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CITY COUNCIL AGENDA ITEM NO. 20

Meeting Date: December 9, 2003

Subject/Title: Public Hearing to Determine Whether a Material Breach of Cable Television Franchise Has Occurred—Assignment of Franchise Without City’s Approval

Submitted By: Dennis Beougher, City Attorney
____________________________________________________________________________

RECOMMENDATION
Set the date and approve a resolution for a public hearing to determine whether a material breach of the City’s cable television franchise and Municipal Code has occurred. Notify the franchisee of the date, time and place of that hearing and the possible grounds for finding a material breach and/or violation of the Municipal Code and the penalties therefor. If the City Council finds, after a full hearing providing adequate notice and procedural due process to the franchisee, that a violation of the City’s cable television franchise and/or Municipal Code has occurred due to an assignment or transfer of the franchise without the City’s prior approval, and/or related violations, that City Council take appropriate action, which may include, but not be limited to, termination of the franchise and/or any other appropriate action, as permitted by the franchise, the Municipal Code and/or applicable law.

This public hearing proposed for January 13, 2004 will consider whether the City should terminate its current cable television franchise, and in addition:

1. under Ordinance 705 (the current “Regulatory Ordinance”), seek forfeitures of $100 per day from the franchisee and its surety under the appropriate bond under chapter 5.24.430 for material violations of the franchise beginning on or about February 28, 2002, but effective as of the date of the Regulatory Ordinance; or

2. under Ordinance 181 (the “1968 Ordinance”), take action against certain persons for criminal penalties under chapter 5.24.340 of that Municipal Code for violating or causing or permitting another person to violate chapter 5.24.330 D of that Municipal Code.

PREVIOUS ACTION
On June 28, 1983, by Resolution No. 83-33, the City issued to a Nevada corporation, Televents of East County, Inc., a license to operate a cable television system. On June 23, 1998, by Resolution No. 98-119, the City extended the term of the Cable Television Franchise with “Televents of East County, Inc., a Nevada corporation”, until September 30, 1998. On September 8, 1998, by Resolution No. 98-160, the City granted a Cable Television Franchise to “Televents of East County, Inc., a Nevada corporation,” until September 30, 2001. On November 13, 2001, by Resolution No. 2408, the City granted a Cable Television Franchise to “Televents of East County, Inc., a Nevada corporation,” from October 1, 2001 through September 30, 2003.

BACKGROUND
The City has always granted or extended its cable television franchise to “Televents of East County, Inc., a Nevada corporation.” This franchise, and all extensions thereof, has been duly accepted by representatives of the franchisee. See letter of July 1, 1998, from Dan McCarty, Division Senior Vice President to Donna J. Rogers; letter of September 15, 1998, from John Kopchik, Division President, to John Elam, City Manager; “Renewal Negotiation Process Terms,” paragraph two, adopted November 26, 2002.

In a letter dated February 28, 2002, Mr. Philip Arndt notified the City about the merger of AT&T Corp., “the parent corporation of your franchisee,” and Comcast Corporation. In that letter, Mr. Arndt assured the City that “the transaction will not change the holder of the franchise; the franchise will continue to be held by the same legal entity after the merger is complete.” In a letter dated November 18, 2002, Mr. Don Schena of Comcast notified the City that said merger had been completed. In a letter dated December 6, 2002, Mr. F. Kent Leacock informed the City that “Televents of East County, Inc., has changed its name to Comcast of California IV, Inc.” He assured the City that “this is merely a name change and does not act to dissolve the corporation or transfer any of its assets.” On July 23, 2003, Philip Arndt submitted a response to the City’s Request for Proposal dated September 4, 2002, in the name of Comcast of California IV, Inc. In response to the City’s interrogatories and requests for production of documents by Comcast, Comcast representatives submitted documents on November 19, 2003, showing for the first time that Comcast of California IV, Inc., is a Wyoming corporation. In addition, on November 19, 2003, Mr. Don Schena testified under oath that Comcast of California IV, Inc., is a Wyoming corporation. On that same date, Ms. Stephanie Phillipps and Mr. Jeffrey Jacobs submitted a brief reiterating that statement.

Nothing has ever been submitted by Televents of East County, Inc., Comcast of California IV, Inc. or Comcast Corporation (represented to be the parent of Comcast of California IV, Inc.) to the City regarding this transaction, either:

as required under the Regulatory Ordinance:

1. seeking the consent of the City to the transfer of the franchise from a Nevada corporation to a Wyoming corporation as required by Resolution No. 83-33, section 11 and Municipal Code section 5.24.300 (a);
2. seeking the City’s approval of the financial capacity and financial responsibility of the apparent transferee as required by Resolution No. 83-33, section 11;
3. promptly notifying the City of any actual or proposed transfer of the Franchise or Cable System as required by Municipal Code section 5.24.300 (a);
4. demonstrating the legal, technical, character and financial qualifications of the transferee as required by Municipal Code section 5.24.300 (d);
5. agreeing that the transferee will abide by all terms and conditions of the Franchise before approval of the transfer as required by Municipal Code section 5.24.300 (g);

or as required under the 1968 Ordinance:

6. seeking to obtain the prior consent of the City Council expressed in writing as required by Municipal Code section 5.24.330 D;
7. filing with the City Council thirty days prior to the transfer written evidence of the proposed transaction certified to by the grantee or its duly authorized officers as required by Municipal Code section 5.24.330 D; or
8. showing the financial responsibility of the proposed assignee to the satisfaction of the City and its agreement to comply with all the relevant provisions of the Municipal Code, as required by Municipal Code section 5.24.330 D.

Staff recommends that the City Council adopt alternatives within the resolution itself. The reason for this is that Comcast’s attorneys have refused to stipulate that the City’s Regulatory Ordinance adopted in Resolution 705 on May 28, 2002 governs the substantive and procedural aspects of a revocation of their franchise, even though Comcast never specifically objected to those provisions before Resolution 705 was adopted. Therefore, Comcast may contend that the prior ordinance, No. 181 adopted November 26, 1968, governs some or all of this proceeding.

There are slight differences in 1) the requirements imposed on the franchisee and the proposed assignee and 2) the language of those requirements, in the current Regulatory Ordinance and the 1968 Ordinance. In addition, while both ordinances permit revocation of the franchise for violations of those transfer-related requirements, the additional penalties are different. In the current Regulatory Ordinance, the City may recover jointly and severally from “the grantee and the surety under the appropriate bond” a forfeiture of $100 per day or less. Under the 1968 Ordinance, “any person who violates or causes or permits another person to violate” the ordinance “is guilty of a misdemeanor” and, upon conviction, “shall be punishable by a fine of not more than five hundred dollars or imprisonment for not more than six months, or by both such fine and imprisonment. A violator may be deemed guilty of a separate offense for each day during a portion of which violation of this chapter is committed, continued or permitted.” Section 5.24.340.(1968)

Based on the information that the City staff possesses and will produce at the hearing, and any evidence that the franchisee may produce, staff recommends that the City conduct a public hearing to determine whether there has been a material violation of the current cable television franchise. If the City Council finds that the franchise was assigned or transferred without the City’s prior approval, and that related requirements were violated, either of which would constitute a material violation warranting termination of the franchise, the City Council should take appropriate action which may include, but not be limited to, termination of the franchise and/or any other appropriate action, as permitted by the franchise, the Municipal Code and/or applicable law.

Attachments:
Resolution

RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL NOTIFYING CABLE TELEVISION FRANCHISEE OF CITY’S INTENT TO TERMINATE FRANCHISE AND SEEK OTHER PENALTIES.

WHEREAS, on June 28, 1983, by Resolution No. 83-33, the City of Brentwood issued to Televents of East County, Inc., a Nevada corporation, a license to operate a cable television system; and

WHEREAS, on June 23, 1998, by Resolution No. 98-119, the City of Brentwood extended the term of the Cable Television Franchise with Televents of East County, Inc., a Nevada corporation, until September 30, 1998; and

WHEREAS, on September 8, 1998, by Resolution No. 98-160, the City of Brentwood granted a Cable Television Franchise to Televents of East County, Inc., a Nevada corporation, until September 30, 2001; and

WHEREAS, on November 13, 2001, by Resolution No. 2408 the City of Brentwood granted a Cable Television Franchise with Televents of East County, Inc., a Nevada corporation, from October 1, 2001 through September 30, 2003; and

WHEREAS, on February 28, 2002 and on December 6, 2002, the City of Brentwood was notified by AT&T Corporation and Comcast Corporation that their merger did not change the holder of the cable television franchise or act to dissolve the corporation or transfer any of its assets; and

WHEREAS, on July 23, 2003, Comcast of California IV, Inc., submitted to the City of Brentwood an application for a renewal of the cable television franchise; and

WHEREAS, on November 18, 2003, Comcast of California IV, Inc. delivered documents to the City showing that it is a Wyoming corporation; and

WHEREAS, on November 26, 1968, the City Council adopted Ordinance No. 181 (an Ordinance Providing for the Granting of Franchises, etc.), codified as Chapter 5.24 of the Municipal Code; and

WHEREAS, on March 26, 2002, the City Council adopted Ordinance No. 700 repealing Chapter 5.24 and adopting a new Chapter 5.24; and

WHEREAS, on May 28, 2002, the City Council adopted Ordinance No. 705, repealing Chapter 5.24 and adopting a new Chapter 5.24.

NOW, THEREFORE, BE IT RESOLVED that the City Council hereby finds that all the above recitals are true and correct, and hereby issues a notice of intent to terminate the Cable Television Franchise held by Televents of East County, Inc. or Comcast of California IV, Inc. or both, for substantial breach by grantee under Municipal Code chapter 5.24.390 A (1), (2), and (6); and chapter 5.24.390 C-F; and to assess penalties pursuant to Chapter 5.24.440, by violating the following material terms of the cable television franchise and the Municipal Code:

Resolution No. 83-33, section 11 for failure to first obtain the City’s approval of the financial capacity and financial responsibility of any transferee or assignee prior to transferring or assigning its rights thereunder;

Municipal Code chapter 5.24.300 (a) for assigning and transferring the Franchise or Cable System without the prior written consent of the City Council;

Municipal Code chapter 5.24.300 (c) for failing to promptly notify the City of any actual or proposed transfer of, or acquisition by any other party of control of, or a change in a controlling interest in, the Franchise or the Cable System;

Municipal Code chapter 5.24.300 (d) for failure of the proposed assignee or transferee of the Franchise or the Cable System to show legal, technical, character and financial qualifications;

Municipal Code chapter 5.24.300 (g) for failure of the successor(s) in interest agreeing in writing to abide by all terms and conditions of the Franchise before approval of the transfer;

In the alternative or in addition, section 15d of Ordinance No. 181, codified as chapter 5.24.330 D of the Municipal Code (1968), for selling, transferring, leasing, assigning or disposing of the franchise without obtaining the prior consent of the City Council expressed in writing;

In the alternative or in addition, section 15d of Ordinance No. 181, codified as chapter 5.24.330 D of the Municipal Code (1968), for not filing with the City Council thirty days prior to the sale, transfer, assignment or lease of the franchise, written evidence of the proposed transaction certified to by the grantee or its duly authorized officers;

In the alternative or in addition, section 15d of Ordinance No. 181, codified as chapter 5.24.330 D of the Municipal Code (1968), for failure of the proposed assignee, purchaser or lessee to show financial responsibility to the satisfaction of the City;

In the alternative or in addition, section 15d of Ordinance No. 181, codified as chapter 5.24.330 D of the Municipal Code (1968), for failure of the proposed assignee to agree to comply with all the provisions of chapter 5.24 of the Municipal Code.

BE IT FURTHER RESOLVED that pursuant to Municipal Code chapter 5.24.390 (c) the City Council will hold a further proceeding on Tuesday, January 13, 2004, at or about 7:00 p.m. in the City Council chambers, 150 City Park Way, Brentwood, California 94513-1396 to place the issue of termination of the franchise before the City Council and to provide written notice to the parties of the City’s intent to terminate the franchise on or after Monday, February 2, 2004, at or about 4:00 p.m. in the City Council chambers, 150 City Park Way, Brentwood, California 94513.

BE IT FURTHER RESOLVED that, pursuant to Municipal Code chapter 5.24.390 (e) the City reserves the right to terminate the franchise on or after Monday, February 2, 2004, at or about 4:00 p.m. in the City Council chambers, 150 City Park Way, Brentwood, California 94513, with no further time for compliance because of fraud or material misrepresentation by or on behalf of Televents of East County, Inc. and/or Comcast of California IV, Inc. and/or Comcast Corporation.

BE IT FURTHER RESOLVED that, pursuant to Municipal Code chapters 5.24.430 and 5.24.440, the City hereby serves notice of its intent at the proceeding on Tuesday, January 13, 2004, at or about 7:00 p.m. in the City Council chambers, 150 City Park Way, Brentwood, California 94513-1396 to recover forfeitures from Televents of East County, Inc., and/or Comcast of California IV, Inc. and/or Comcast Corporation and/or its surety under the appropriate bond, of one hundred dollars ($100.00) per day for the material violations of the Franchise beginning on or about February 28, 2002 but effective with the adoption of the Regulatory Ordinance on May 28, 2002; or

BE IT FURTHER RESOLVED in the alternative or in addition, that, pursuant to Municipal Code chapter 5.24.340 (the 1968 Ordinance), following the proceeding on Tuesday, January 13, 2004, on or about 7:00 p.m. in the City Council chambers, 150 City Park Way, Brentwood, California 94513-1396, the City may refer to the District Attorney the following persons for prosecution under Municipal Code chapter 5.24.340 (the 1968 Ordinance) for violating or causing or permitting another person to violate Municipal Code chapter 5.24.330 D (the 1968 Ordinance):

Televents of East County, Inc.
Comcast of California IV, Inc.
Comcast Corporation
Ralph J. Roberts, Chairman, Comcast Corporation
Brian L. Roberts, President, Comcast Corporation
Stephen B. Burke, President, Comcast of California IV, Inc.
C. Stephen Backstrom, Vice President, Comcast of California IV, Inc.
Arthur R. Block, Senior Vice President, Secretary and Director, Comcast of California IV, Inc.
Donald Schena, Regional Senior Vice President, Comcast Cable Communications, Inc.
F. Kent Leacock, Vice President of Government Affairs and Franchising, Comcast Cable Communications, Inc.
Philip Arndt, Government Affairs Manager, Comcast Cable Communications, Inc.
Jeffrey A. Jacobs, Esq., Comcast Cable Communications, Inc.
Stephanie M. Phillipps, Esq., Arnold and Porter

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 9th day of December 2003, by the following vote:
 

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