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HomeMy WebLinkAbout2000-05-23 - AGENDA REPORTS - CABLE TRFR AOL TIME WARNER (2)CITY OF SANTA CLARITA AGENDA REPORT City Manager Approva/Steve Item to be presented btark NEW BUSINESS DATE: May 23, 2000 SUBJECT: TIME WARNER TRANSFER TO AOL TIME WARNER, INC. DEPARTMENT: Administrative Services RECOMMENDED ACTION City Council adopt Resolution, changing control of the cable franchise from Time Warner Cable to AOL Time Warner, Inc. BACKGROUND The action before Council is to authorize a franchise transfer from Time Warner Cable to AOL Time Warner, Inc. Legally, to do this, a City must evaluate three qualifications to approve a franchise transfer from one cable company to another. The three qualifications that must be met are: Legal: Is AOL Time Warner legally qualified to operate in the State of California? Economic: Is AOL Time Warner financially sound to continue cable operation in the City of Santa Clarita? Technical: Is AOL Time Warner technically qualified to continue operating the cable system in the City of Santa Clarita? A City must find that the new company meets all three qualifications before it can legally approve a franchise transfer. The rules for transferring a cable franchise are very narrow in scope and therefore do not allow the City of Santa Clarita to consider additional factors. As a result of staffs review, it has been determined that designated transferee, AOL Time Warner, Inc., has met all qualifications for the City Council to approve a franchise transfer. Staff arrived at this conclusion by working with the City Attorney, who has provided the City with a legal opinion based on review of the Federal Communication Commission Form 394, furnished by both AOL and Time Warner Communications (see attachment). In addition, just as Council directed staff the last time a franchise transfer took place, a public meeting was held on April 5, 2000. This meeting provided residents the opportunity to comment on cable services in the City by Time Warner Cable and MediaOne, even though only Time Warner is involved in the transfer. The meeting was not well attended Adopted: t W_ � 3 "� TIME WARNER TRANSFER TO AOL TIME WARNER, INC. May 23, 2000 — Page 2 by the public; however, staff was able to review the details of the transfer with several Time Warner cable representatives. Outside of the cable television transfer being presented tonight for consideration, staff has also met with Time Warner Cable to discuss issues related to assisting the City in bringing the latest technology to Santa Clarita. The Administrative Services Department is currently working with the City Manager's Office in developing a plan with Time Warner Cable to provide the new Canyon Country Library with Internet connections that far exceed their obligation under the traditional social contract. Making new technologies available to all residents in the City continues to be a priority for staff as the City's cable companies introduce state-of-the-art technologies in Santa Clarita. Additionally, City staff continues to monitor the changes in cable television in the City. As the City Council may be aware, on April 30, 2000, Time Warner. Communications was unable to reach an agreement with Disney Corporation concerning the retransmission of Disney -owned KABC Channel 7. Therefore, on Monday May 1, Channel 7 was pulled from all of Time Warner customer's channel line-up by blacking out the station. Since then, Channel 7 has been restored until at least July 15 of this year. In the meantime, both Time Warner and Disney are once again negotiating an agreement to restore the KABC network permanently to all Time Warner customers. The City's Administrative Services Department has met with both Disney and Time Warner representatives to better understand the implications of their decision on residents in Santa Clarita. The Mayor has also sent a letter to Eric Brown, Vice President & General Manager of Time Warner Communications, stating that the City of Santa Clarita should be provided with sufficient notice when programming is going to be disrupted. Staff will continue to monitor these negotiations and provide updates to the Council as necessary. As a result of the disruption, Time Warner Cable has taken some initial steps in addressing the KABC Channel 7 blackout. Time Warner will be giving a two-day credit on basic reception service, which will amount to a $1.00 credit on the next monthly bill. They will also be providing a free month of HBO Family to all of their customers, starting June 15. Staff is pleased that Time Warner has chosen to offer credits due to the disruption. It is staffs hope that an agreement will be worked out between Disney and Time Warner by July 15. ALTERNATIVE ACTIONS Do not adopt Resolution, changing control of franchise transfer from Timer Warner Cable to AOL Time Warner, Inc. Other action as determined by Council. TIME WARNER TRANSFER TO AOL TIME WARNER, INC. May 23, 2000 — Page 3 FISCAL IMPACT Time Warner Communications will reimburse the City for any expenses that we have incurred in transferring the franchise, including staff and legal cost. ATTACHMENTS Resolution of Franchise Transfer Attorney Opinion Letter SS:FO:hds W�61\wc,Wefr BURKE, WILLIAMS & SORENSEN, LLP QfEICE MZFMQRAND1JM TO: Frank Oviedo FROM: Stephen R. Onstot—� � `.� f% �/ FILE NO. 02012-0407 DATE: May 2, 2000 RE: FCC394 Application of Time Warner Communications for Transfer of Cable Television Franchise within City of Santa Clarita Upon review of the supplemental materials recently received completing the AOL/Time Warner Communications FCC394 Application for Transfer of Cable Television Franchise, it is clear that the transferee possesses the requisite legal, financial, and technical qualifications for approval of the application. The cable franchise, upon approval of transfer, would be operated by essentially the same franchisee as prior to the America On Line, Inc. (AOL) and Time Warner, Inc. merger. The designated transferee would be AOL Time Warner, Inc., d.b.a, Time Warner Cable. Time Warner, Inc. and AOL will continue to operate as wholly-owned subsidiaries of the newly formed AOL Time Warner, Inc. Likewise, the current franchisee, Time Warner Communications, a subsidiary of Time Warner, Inc. will continue to exist as a subsidiary of AOL Time Warner, Inc. Under the merger agreement, AOL and Time Warner, Inc. will continue to conduct and pursue the same lines of business in essentially the same manner as prior to the merger. Therefore, Time Warner Communications will maintain its license to conduct business within California and shall continue to be legally qualified to act as a cable franchisee within the City of Santa Clarita. From the annual reports of both AOL and Time Warner, Inc. and their recent SEC filings included in the application, it is clear that the franchisee will continue to possess the requisite financial qualifications for operation of the cable franchise. Additionally, because the franchise will be operated by essentially the same entity, it is also clear that the applicant possesses the requisite technical qualifications to continue to do so. Accordingly, we see no legal reason why the proposed change of control should be disapproved by the City Council.