within the boundaries of and/or adjacent to the City of Anaheim. This franchise expires December 19, 2010.

2.  Century-TCI California, L.P., a subsidiary of Adelphia, serves the unincorporated area within the boundaries of and/or adjacent to the City of La Habra. This franchise expires August 2, 2011.

3.  Century-TCI California, L.P., a subsidiary of Adelphia, serves the unincorporated area within the boundaries of and/or adjacent to the City of Yorba Linda. This franchise expired on August 1, 2003.

4.  Fort Myers Acquisition Limited Partnership (Fort Myers), a subsidiary of Adelphia, serves the following areas:

a. unincorporated Santa Ana Heights;

b. unincorporated areas adjacent to the cities of Buena Park and Placentia;

c. unincorporated Sunset Beach.

This franchise expired on August 1, 2003.

 

The County has awarded three franchise agreements to Time Warner as follows:

 

1. Time Warner-Advance/Newhouse Partnership, a subsidiary of Time Warner, serves unincorporated areas within the boundaries and/or adjacent to the City of Orange.

2. KBLCOM, Inc., a subsidiary of Time Warner, serves the unincorporated area within the boundaries of and/or adjacent to the City of Westminster known as Midway City.

3. KBLCOM, Inc., a subsidiary of Time Warner, serves the unincorporated area adjacent to the cities of Los Alamitos and Seal Beach known as Rossmoor.

 

All three franchises with Time Warner have expired.

 

The County also issued a franchise to Comcast to serve the unincorporated North Tustin area which has expired.

 

Codified Ordinances Governing Orange County Cable Franchises

 

The Orange County Codified Ordinance Section 5-4-1 through 5-4-38 entitled “Cable Television Systems” was in effect when the above mentioned franchises were originally awarded. This Ordinance was first enacted on October 12, 1976 and was last amended on February 7, 1984. Due to three major amendments since 1992 to Title VI of the Communications Act of 1934, many sections of this Ordinance were determined to be obsolete or were preempted by Federal law. As a result, the Board enacted Sections 5-6-100 through 5-6-128 to the County Codified Ordinances entitled “Cable Television and Customer Service Standards”. These sections became effective December 18, 2002.  A franchise agreement between the County and Cox Communications which was awarded on May 24, 2004 is governed by this new Ordinance.

 

The prior version of the County Ordinance (Section 5-4-9 (b)) contains a provision which states that “Should County, for any reason, be unable to complete the renewal proceeding prior to expiration of this franchise, grantee shall have the right to continue operation of the CATV system pursuant to the terms of the franchise until such time as the renewal proceeding is conducted.”

 

Since each of the three operators (Adelphia, Time Warner and Comcast) has provided the County with a renewal application, therefore expressing its desire to renew the expired franchise, the operators assert that they can operate the expired franchises under the terms of the prior version of the Ordinance, and under the terms of the expired agreements.  This circumstance makes it difficult to complete negotiation of a new franchise agreement if the company prefers, for any reason, to continue to operate under the prior Ordinance and expired agreement.

 

 

Franchise Negotiations

 

Adelphia, Time Warner and Comcast have been provided with franchise agreements reflecting the same terms and conditions as were recently approved in the franchise agreement between the County and Cox Communications. A negotiated agreement with Adelphia may be ready for presentation to the Board soon, but it is subject to review by Time Warner under the terms of their purchase agreement of the Adelphia cable systems. Negotiations with Time Warner continue and Comcast has not responded to the County's draft agreement.

 

Basis for Denial of Transfer Requests

 

As three of the franchises (two with Adelphia and one with Comcast) requested for transfer have expired. County Counsel has advised that expired franchises probably cannot be transferred.  Due to a lack of progress in negotiations in the limited period allowed by the extension period to responding to the transfer requests, there is now insufficient time to complete the negotiations for new franchise agreements for the expired franchises. Approving the transfer requests at this time would introduce legal questions regarding the validity of the transfer, as well as negate any incentive for the operators to complete negotiations for new franchise agreements. This is further complicated by the fact that the franchise agreements issued to Time Warner have also expired.

 

Moreover, staff has requested clarification from the cable operators on ownership information related to the franchise transfers that has not yet been provided. Further, the County has requested Time Warner to complete a compliance review questionnaire, response to which has not yet been provided. The purpose of this questionnaire is to determine if Time Warner is in compliance with their franchise agreement and federal law, including Federal Communications Commission customer service standards. The operator’s responses to the questionnaire may have an impact on County positions with respect to franchise negotiations and transfer terms.

 

The County has proposed an additional extension of time for consideration of transfer approval and to negotiate franchise renewals.  Agreement to this extension of time has not been received from the cable operators.  Many important issues in these negotiations relating to customer service and adherence to compliance with the County's ordinance remain unresolved. Approval of the transfers without resolution of the outstanding issues may jeopardize the County’s ability to safeguard customer rights, and ensure satisfactory customer service. RDMD staff therefore recommends that the transfers be denied.  Adoption of the recommended action will give the County time to acquire the data needed to perform proper due diligence, ensure that customer service needs are protected, and avoid creating a situation where the validity of the awarded franchise is in question.  Any necessary transfer agreements and franchise renewal agreements will then be presented to the Board at a later date.  Franchise negotiations can continue even if the transfer requests are denied if the parties are agreeable.

 

CEQA Compliance:  The Recommended Actions for Denial of Cable Franchise Transfer are not projects pursuant to statutory exemption 15307(a) of the CEQA Guidelines which states that "CEQA does not apply to projects which a public agency rejects or disapproves".  Should your Board approve the Cable Franchise Transfers, however, those actions would be categorically exempt (Class 1) from the provisions of CEQA pursuant to Section 15301 of the CEQA Guidelines which exempt licensing activities associated with existing public or private structures, facilities or mechanical equipment.

 

 

 

 

 

FINANCIAL IMPACT:

 

N/A

 

STAFFING IMPACT:

 

N/A