MEMORANDUM
To: City Council
From: David J. Deutsch
Re: Cable Transfer R-41-02
Date June 10, 2002
On February 28, 2002, Comcast filed FCC Form 394 with the City, describing
the proposed merger of Comcast Corporation and AT&T Broadband Corporation
into a new corporation, AT&T Comcast. The newly formed company will assume
ultimate parent company ownership and control of the City's franchisee, Comcast
Cablevision of Maryland. Copies of the current corporate structure and the
proposed new corporate structure are attached.
The franchise agreement between the City and Comcast Cablevision requires
the approval of the City when such a transfer is proposed, and FCC regulations
provide the City with 120 days in which to review the legal, financial and
technical qualifications of the new corporation. In order to sufficiently
review the material, the City joined with 15 municipalities in Prince George's
County and our legal consultant to determine whether or not the new Corporation
had the qualifications necessary to continue to operate the City's cable system
in accordance with our franchise agreement.
The merger of the two companies is a nationwide issue affecting over 2,000 franchises and requires FCC approval. Should the FCC approve the merger, the company will have more than 22 million subscribers, making AT&T Comcast the largest provider of cable services in the country. Due to the impact this merger will have, much work has been done around the country in reviewing the transaction. Our attorney consulted with the Baller-Herbst Law Group, a firm with clients throughout the country, and has been able to obtain the research done by this firm for much larger jurisdictions.
In the detailed report done by Baller Herbst on the legal, financial, and technical qualifications of AT&T Comcast, they conclude that "although they have some concerns regarding AT&T Comcast Corporation's ability to overcome the risks inherent in this transaction…. AT&T Comcast has the legal, financial and technical qualifications to control the operation of the cable system."
In light of the concerns mentioned in the report, the City has obtained assurances from the franchisee that the proposed merger will not require an increase in cable rates or a reduction in the quality of customer service or cable service in the City.
Having reviewed the report, and given the assurances received from Comcast Cablevision in the attached agreement, the Guarantee of Performance by the parent company, the advice of our legal consultant, and the recommendation of the Baller Herbst Law Group, staff is recommending the Council approve Resolution R-41-02, consenting to the transfer of control of the cable franchise.
R-41-02
RESOLUTION OF THE COUNCIL
OF
THE CITY OF BOWIE, MARYLAND APPROVING THE CHANGE OF
CONTROL OF THE CABLE COMMUNICATIONS FRANCHISE
WHEREAS, Comcast Cablevision of Maryland, Inc. (Franchisee) holds a franchise (the Franchise) and is duly authorized to operate and maintain a cable communications system in the City of Bowie, Maryland ("City") pursuant to an existing franchise agreement (the "Franchise Agreement"), Chapter 12 of the City Code (the "Cable Ordinance") and a Transfer Resolution and Agreement (the "Transfer Documents"). The Franchise Agreement, Cable Ordinance and Transfer Documents are collectively referred to as the "Franchise Documents"; and
WHEREAS, Franchisee and its predecessors
have provided cable television service to subscribers in the City pursuant
to the Franchise and Franchise Documents, through their cable system in the
City; and
WHEREAS, pursuant to a Separation and Distribution Agreement between AT&T
Corp. ("AT&T") and AT&T Broadband Corp. and the Agreement
and Plan of Merger between AT&T and Comcast Corporation ("Comcast"),
a newly formed entity AT&T Comcast Corporation ("Transferee")
will assume ultimate parent company ownership and control of the Franchisee
(the "Transaction"); and
WHEREAS, Franchisee will continue to hold the Franchise after consummation
of the Transaction; and
WHEREAS, Franchisee, Comcast and Transferee jointly filed a copy of Federal
Communications ("FCC") form 394, together with certain attached
materials, with the City on or about February 28, 2002, which materials more
fully describe the Proposed Transaction, and which form contains certain promises,
representations and warranties by Franchisee, Comcast and Transferee;
WHEREAS, Franchisee has provided supplemental information in support of the
Application, including representations that the terms of the Transaction do
not require an increase in cable television subscriber rates or a reduction
in the quality of customer service or cable service in the City; and
WHEREAS, Comcast Cable Communications, Inc., of which Franchisee is a subsidiary,
agrees that it will enter into a Performance Guarantee in a form substantially
similar to that currently a part of the Franchise Agreement; and
WHEREAS, after review of FCC Form 394 and additional information obtained
from Franchisee and other sources, including a financial review, and relying
upon representations by Franchisee, Comcast, and Transferee, the City is willing
to grant its consent to the Proposed Transaction, so long as Franchisee's,
Comcast's and Transferee's representations are complete and accurate and subject
to the Franchisee entering into a Transfer Agreement with the City.
NOW THEREFORE BE IT RESOLVED THAT:
Section 1: The City's consent to, and approval of, the Transfer is Granted
in accordance with the Cable Ordinance, subject to and contingent upon the
following conditions:
(a) that on or before June 27, 2002, Franchisee enters into and executes a
Transfer Agreement, substantially in the form of Exhibit A, attached hereto;
and
(b) that on or before June 27, 2002, Franchisee executes certain letters of
agreement, substantially in the form of Exhibit B, attached hereto; and
(c) that on or before June 27, 2002, Comcast Cable Communications, Inc., enters
into and executes a Performance Guarantee substantially in the form of Exhibit
C, attached hereto; and
(d) that within thirty (30) days of change of control of Franchisee, Transferee
enters into and endorses an Acknowledgment and Acceptance substantially in
the form of Exhibit D, attached hereto; and
(e) that the Transfer is consummated on or before June 30, 2003;
(f) that the Transfer is consummated on terms and conditions identical in
all material respects to those described in the Transfer Application and the
Transfer Agreement.
Section 2: If any representations made to the City by Franchisee, Comcast,
Comcast Cable Communications, Inc., or Transferee are not satisfied, then
the City's consent to, and approval of, the Transfer is hereby denied as of
the date hereof.
Section 3: If any representations made to the City by Franchisee, Comcast,
Comcast Cable Communications, Inc. or Transferee prove to be incomplete, untrue
or inaccurate in any material respect, it shall be deemed a material breach
of the Franchise Documents and the City shall have available to it all remedies
provided in the Franchise Documents and applicable law including, without
limitation, revocation or termination of the Franchise.
Section 4: The Mayor is hereby authorized to execute a Transfer Agreement
as specified in Section 1(a), and letters of agreement as specified in Section
1(b), on behalf of the City.
INTRODUCED AND PASSED by the Council of the City of Bowie, Maryland, at a
meeting on June 17, 2002.
EFFECTIVE ON THE 27TH DAY OF JUNE, 2002.
WITNESS: CITY OF BOWIE, MARYLAND
By:______________________________
Pamela A. Fleming, City Clerk
By: ______________________________
G. Frederick Robinson, Mayor