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HomeMy WebLinkAbout1993-02-11 TimeWarnerCable Franchise Transfer to Time Warner Entertainment LP TWEi John E. Fogarty Associate General Counsel T 1 M E W A R N E R CABLE February 11, 1993 Charles Guttman, Esq. City Attorney City of Ithaca 108 East Green street Ithaca, NY 14850 RE: Franchise Transfer to Time Warner Entertainment, L.P. ("TWE") Dear Charles: Following up on our discussion, I am sending you a separate letter in response to Mayor Nichols' letter of January 7, 1993. As I explained in our conversation, we need to be on record in response to that letter. Hopefully, this will be the last word on the transfer issue. To that end, I want to provide you information which will hopefully put to rest reports circulating in Ithaca that Time Warner has paid a considerable sum to the City of Medford, Massachusetts in order to secure approval of the transfer of that franchise from Warner Cable Communications to TWE. As I told you on the phone, the report is without basis. A payment was recently made to the City of Medford in connection with franchise obligations for support of PEG access. The payment had nothing to do at all with approval of the transfer to TWE. In fact, approval of local franchising authorities in Massachusetts was not required for the TWE transaction because the Commonwealth Community Antenna Television Commission held that the transfer was "between a commonly controlled corporation or between a parent and subsidiary." and thus did not require the consent of state or local authorities. I enclose for your information a letter of January 28, 1992 from the Commissioner for the Massachusetts Community Antenna Television Commission to Nick Leuci of Warner Cable Communications so advising. I hope we can put this transfer issue behind us now and move on to resolution of the outstanding issues between ACC and the City of'Ithaca. I agree with your assessment that we have made Time Warner Cable 300 First Stamford Place Stamford CT 06902-6732 Tel 203.328.0629 800.950.2266 Fax 203.328.0690 A Division of Time Warner Entertainment Company, L.P. Charles Guttman, Esq. February 11, 1993 Page two. considerable progress in our previous meetings and we look forward to receiving the proposal you indicated the City is preparing. Best regards. JEF:pg encl. cc: Ray McCabe PS - As you requested, I enclose a copy of the papers which Time Warner has filed challenging the provisions of the Cable Act. The reference to the City of Ithaca is in the Affidavit of Joe Collins on page 5. "a John E. Fogarty Associate General Counsel TIMEWARNER CABLE February 11, 1993 Charles Guttman, Esq. City Attorney City of Ithaca 108 East Green street Ithaca, NY 14850 RE: Franchise Transfer to Time Warner Entertainment, L.P. ("TWE") Dear Mr. Guttman: The letter of January 7, 1993 from Mayor Benjamin Nichols of the City of Ithaca to the General Manager of American Community Cablevision (the name under which TWE does business as a franchised cable television operator in the City of Ithaca) has been forwarded to me. The letter advises of a resolution of the Ithaca City Council of January 6, 1993, purporting to withdraw the consent of the City of Ithaca, granted by resolution dated March 24, 1992, to the transfer of the cable television franchise from American Television and Communications Corporation ("ATC") to TWE. It is TWE's position that the resolution of January 6, 1993, which was adopted without any notice to TWE, is of no force and effect. Mayor Nichols' letter advances two reasons in support of the January 6th resolution. Neither provides any valid basis. The first alleged reason is that TWE "has not become a signatory to the franchise." It is noteworthy that this is not a condition to the approval voted on March 24, 1992. More importantly, no document for execution has been proffered to TWE which is, of course, willing to execute any document affirming its assumption of the franchise and the obligations thereunder, at the City's request. Most significantly, TWE has consistently made clear that it recognizes that, as successor franchisee, it is bound by the terms and conditions of the franchise in effect. I attach a copy of a letter of July 13, 1992 to the City Clerk of Ithaca advising that "TWE has now assumed all rights and obligations of the franchise and will abide by the terms and conditions thereof." The second reason alleged by the resolution of January 6, 1993 is that "the construction of the entire system has not been completed." It is TWE's position that this is factually incorrect. Even if the statement were true, this is the first time that the Time Warner Cable 300 First Stamford Place Stamford CT 06902-6732 Tel 203.328.0629 800.950.2266 Fax 203.328.0690 A Division of Time Warner Entertainment Company, L.P. Charles Guttman, Esq. February 11, 1993 Page two. City has so claimed. If, indeed, the entire system has not been completed, it was not completed on March 24, 1992 when the City approved the transfer. In our view, the City may not raise such an allegation more than six months after the transfer of the franchise as a basis for withdrawal of its consent. As the City is well aware, the cable television franchise was transferred on June 30, 1992 from ATC to TWE in reliance on the consents to the transfer received from the City of Ithaca and the State of New York. The transfer of the City of Ithaca cable television franchise was but one of a great number of cable television franchises and other assets transferred to TWE on that date pursuant to an Agreement of Limited Partnership of which the City was advised. The City may not at this late date withdraw its consent. Since June 30, 1992, TWE has been the successor cable television franchisee to ATC and has owned and operated the system in the City of Ithaca. For the reasons described above, it is TWE's position that the resolution of January 6, 1993 is of no force and effect and TWE will continue to operate its cable television system in the City of Ithaca p .suant to the terms of its franchise agreement with the City of rtaca. Very John JEF:pg cc: Ray McCabe cs ;nile TraflSrntS.S10fl CABLE Corporate Headquarters 300 First Stamford Place Stamford, Connecticut 06902 Phone: 203.328.0600 FAX: 203-328-0690 (0692) Date: ?.� I `L,..._ .. , --- - _.... From: A , '':...0 c:1 ':). I U r - Fax Number: C, ? -1. 2 .... :1 _ :,� ,.)) . 42 Number of Pages, Including This Cover:`• THIS MESSAGE IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL OR ENTITY TO WHICH IT IS ADDRESSED AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL AND EXEMPT FROM DISCLOSURE. If the reader of this message is not the intended recipient or an employee or agent responsible for delivering the message to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. Ifyou have received this communication in error, please notify us immediately by telephone and return the original message to us by mail, ihank you. If there are any problems with the transmission of this document, please call (202) $28- AUG 20 '93 01:22PM TIME WARNER CABLE John E. Fogarty Associate General Couaase TIMEWARNEROlet CABLI August 20, 1993 Charles Guttman, Esq. City of Ithaca 108 East Green Street Ithaca, NY 14850 P.2/7 Dear Mr. Guttman: Following up on your letter of Say 26, 1993 and our subsequent conversations, I enclose for your review a draft Memorandum which I believe incorporates the understandings we have reached and, hopefully, provides a basis acceptable to the City for resolving these issues. One of the points in the Memorandum requires further explanation. As I previously mentioned to you, Time Warner Entertainment Company, L.P. ("TWE") has reached an agreement with U.S. West Inc. under the terms of which U.S. West will invest $2.5 Billion and acquire a 25.51% limited partnership interest in TWE. We believe U.S. West's experience and leadership in the telcommunications industry make it an eminently suitable partner for TWE. This investment by a leading telephone company in TWE will enhance our ability to make the technological innovations which will allow us to provide increased information, entertainment and communications options for our customers. U.S. West's investment will, of course, also strengthen TVVE's already formidable financial standing. Through subsidiaries, Time Warner Inc., of course, remiss majority ownership of TWE and, as the only general partner in TWE, continues to maintain full management, operational and creative control over TWE' s businesses, including its cable operations. Thus, we can assure you that, as at the time of the creation of TWE, the U.S. West investment does not result in a change in control of the cable franchise. Nor will there be any effect on the ongoing local management of the cable system as a result of the investment. The management, personnel, operations and policies of the cable system will not be affected by this investment. There will certainly be no adverse impact on the cable system or its customers as a result of this transaction. • RUG 20 '93 01:23PM TIME WARNER CABLE P.3/7 Charles Guttman, Esq. August 20, 1993 Page 2 Our present intention is to close the transaction .with U.S. West some time in mid- September. Of course, the validity of any transfer of the franchise from American Television and Communications Corporation to TWE is one of those issues about which there has been some disagreement. In paragraph 9 of the proposed Memorandum, we seek to resolve that issue as well as treat the issue of the investment by U.S. West. We are in full agreement with the desire expressed in your letter to conclude this matter as quickly as possible and we are ready to discuss any issue you may have with respect to the Memorandum at your earliest convenience. Thank you for your patience and cooperation. cc: Ray McCabe JEF:pg 1\ "1 AUG 20 '93 01:23PM TIME WARNER CABLE R.4/7 MEMORANDUM OF,PN]1F$STANDING This Memorandum of understanding is made this day of August, 1993 between "the City" which is the City of Ithaca, New York and "the Franchisee" which is the party which is the cable television franchisee under the 'terms of that certain Franchise Agreement effective January 20, 1988 between American Television and Communications corporation, d/b/a American Community Cablevision. WHEREAS, disagreements have arisen between the City, and Franchisee concerning the interpretation of certain terms of the Franchise Agreement; AND WHEREAS the parties hereto desire to settle those disagreements and clarify the terms of the Franchise Agreement; AND WHEREAS the parties have conducted extensive negotiations in order to reach agreement regarding clarification of the terms of the Agreement; NOW THEREFORE, the City and the Franchisee have agreed as follows: 1. (a) "Gross City Revenues" as defined in section 1.18 of the Franchise Agreement do not include money collected by Franchisee attributable to franchise fees for the period of the franchise term prior to January 1, 1992. (b) "Gross City Revenues" as defined in Section 1.18 of the Franchise Agreement do include money collected by Franchisee and attributable to franchisee fees for the period commencing January 1, 1992 until the termination of the franchise. (c) For the period on and after January 1, 1992 the payments made by Franchisee to the City under the provisions of Article 20 of the Franchise Agreement shall be calculated based on Gross City Revenues which include payments attributable to franchise fees. Any amounts owing to the Citybased on the clarification of the Franchise Agreement set forth in this Memorandum of Understanding shall be paid to the City at the time of its execution. (d) In the period on and after January 1, 1992 the money provided for capital PEG access equipment replacement and expansion under the provisions of Article 14.1(c)(3) of the Franchise Agreement shall be calculated based on Gross City Revenues which include payments attributable to franchise fees. 2. (a) "Gross City Revenues" as defined in Section 1.18 of the Franchise Agreement do not include revenue received by Franchisee from the sale of advertising time on its cable television system for the period of the franchise term prior to r7 AUG 20 '93 01:24PM TIME WARNER CABLE P•5/7 January 1, 1992. (b) Gross City Revenues as defined in Section 1.18 of the Franchise Agreement do include revenue received by Franchisee from the sale of . advertising time on its cable television system for the period commencing January 1, 1992 until the termination of the franchise. (c) For the period on and after January 1, 1992 the payments made by Franchisee to the City under the provisions [at Article 14.1(c)(3)] of Article 20 of. the. Franchise Agreement shall be calculated based on Gross City Revenues which include payments attributable to the sale of advertising time. Payments made by Franchisee to the City under the provisions of Article 20 of the Franchise Agreement shall be calculated based on Gross City Revenues which include revenue received by Franchisee from the sale of advertising time on its cable television system. Any amounts owing to the City based on the clarification of the 'Franchise Agreement set forth in this Memorandums of Understanding shall be paid to the City at the time of its execution. (d) In the period on and after January 1, 1992 the money provided for capital PEG access equipment replacement and expansion under the provisions of. Article 14.1(c)(3) of the Franchise Agreement shall, be calculated based on Gross City Revenues which include payments attributable to the sale of advertising time. (e) To determine the advertising revenueswhich shall be deemed Gross City Revenues under this Memorandum of Understanding, the total advertising revenues from Franchisee's cable television system serving the City of Ithaca and neighboring jurisdictions shall be multiplied by a fractionthe numerator of which is the. number of subscribers within the City of Ithaca and the denominator of which is the total number of subscribers served by the cable television system. 3. If the City seeks certification to regulate the rates for basic service pursuant to the rules of the Federal Communications Commission ( "FCC"), rates for basic cable service will be regulated pursuant to those rules. If the. City determines not to seek certification to regulate the rates for basic cable service pursuant to the rules of the FCC, then the rates for basic cable service will be regulated pursuant to Article 19 of the Franchise Agreement and, from the effective date of this Memorandum of Understanding, the maximum rate permitted under Article 19 will be inclusive of the amount attributable to franchise fees. The City waives and will not at any time in the future assert any claim that Franchisee's rates for basic cable service in effect at any time prior to the date of this Memorandum of Understanding were not in compliance with Section 19 or any applicable law or regulation. 4. The need -based Senior Citizen's discount for basic cable service provided in Article 19.1 shall within 60 days after the execution of this Memorandum of Understanding be extended to the AUG 20 '93 01:25PM TIME WARMER CABLE P.6/7 most popular non -basic tier of cable service, 5. Franchisee will extend its existing 450 Mhz high split institutional network to the current locations of the Southside Community Center, the Cooperative Extension and the Science Center, all located within the City of Ithaca. The technical capability provided by the extension will allow transmission of programming from these`institutionss to Franchisee's hub and then distribution on any existing PEG channels. Franchisee will provide a total of five quality Agile Modulators and Demodulators for use in transmitting programming from any five institutional network locations simultaneously. This equipment will be of similar specifications or better as the Scientific Atlanta Model 9270 modulator and Jerrold S890D demodulator. Upon completion of the extension to the above-mentioned locations, Franchisee shall be deemed in compliance with all requirements of the Franchise Agreement concerning the institutional network and Franchisee shall have no further obligations under the Franchise Agreement with respect to the institutional network other than to maintain and operate the institutional network as it .exists at the date of the completion of the extensions to the above mentioned three locations. 6. In addition to the requirements of Article 14.7 of the Franchise Agreement, Franchisee will cablecast one monthly meeting of the Common Council Committee of the whole. 7. The cost of the equipment used to activate channels 53 and 54 (both previously activated) and any channels activated after the date of this Memorandum of Understanding for public, educational and governmental access shall not be deducted or credited against funds expended by Franchisee pursuant to section 14.1(C)(3) of the Franchise Agreement. The equipment subject to this paragraph will be as set forth in the letter of November 20, 1991 from Peter Hess to Barbara Lukens which is annexed hereto as Exhibit A. 8. There are presently four channels used for public, educational and governmental access purposes on Franchisee's cable television system in the City of Ithaca. Channels [list). Upon execution of this Memorandum of Understanding, Franchisee will deignate and activate an additional public access channel as soon as reasonably practicable. Franchisee may, pursuant to Section 14.1(A)(1) of the Franchise Agreement, designate up to five additional channels for public, educational and governmental access. Franchisee shall designate and activate an additional public access channel if there is cablecast more than 30 hours of original programming per week per channel on the channels used for public access purposes over a continuous four-month period. Franchisee shall designate and activate an additional educational and governmental access channel if there is cablecast more than 30 s AUG 20 '93 01:25PM TIME WARNER CABLE P.7/7 hours of original programming per week per channel on the channels used for educational and governmental access purposes over a continuous four-month period. Franchisee shall activate any channel as required hereunder within three months of the end of the continuous four-month period giving rise to the obligation. Original programming shall be defined for purposes ofthis Memorandum of Understanding as the first showing and the first repeat of original shows and the first showing of syndicated shows. The showing of a program which has been previously cablecast on a public, educational and governmental access station shall be deemed a first showing if there has been no prior showing on these channels within the past year. 9. The City consents totheextent necessary or advisable under the Franchise Agreement to the transfer of .the cable television franchise from American Television and Communications Corporation to Time Warner Entertainment Company, L.P. ("TWE") (including any necessary transfers through one or more subsidiaries of Time Warner) and the granting of a limited partnership interest in TWE to U.S. West Inc. The City hereby consents to all actions previously or subsequently taken to effectuate the ownership changes described herein. 10. The City and Franchisee agree that, except for any actions required under the terms of this Memorandum of Understanding, Franchisee is in compliance with the terms and conditions of its Franchise Agreement with the City except that the City reserves the right to dispute any financial information previously submitted by Franchisee. Ithaca CITY OF ITHACA By: AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION By• TIME WARNER ENTERTAINMENT COMPANY, L.P. By: