City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
That the City Council adopt the resolution conditionally authorizing the assignment and
ultimate transfer of control of the cable television franchise from Comcast Corporation to a
wholly-owned subsidiary of Time Warner Cable Inc.
BACKGROUND:
Comcast of Los Angeles, Inc., a corporate subsidiary of Comcast Corporation, is the holder
of the current Culver City cable television franchise. On June 14, 2005, the City received an
FCC Form 394 entitled “Application for Franchise Authority Consent to Assignment or
Transfer of Control of Cable Television Franchise” (“Form 394”). The Form 394 seeks the
City’s consent to the transfer of the City’s cable television franchise from Comcast
Corporation to a subsidiary of Time Warner Cable Inc. As detailed below, if consented to by
the City Council, the proposed transfer will involve various corporate transactions which will
ultimately result in the Culver City cable television franchise being held by a corporate
subsidiary of Time Warner Cable Inc.
On April 20, 2005, Time Warner NY Cable, LLC (“TWNY”), a wholly-owned subsidiary of
Time Warner Cable Inc., and Comcast Corporation (“Comcast”), the ultimate parent
company of the City’s franchised cable operator, each entered into separate definitive
agreements to acquire, collectively, substantially all of the assets of Adelphia
Communications Corporation (“Adelphia”) for a total of $12.7 billion in cash (of which
TWNY will pay $9.2 billion and Comcast will pay the remaining $3.5 billion) and 16% of
the common stock of Time Warner Cable Inc. It should be noted that Adelphia filed for
Meeting Date: September 26, 2005 Item Number: A-2
AGENDA ITEM: Consideration of a Resolution Conditionally Authorizing the
Assignment and Ultimate Transfer of Control of a Cable Television Franchise by
Comcast Corporation to C-Native Exchange I, LLC, a Wholly-Owned Subsidiary of
Time Warner Cable Inc.
Contact Person/Dept.: Bill Rudell/Richards
Watson & Gershon; Roland Miranda/City
Attorney’s Office
Phone Number: (213) 626-8484; (310)
253-5660
Fiscal Impact: Yes [] No [x] General Fund: Yes [] No []
Public Hearing: [] Action Item: [x] Attachments: [x]
Public Notification:
Master Notification List 9/21/05; Comcast of Los Angeles, Inc.; Time Warner Cable
Department Approval:
Carol Schwab City Attorney 9/22/05
CAO Approval:
City Controller Approval:
N/ACity of Culver City, California
City Council Agenda Item Report
protection under Chapter 11 of the U.S. Bankruptcy Code on June 25, 2002. At the same
time that Comcast and TWNY entered into the agreements to purchase Adelphia’s assets,
Time Warner Cable Inc., Comcast, and their respective subsidiaries also agreed to swap
certain cable systems to enhance their respective geographic clusters of subscribers (“Cable
Swaps”). The cable system now owned and operated by Comcast of Los Angeles, Inc., the
franchisee in the City of Culver City, is one of many cable systems in Southern California
involved in the Cable Swaps.
Under federal law, a franchising authority (in this case, the City Council) has 120 days from
the date of submission of a Form 394 to act upon such an application for transfer of a
franchise. If a franchising authority does not act upon a transfer application within 120 days,
the transfer application will be deemed to have been unconditionally granted, unless the
franchising authority and the requesting party have agreed to an extension of the 120-day
deadline. Therefore, without action by the City Council on or before October 12, 2005 or an
extension agreement between the City and Time Warner Cable Inc., Time Warner Cable
Inc.’s transfer application will be deemed to have been unconditionally granted as of October
12, 2005.
DISCUSSION:
In accordance with Section 11.30.145 of Chapter 11.30 of the Culver City Municipal Code,
the City has the right to review and to approve the financial, technical, and legal
qualifications of the proposed transferee in connection with the requested interim assignment
and ultimate transfer of control of the franchise.
City staff, the City’s cable consultant, and the City’s special counsel have reviewed the
documentation that accompanied the Form 394 and, based upon the representations set forth
in that documentation, have concluded that the proposed transferee has the requisite
financial, technical, and legal qualifications to adequately perform, or to ensure the
performance of, all obligations required of the franchisee under the franchise, and that the
transferee will be bound by all existing terms, conditions, and obligations of the franchise as
it currently exists or as it may be modified or superseded prior to the closing of the
transaction involving the Cable Swaps.
The ultimate proposed transferee of the City’s cable franchise, C-Native Exchange I, LLC, is
a new entity with no history related to the ownership and operation of cable television
franchises. Consequently, the proposed transfer resolution is conditioned upon Time Warner
Cable Inc. guaranteeing C-Native Exchange I, LLC’s contractual obligations under the
franchise agreement. In addition, the transfer resolution imposes a reimbursement obligation
upon Comcast Corp. and Time Warner Inc. for the costs and expenses incurred by the City in
reviewing and processing this franchise transfer application. City of Culver City, California
City Council Agenda Item Report
The transactions between Time Warner Cable Inc., Comcast, and Adelphia are subject to
regulatory review and approvals, including the U.S. Department of Justice, the Federal
Communications Commission, and local franchise authority approvals, as well as the
Adelphia bankruptcy process, which involves approvals by the bankruptcy court having
jurisdiction of Adelphia’s Chapter 11 case and Adelphia’s creditors. The closing of these
transactions is expected to occur during the first quarter of 2006.
Until the closing actually occurs, City staff intends to continue its negotiations with Comcast
in connection with a cable television franchise renewal agreement and to agendize for City
Council consideration a revised regulatory ordinance applicable to cable, video, and
telecommunications service providers. In addition, until that closing, Comcast will continue
to be required to perform all of its obligations under the existing franchise agreement. These
obligations would include, but not be limited to, any obligations relating to system
maintenance and customer service requirements. Once the cable franchise has been
transferred to C-Native Exchange I, LLC, all obligations under the franchise will become the
obligations of C-Native Exchange I, LLC, as the franchisee, and Time Warner Inc., as the
corporate guarantor of the franchisee’s obligations.
FISCAL ANALYSIS:
The cable television transfer transaction described in the Form 394 is not expected to have
any fiscal impact, positive or negative, on the City.
ATTACHMENTS:
Resolution.
MOTION:
That the City Council:
Adopt the resolution conditionally authorizing the assignment and ultimate transfer of control
of the cable television franchise by Comcast Corporation to a wholly-owned subsidiary of
Time Warner Cable Inc.