4 Cable TV Franchise Apps.BRIAN T. GROGAN
',612) 347-0340
E-Mail: GroganB~moss-bamett.com
August 8, 2000
VIA U.S. MAIL AND E-MAlL
Mr. Scott Botcher
City Manager
City of Chanhassen
P.O. Box 147
Chanhassen, MN 55317
Re:
Report Regarding Everest Connections Corporation's Proposal for a Cable
Communications Franchise
Dear Scott:
Enclosed herewith please find Moss & Bamett's Report to the City of Chanhassen,
Minnesota regarding Everest Connections Corporation's proposal for a cable communications
franchise. The report should be distributed to the City Council for its review and consideration.
If you have any questions or ifI can provide any additional information or clarification,
please feel free to contact me.
Very truly yours,
BTG/tlh
Enclosures (sent via U.S. Mail and e-mail)
CC:
Brian T. Grogan
Jane Bremer, Esq., legal counsel to Everest (via U.S. Mail w/enclosure)
Mr. Tom Bordwell, Mediacom Minnesota, LLC (via U.S. Mail w/enclosure)
354002/I
Report to the City
Chanhassen, Minnesota
Regarding Everest Connections Corporation's
Proposal for a Cable
Communications Franchise
August 7, 2000
Prepared by:
BRIAN T. GROGAN
MICHAEL R. NIXT
Moss & Barnett
A Professional Association
4800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4129
Phone: (612) 347-0340
Fax: (612) 339-6686
E-mail: groganb@moss-barnett.com
Report to the City of
Chanhassen, Minnesota
Regarding Everest Connections Corporation's
Proposal for a Cable
Communications Franchise
August 7, 2000
TABLE OF CONTENTS
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Section 6.
Section 7.
Section 8.
Section 9.
Introduction ................................................................................................ 1
Statutory Requirements ............................................................................. 2
Procedure Followed by City ..................................................................... 12
Information Reviewed .............................................................................. 13
Everest's Legal Qualifications .................................................................. 14
Everest's Technical Qualifications ............................................................ 16
Everest's Financial Qualifications ............................................................. 20
Compliance with State Requirements ...................................................... 24
Recommendations ................................................................................... 28
Exhibits:
Notice of Intent to Franchise
Request for Proposal Official Form
Letter to the City dated July 12, 2000 from Jane Bremer, Esq., of Larkin Hoffman
Daly & Lindgren, Everest's legal counsel
Proposed Resolution
353554/1
Section 1.
Introduction.
In April of 2000, Everest Connections Corporation ("Everest") requested the
issuance of a cable communications franchise from the City of Chanhassen, Minnesota
("City") to construct, own and operate a cable system.
The City contacted Moss & Barnett seeking input regarding the appropriate
procedure to be followed when considering the award of a cable communications
franchise to Everest or any other qualified entity. Moss & Barnett reviewed state and
federal statutory requirements with City representatives ~tnd developed a
comprehensive franchise procedure to comply with applicable laws.
In accordance with Minnesota Statutes § 238.081, the City published a Notice of
Intent to Franchise (attached as Exhibit A) and requested applications for a franchise
from any interested entities. Copies of the Notice of Intent to Franchise were forwarded
directly to Everest and to the City's existing cable television operator, Mediacom
Minnesota, LLC ("Mediacom"). Applicants were instructed to obtain from the City a
Request for Proposal Official Application Form (attached hereto as Exhibit B). Upon the
deadline for submitting applications, July 12, 2000, the City received an application from
Everest.
Pursuant to Minnesota Statutes § 238.081, the City has scheduled a public
hearing for August 14, 2000 to receive input from interested parties regarding Everest's
application. Input will be provided at the public hearing with respect to Everest's
application.
This report will review relevant statutory requirements that the City must follow in
processing a request for a cable communications franchise. The report will then outline
each and every source of information received and considered in preparing this report.
Thereafter, the report will review Everest's legal, technical and financial qualifications to
own and operate a cable communications system in the City, as well as whether
Everest's application complies with State statutory requirements. Finally, the report will
provide recommendations for the City Council's consideration in taking action on
Everest's application.
353554/1 1
Section 2.
Statutory Requirements.
Federal Regulatory Scheme: Competition Among Cable Television
Providers and the Federal Cable Act
The Cable Communications Policy Act of 1984, as amended by the Cable
Consumer Protection And Competition Act of 1992 and the Telecommunications Act of
1996 (hereinafter collectively referred to as the "Cable Act") contains many provisions
relevant to the application before the City. According to the Cable Act, one of its
primary purposes is to
promote competition in cable communications and minimize unnecessary
regulation that would impose an undue economic burden on cable
systems. ~
Furthermore, 47 U.S.C. § 541(a)(1) provides that a franchising authority may
award one or more franchises within its jurisdiction. To that end, the Cable Act states
that a franchising authority may not grant an exclusive franchise and may
not unreasonably refuse to award an additional competitive
franchise. ,,2
Any applicant whose application for a second franchise has been denied by a
final decision of a franchising authority is not without recourse. The applicant may
appeal an adverse decision pursuant to the provisions of § 635 of the Cable Act.
The Cable Act also provides that a city may require certain assurances from the
prospective franchisee. Subsection 4 of 47 U.S.C. § 541(a) provides that
in awarding a franchise, the franchising authority-
Ao
B°
Co
shall aflow the applicant's cable system a reasonable period of time
to become capable of providing cable service to all households in
the franchise area;
may require adequate assurance that the cable operator will
provide adequate public, educational, and governmental access
channel capacity, facilities, or financial support; and
may require adequate assurance that the cable operator has the
financial, technical, or legal qua/if/cations to provide cable service."
1 47 U.S.C. § 521 (b).
2 47 U.S.C. § 541 (a)(1) (emphasis added).
353554/1 2
that it
report
When it passed the 1992 amendments to the Cable Act, Congress suggested
favors competition in the delivery of cable communications services. The Senate
that accompanied the amendments concluded that:
Based on the evidence and the record taken as a .whole, it is clear that
there are benefits from competition between two cable systems. Thus, the
Committee believes that local franchising authorities should be
encouraged to award second franchises. Accordingly, [the Cable Act
as amended], prohibits local franchising authorities from unreasonably
refusing to grant second franchises.3
Federal Communications Commission Observations on Competition in the
Cable Television Industry
Five years after the Cable Consumer Protection and Competition Act of 1992, the
Federal Communications Commission ("FCC") noted that "local markets for the delivery
of video programming generally remain highly concentrated and continue to be
characterized by some barriers to entry and expansion by potential competitors to
incumbent cable systems.''4 The FCC further found that competitive overbuilding - i.e.,
the process of constructing a second, competing cable system - by franchised cable
operators remains "minimal but is increasing.''5 In the "relatively few areas" where head-
to-head competition between cable providers has developed, the FCC found that "cable
operators have responded quickly with a mix of increased programming choices, lower
rates, and improved customer service.''6
The FCC outlined a number of communities where competitive overbuilding has
occurred throughout the United States. In particular, the FCC stated as follows:
From 1995, when overbuild activity began to increase, to June 1998,
competing franchises have been awarded covering 149 communities in 21
states with the potential to pass 7.2 million homes. However, not all of the
franchises awarded are currently in operation serving customers. Once a
franchise is awarded, it takes a significant amount of time for the
franchisee to build or gain access to a network over which to provide video
service. For example, as of December 1998, Ameritech held 87 franchise
awards, but of the communities included in those franchise areas, service
is currently being offered in only 72 communities (i.e. parts or whole of the
87 franchise areas). Ameritech's 87 franchise awards gives it the potential
to pass 1.5 million homes, and Ameritech thus far has passed 1 million of
those homes with its infrastructure. As of December 1998, Ameritech had
3 (emphasis added). S. Rep. No. 102-92, June 28, 1991, reprinted in 1992 U.S. Code Cong. & Admin.
News 1133, 1141, 1146, 1151; H.Conf. Rep. No. 102-862, reprinted in 1992 U.S. Code Cong. & Admin.
News 1231, 1259.
4
In the matter of annual assessment of status of competition in markets for the delivery of video
programming, FCC 97-423, C.S. Docket No. 97-10 (F.C.C. December 31, 1997).
Id. At 10.
6~. At 6; see also Id. At 107.
353554/1 3
a total of 200,000 customers. Given these figures, it appears that
Ameritech has achieved penetration rates of approximately 10% within its
total of 87 franchise areas. This compares with a current national cable
penetration rate of 68%. Because Ameritech has not completed
construction in all 88 areas, however, its penetration rate in areas of direct
competition is significantly higher. Other local exchange carriers ("LECs")
also have yet to build out their entire awarded franchise areas. Bell South
offers service in parts or whole of nine of its 18 franchise areas. GTE
offers service in three of its 11 franchise areas, and SNET offers service in
12 cities within its Connecticut statewide franchise area. More discussion
about Ameritech video service provision and other LEC video efforts are
discussed later in this Report.
Among other smaller firms awarded competing franchises are
RCN-BETG, McLeodUSA, Knology Holdings, Inc., Private Cable Ltd.,
Fiber Vision. New overbuilds since our 1997 Report include
McLeodUSA's overbuild in Cedar Rapids, Iowa which competes with
incumbent TCI. The competitor offers cable video and audio channels
and Internet access, while the incumbent offers cable video and audio
channels, with plans to offer Internet access by the end of November
1998. McLeodUSA is also expanding its fiber optic network in the area,
over which it currently derivers local phone and long distance service in
the city. The company plans to target Des Moines, Iowa next. In May,
1998, Knology Holdings, Inc. was awarded a franchise for 132,000 homes
passed in Charleston, South Carolina, where it has started to compete
with Comcast and Time Warner. Knology already passes 68,000 homes
in Columbus, Ohio; 82,000 homes in Montgomery, Alabama; and 97,000
homes in Huntsville, Alabama where it competes with TCI, Charter,
Comcast, Media Communications, and Wireless One. Knology, similar to
overbuilders RCN and McLeodUSA, offers its customers numerous
services including video, telephony and high-speed Internet access
services, z
We have incorporated into this Report Section 4 of the 1998 FCC Competition
Report. In Section 4, the FCC describes case studies where a second cable operator
has been authorized to compete against incumbent cable operators and the impact on
local cable subscribers. In these case studies, as well as in case studies outlined in its
1997 Report, the FCC found that
incumbent cable operators, when challenged by a new MVPD
[Multi]Channel Video Programming Distributor] entrant, are responding in
a variety of ways. Incumbents have responded by offering better
customer services, new services, new products, larger channel
7 Id. At 25-26 paragraphs 43 and 44 (footnotes omitted).
353554/1 4
compliments for the same price, and, in two cases, apparently cutting
prices?
The FCC concludes its findings in Section 4 of the 1998 Competition Report by
stating "competitive alternatives and consumer choices are still developing and potential
competitors to incumbent cable operators continue to face barriers to enter into markets
for the delivery of video programming."
It does appear, however, the FCC is attempting to reduce these barriers to
competition. In the 1998 FCC Competition Report, FCC Chairman William Kennard
stated that "competition is preferable to regulation.''9 Chairman Kennard argues that
Congress envisioned the removal of market entry barriers, resulting in competition that
would offer additional viewing choices at reasonable prices to millions of American
families across the nation.1° In analyzing the data presented in the FCC Report,
Chairman Kennard indicated that "85% of all households subscribing to multi-channel
video service receive that service from their local cable operator (a 2% decline from the
87% reported a year ago). With this high market share, it is not surprising that cable
prices rose more than four time the rate of inflation between June 1997 and June
1998."11 Chairman Kennard additionally noted that:
The drop in local cable operators' dominance of this market
is primarily due to the continued growth of DBS Systems,
and to a lessor degree, the launch of new open video
systems and instances where incumbent cable operators
have faced head-to-head competition from other cable
operators. These cases are immensely important for they
teach us an important lesson. That lesson is that
competition brings consumer benefits. And, as we
continue to move towards a competitive market, it is my
hope that consumers will benefit from lower prices, improve
customer service, and additional services. 12
Finally, in a separate statement, FCC Commissioner Ness observed that:
"When markets are fully competitive- when people have
meaningful choices- the need for government regulation
abates and benefits of competition are manifest: lower
prices, new and different service offerings, and better
customer service. I am encouraged by the level of
competition that has been achieved thus far, and I support
8 Id. At 120.
9~.
~°~-d. Statement of FCC Chairman William Kennard at 1.
11 Id.
12 I____.(emphasis added).
353554/1 5
efforts by industry and .qovernment to attain a fully
competitive market for video pro.qramminp distribution.''~3
Recent developments: the FCC's 1999 Report
Subsequent to its 1998 comments, the FCC notes additional competition in the
cable television markets in its 1999 Report. In broad terms, the FCC remarked that
"[n]ew municipal overbuild activity continues to grow.''~4 From 1995 to 1999, competing
franchises had been awarded in 210 communities in 28 states.~5 According to the FCC,
incumbent franchises have responded to this competition in a variety of ways, including
"lowering prices, providing additional channels at the same monthly rate, improving
customer service, or adding new services including high speed Internet and telephone
services?8 In Oakland County, Michigan, Ameritech, the competitor, offered a variety
of incentives to consumers in response to the incumbent's promotions. Incentives
offered by Ameritech included "free cable service for two months, $120 worth of
grocery coupons, a free premium movie channel, and free installation.''~7
Despite these advances, the FCC's 1999 report stated that questions remain with
regard to the increased competition. Generally, these concerns have to do with the
long-term viability of the competitors. According to the FCC, "[o]verbuilding often
requires 'deep pockets' to withstand competitive responses from incumbents that lower
prices and increase services.'~8 Therefore, "difficulties obtaining programming and
steep discounts enjoyed by incumbent cable operators can hinder overbuilders' ability to
compete effectively in the video distribution market.''19
In conclusion, the FCC's 1999 report offered some preliminary findings. First, the
FCC found that subscribers have generally benefited from "head-to-head" competition.
Benefits enjoyed by consumers as a result of the increased competition include:
lower monthly charges for services and equipment;
additional program offerings;
access to alternative sources of telecommunications and Intemet services;
new digital services; and
better customer service from the incumbent cable operator?
Second, the FCC determined that incumbent operators have responded to the
increased competition by using "price" rather than "non-price" competitive measures.2~
13_Id. Statement of FCC Commissioner Ness at 2 (emphasis added).
~4 In the matter of annual assessment of status of competition in markets for the delivery of video
~rogramming, FCC 99-418, C.S. Docket 99-230 (F.C.C. December 30, 1999).
s Id. at 22.
~6 ~ at 93.
17 Id. at 94.
~8 I~. at 67 (footnotes omitted).
19 ~ (footnotes omitted).
2o ~
21 ~
353554/1 6
Third, the benefits of competition do not extend beyond those communities
where the competition is present. The FCC's 1999 report cites situations where
competition enjoyed by customers in one municipality does not positively affect the
rates or services in a neighboring location.22 Finally, the FCC observed that the benefits
of competition may be short-lived. Its report referenced the competition between an
incumbent, Coaxial Cable, and a new entrant, Ameritech, in Columbus, Ohio. In that
situtation, the incumbent was forced to sell a 75% stake in its Columbus operations due
to "mounting losses and large sums required to upgrade?3
Minnesota Statutory and Judicial Treatment of Competition in the Cable
Television Industry
Minnesota Statutes
In addition to the requirements contained in the federal Cable Act, Minnesota has
several statutory provisions that must be carefully followed by the City when considering
the award of a franchise. In particular, Minnesota Statutes Chapter 238.08, titled
Franchise Requirement, states that a municipality must require a franchise or
extension permit of any cable communications system providing service within the
municipality. Also, Minnesota Statutes § 238.081, Franchise Procedure, provides a
precise procedure to be followed by a municipality when requesting applications for a
cable communications franchise.
The text of § 238.08 and § 238.081 is set forth below to provide the City with the
exact requirements of state law on this matter.
Minnesota Statute § 238.08, Franchise Requirement, provides in pertinent
part:
Subdivision 1. (a) A municipality shall require a franchise or extension permit of
any cable communications system providing service within the municipality.
(b) No municipafity shall grant an additional franchise for cable service for an
area included in an existing franchise on terms and conditions more favorable or less
burdensome than those in the existing franchise pertaining to: (1) the area served; (2)
public, educational, or governmental access requirements; or (3) franchise fees. The
provisions of this paragraph shall not apply when the area in which the additional
franchise is being sought is not actually being served by any existing cable
communications company holding a franchise for the area. Nothing in this paragraph
prevents a municipa#ty from imposing additional terms and conditions on any additional
franchises.
22 Id._~. ("[I]n Independent, Ohio, Cablevision charges a total package price of $50.69 for a channel line-up
nearly identical too that offered by in nearby Brooklyn, Ohio, for $30.90 where it competes with
Ameritech.").
23 Id__~.
353554/1 7
Subd. 2. Nothing in this chapter shall be construed to prevent franchise
requirements in excess of those prescribed unless such requirement is inconsistent with
this chapter.
Subd. 3. Nothing in this chapter shall be construed to limit any municipality from
the right to construct, purchase, and operate a cable communications system. Any
municipal system shall be subject to this chapter to the same extent as would any
nonpublic cable communications system.
Subd. 4. Nothing in this chapter shall be construed to limit the power of any
municipality to impose upon any cable communications company a fee, tax or charge.
Minnesota Statute § 238.081, Franchise Procedure, provides in pertinent part:
Subdivision 1. Publication. The franchising authority shall have published
once each week for two successive weeks in a newspaper of general circulation in each
municipality within the cable service territory, a notice of intent to franchise, requesting
applications for the franchise.
Subd. 2. Required information. The notice must include at least the following
information:
(1) the name of the municipality making the request;
(2) the closing date for submission of applications;
(3) a statement of the application fee, if any, and the method for its submission;
(4) a statement by the franchising authority of the desired system design and
services to be offered;
(5) a statement by the franchising authority of criteria and priorities against which
the applicants for the franchise must be evaluated;
(6) a statement that applications for the franchise must contain at least the
information required by subdivision 4;
(7) the date, time, and place for the public hearing, to hear proposals from
franchise applicants;
(8) the name, address, and telephone number of the individuals who may be
contacted for further information.
Subd. 3. Other recipients of notice. In addition to the published notice, the
franchising authority shall mail copies of the notice of intent to franchise to any person it
has identified as being a potential candidate for the franchise.
Subd. 4. Contents of franchising proposal The franch/s/ng authority shall
require that proposals for a cable communications franchise be notarized, and contain,
but not necessarily be I/mited to, the follow/ng /nformation:
353554/I 8
(1)
(7)
(8)
(10)
(11)
Plans for channel capacity, including both the total number of channels
capable of being energized in the system and the number of channels to
be energized immediately;
A statement of the television and radio broadcast signals for which
permission to carry will be requested from the Federal Communications
Commission;
A description of the proposed system design and planned operation,
including at least the following items:
(i) the general area for location of antennae and the head end, if
known;
(ii) the schedule for activating two~way capacity;
(iii) the type of automated services to be provided;
(iv) the number of channels and services to be made available for
access cable broadcasting; and
(v) a schedule of charges for facilities and staff assistance for access
cable broadcasting;
the terms and conditions under which particular service is to be provided
to governmental and educational entities;
a schedule of proposed rates in relation to the services to be provided,
and a proposed poficy regarding unusual or difficult connection of
services;
a time schedule for construction of the entire system with the time
sequence for wiring the various parts of the area requested to be served in
the request for proposals;
a statement indicating the applicant's quafifications and experience in the
cable communications field, if any;
an identification of the municipafities in which the applicant either owns or
operates a cable communications system directly or indirectly, or has
outstanding franchises for which no system has been built;
plans for financing the proposed system, which must indicate every
significant anticipated source of capital and significant limitations or
conditions with respect to the availability of the indicated sources of
capital;
a statement of ownership detailing the corporate organization of the
applicant, if any, including the names and addresses of officers and
directors and the number of shares held by each officer or director, and
intracompany relationship including a parent, subsidiary or affiliated
company; and
a notation and explanation of omissions or other variations with respect to
the requirements of the proposal
Substantive amendments may not be made in a proposal after a proposal
has been submitted to the franchising authority and before award of a
franchise.
353554/1 9
Subd. 5. Time limits to submit applications. The franchising authority
shall allow at least 20 days from the first date of published notice to the closing
date for submitting applications.
Subd. 6. Public hearing on franchise. A public hearing before the franchising
authority affording reasonable notice and a reasonable opportunity to be heard with
respect to all applications for the franchise must be completed at least seven days
before the introduction of the franchise ordinance/n the proceedings of the franchising
authority.
Subd. 7. Award of franchise. Franchises may be awarded only by ordinance.
Subd. 8. Costs of awarding franchise. Nothing in this section prohibits a
franchising authority from recovering from a successful applicant the reasonable and
necessary costs of the entire process of awarding the cable communications franchise.
In addition to the above referenced state statutes, Minnesota Statutes § 238.084
identifies the required contents of a franchise ordinance. Given that the City has an
existing Franchise Ordinance with Mediacom Minnesota, LLC24 (the "Mediacom
Franchise") that complies with the requirements of § 238.084, the City may grant
substantially the same ordinance to Everest if the City finds that Everest is a qualified
applicant. The reason for using substantially the same franchise is to ensure that any
and all entities providing cable communications service within the City are treated in a
competitively neutral and nondiscriminatory manner so that no one entity is given an
unfair advantage over the other. While there is no statutory requirement for such
uniformity, we strongly recommend equal regulatory treatment for all cable operators in
the City.25 Furthermore, the Mediacom Franchise at Section 2.5 contains a requirement
for a level playing field which the City must consider when entertaining the grant of a
franchise to a competitive provider.
Judicial Treatment: The Minnesota Court of Appeals' Decision Regarding
Minnesota's Cable Statutes and Competing Cable Television Franchises
In its report accompanying the 1992 amendments to the federal Cable Act, the
United States Senate observed that:
24 Ordinance No. 280 effective on or about July 9, 1998, expiration date on or about July 9, 2013.
25 Minn. Stat. §238.08(b) requires only that additional franchises cannot be granted on terms and
conditions more favorable or less burdensome that those in the existing franchise pertaining to: 1. The area served;
2. Public, educational and governmental access requirements; or
3. Franchise fees.
353554/1 1 0
In addition to mergers between an incumbent cable system and a potential
competitor, incumbent cable systems often wage legal battles to prevent
cities from awarding second franchises or building their own franchises.26
In 1999, the Minnesota Court of Appeals addressed one of these "legal battles"
referenced by the Senate Report. In In Re Application of Dakota Telecommunications
Group, d/b/a Dakota Telecom, Inc., for a Cable Television Franchise in Marshall,
Minnesota (hereinafter "Dakota Telecom"), the incumbent franchise, Bresnan
Communications ("Bresnan"), challenged the City of Marshall's ("Marshall")27 grant of a
competing franchise to Dakota Telecommunications Group ("DTG"). Bresnan argued,
among other things, that Marshall acted "arbitrarily and capriciously" when it granted the
competing franchise and that Marshall violated Bresnan's due process rights.
The Court of Appeals rejected Bresnan's arguments and generally determined
that an incumbent franchisee may not challenge the general fitness of a competing
franchise. In its opinion, it noted that Minnesota's cable statutes were "enacted to
encourage such competition." The opinion further recognized that:
Although [Minnesota's] Cable Act.. intends to further the public's
interest by only awarding franchises to responsible cable operators, it
does not support an incumbent franchisee's attempt to secure a monopoly
by challenging the fitness of new, competing franchises·
Also, the court determined that Marshall adhered to all procedural requirements when it
considered the competing application. According to the court,
Because [Marshall] properly focused on DTG's ability to construct and
initially operate its proposed system, we conclude it sufficiently considered
substantial evidence of DTG's financial condition.
This decision from the Court of Appeals provides additional guidance for cities
considering an application for a competing franchise. Generally, three lessons may be
learned from the case:
Minnesota courts will give broad discretion to a city's decision whether to
award a competing franchise as long as the city follows the applicable
statutory framework;
Minnesota's Cable Act was designed to encourage and foster competition
in the cable television industry; and
An incumbent franchisee may not challenge the city's decision to award a
competing franchise on due process grounds.
26 S. Rep. No. 102-92, June 28, 1991, reprinted in 1992 U.S. Code Cong. & Admin. News 1133, 1141,
1146, 1151; H. Conf. Rep. No. 102-862, reprinted in 1992 U.S. Code Cong. & Admin. News 1231, 1259.
27 Moss & Barnett represented the City of Marshall in the process of awarding a franchise to Dakota
Telecommunications Group.
353554/1 1 1
Section 3.
Procedure Followed by City.
In April of 2000, Everest requested that the City conduct the required procedure
to consider the award of a cable communications franchise to Everest. After
consultation with Moss & Barnett a detailed procedure was prepared to comply with
applicable state and federal laws regarding the processing of Everest's request.
To that end, on June 12, 2000, the Chanhassen City Council authorized
publication of a Notice of Intent to Franchise a Cable Communications System. The
notice was published once each week for two successive weeks in the Chanhassen
Villager, the newspaper of general circulation in the City. The Notice was first published
on June 22, 2000, and was thereafter published on June 29, 2000. Copies of the Notice
of Intent to Franchise and the Affidavits of Publication have been attached hereto as
Exhibit A.
The Notice of Intent to Franchise referenced the City's Request for Proposals
Official Application Form which was made available on request at the office of the City
Clerk. Copies of the Notice of Intent to Franchise and Official Application Form were
sent directly to Everest, WOW, Seren Innovations, Inc., as well as the incumbent cable
operator, Mediacom. A copy of the Official Application Form has also been enclosed
herewith as Exhibit B.
Pursuant to Minn. Stat. §238.081 the City established a deadline for submitting
applications on July 12, 2000, at least twenty (20) days following the first date of
publication.
The City will publish a Notice of a Public Hearing to receive input on Everest's
application. The Public Hearing is scheduled for August 14, 2000 at approximately 6:30
p.m. All interested parties will have an opportunity to comment on Everest's application.
353554/1 12
Section 4.
Information Reviewed.
Below is a listing of all information received and reviewed by Moss & Barnett.
Each of the listed documents was carefully reviewed and considered in the
preparation of this report, and are hereby incorporated into this report by
reference. The information contained within these documents is part of the City's
record on which the City's decision is based.
Ao
Notice by the City of Chanhassen, Minnesota of its intent to franchise a
cable communication system published in the Chanhassen Villager on
June 22, 2000 and June 29, 2000, together with Affidavits of Publication.
City of Chanhassen, Minnesota Request for Proposals-Official Application
form.
Letter dated July 12, 2000 from Jane Bremer, Esq. of Larkin Hoffman Daly
& Lindgren, Everest's legal counsel, to the City enclosing Everest's
application proposal (including all exhibits).
Letter from 'Bremer dated July 27, 2000 enclosing revised page 11 for
Everest's application.
353554/1 1 3
Section 5.
Everest's Legal Qualifications.
The legal qualifications standard relates primarily to an analysis of whether
Everest is duly organized and authorized to own and operate a cable communications
system within the City.
Everest Connections Corporation ("Everest") is a Delaware corporation and has
not yet created its planned Minnesota operating subsidiary. Everest represents that it is
a corporation duly organized, validly existing and in good standing under the laws of the
State of Delaware.
As outlined in the chart following this page, Everest is wholly owned by Everest
Global Technologies Group, LLC ("EGTG"). The Minnesota operating subsidiary will
also be wholly owned by EGTG. Everest has indicated an intent to assign any franchise
granted by the City to the operating subsidiary which subsidiary will enter into a
management agreement with Everest. Any franchise granted by the City to Everest
should be conditioned upon the City's ability to consider requiring an appropriate
corporate guarantee at the time of any proposed assignment.
Based on our review of the information provided, we do not believe the City can
reasonably withhold approval of Everest's request to obtain a cable communications
franchise based upon Everest's legal qualifications.
353554/1 1 4
UtiliCorp
United, Inc.
EVEREST
GLOBAL
TECHNOLOGIES
GROUP, LLC
GLA
NEW VENTURES
LLC
100%
I
EVEREST
CONNECTIONS
CORPORATION
(management
company)
-- management agreement
I
Minnesota
Operating
Subsidiary
100%
EVEREST
CONNECTIONS
CORPORATION
OF VIRGINIA
GLA NETWORK
TECHNOLOGIES,
INC.
353554/1 1 5
Section 6.
Everest's Technical Qualifications.
The technical qualification standard relates to the technical expertise and
experience of Everest with respect to cable communications.
Everest is a relatively new entrant into the cable television industry and does not
currently operate a cable communications system in any other city in the State of
Minnesota or nationwide. Everest is in the process of constructing a cable system
throughout the Kansas City metropolitan area and is seeking authorization in Fort
Lauderdale, Florida and Tulsa, Oklahoma. To aid the City in an analysis of the
responses provided by Everest to the technical qualifications questions contained within
the application, we have retained the services of Mr. Jonathan Kramer of Kramer. Firm,
Incorporated.
Mr. Kramer is nationally recognized by government telecommunications
administrators, cable television operators and telecommunications business leaders, as
a leading communications technology advisor in the areas of broadband
communications, cable communications, telephony, and wireless communications
(cellular, PCS, broadcast, and satellite). He has broad practical experience, as well as
comprehensive theoretical knowledge in the broadband communications field. With
undergraduate education at CSUN, UCLA, LATTC, and WLAC; AS Degree in Radio
Communications (with honors), Los Angeles Trade Technical College.
Mr. Kramer's analysis of Everest's application
Pa.qe I of the Application
Bandwidth
Everest indicates that it intents to construct and operate an 860 MHz system.
Such a system is able to carry about 135 uncompressed video channels in normal
NTSC format. Thus, I would Everest employ some level of video compression at the
time of system activation, with increasing use of digital compression thereafter.
A system bandwidth of 860 MHz is consistent with systems being rebuilt and
deployed elsewhere. Only a few systems have attempted to activate bandwidth in
excess of 860 MHz due, primarily, to signal maintenance problems associated extended
bandwidth.
Digital Compression/Digital Music
Future deployment of "more than three hundred (300) channels of video service
and forty (40) channels of digital music service" is easily accomplished using the
bandwidth proposed, coupled with digital compression.
353554/1 1 6
PaRe 3 of the Application
Fiber-to-Feeder Architecture; Homes per Node; Status Monitor
Here, Everest expands on its technology element statement to indicate its intent
to use a fiber-to-feeder architecture with each fiber node serving an average of 125
homes. Further, Everest proposes to employ "state-of-the-add electronics" and status
monitoring. Each of the elements is consistent with a high quality, technically
sophisticated cable system.
PaRe 4 of the Application
Two- Way System Design/Activation
Everest proposes to immediately activate its system for two-way operations. This
is consistent with comparable systems, and is required to provide data services, such
as Internet and telephony, and to facilitate pay-per-view data transmissions.
PaRe 7 of the Application
Time to Build
An estimate of 48 to 60 months to build out a 14,800-mile plant in greater
Minneapolis/St. Paul does not strike me as excessive. The issue to explore, not
discussed in the Application, is the order of the areas to be built. Will the City be on the
front end of the timetable?28
PaRe 17 of the Application
Collocation of Facilities
It is unusual to see outside plant facilities collocated. Although a desirable goal
from the standpoint of reducing the impact on the right of way (especially underground),
most existing underground enclosures are smaller than required to permit collocation.
If the City wishes to promote future collocation, and anticipates other entrants into
the market, then special construction requirements must be developed before Everest's
build commences.
Pa.qe 18 of the Application
Aesthetic Interference
Everest's reference to the National Electrical Code (NEC) is inappropriate as the
NEC does not deal with the aesthetics of cable construction.
28 See, also, Application pa.qe 15 @ L(2).
353554/1 1 7
Application Attachment 2
HFC System Model
Everest's depiction of only three fibers per node is likely understated. It is
common for a minimum of four fibers per node, and I expect that Everest will deploy up
to six or more fibers per node (for spare capacity purposes).
The depiction of a single 90-volt standby power supply suggests (but is not
conclusive) that it will employ centralized powering.
Question: Does Everest propose to supplement its power supplies with any form
of gas generator?
Finally, the depiction of a single active element (an amplifier) served by the node
is consistent with modern fiber-to-feeder 125 home plant designs.
HFC Multimedia Architecture
Powered Drops
The illustration of a "power passing tap" (coupled with the notation on the "HFC
System Modem" page that the power supply draw will be 22.5 amps) indicates that
Everest will be supplying energy to subscribers.
Transmission via a cable system of more than 60 volts of energY to subscribers,
as appears to be the case here, is prohibited under all versions of the National Electrical
Code before the 1999 edition. If the City has not adopted the 1999 NEC Code, it should
consider doing so now. The 1999 NEC added Code Section 830 governing this type of
powered construction, and sets standards of underground depths, cable types, and
other important safety elements.
Upstream/Downstream Bandwidth
The bandwidth chart on this page indicates that Everest intends to use 375-860
MHz in the downstream (to the subscriber) direction. This means that subscribers will
be requiredto use converters in virtually all cases. This is a consideration element for
basic-only subscribers.
End of Mr. Kramer's analysis of Everest's applications
353554/1 1 8
Mr. Kramer did not express an opinion regarding the technical qualifications of
Everest in as much as he was unable to review any systems which Everest has
constructed.
Based on our review of Everest's technical qualifications it is appears the
experience of Everest's management team is quite impressive. In part Everest relies on
the experience and expertise of GLA Network Technologies, Inc. ("GLA") for certain
management services including network design and business development. GLA is a
Delaware corporation which is wholly owned by Everest. Everest together with GLA
possesses significant expertise in the operation of both cable television and telephone
systems. In particular, GLA has been active in the competitive local exchange market
preparing business plans, network design and marketing promotion for a number of
companies. GLA has also assisted in the planning and design of broadband networks
for a number of cable operators throughout the country and internationally.
Everest has provided the requisite information regarding its technical
qualifications per Minnesota statutes. Its application adequately describes its initial
service area, schedule for two-way activation, automated services, status monitoring,
channel scrambling technology, emergency alert system, over-the-air broadcast signals
to be delivered, and related issues. The application provides the information requested
in the City's Request for Proposals Official Application Form as required by Minn. Stat.
§ 238.081. Everest appears to have qualified and experienced personnel which may
allow it to successfully complete the construction and operation of the system.
In reviewing the technical capabilities of Everest, together with Everest
representations within the materials referenced herein, we do not believe the City can
reasonably withhold approval of Everest's request to obtain a cable communications
franchise based upon Everest's technical qualifications.
353554/1 1 9
Section 7.
Everest's Financial Qualifications.
We have reviewed selected financial information provided by Everest
Connections Corporation ("Everest") regarding Everest's plans to construct and operate
a cable communications system ("System") serving the City of Chanhassen, Minnesota
("City"). The analysis set forth in this Section presents the results of our analysis of the
assumptions used by Everest in establishing financial projections for the implementation
of its strategic plan for the construction, development and operation of the System,
including cable systems serving other communities within Everest's overall strategic
plan, which strategic plan includes the construction and operation of similar systems in
urban communities including Kansas City, Missouri, Ft. Lauderdale, Florida and Tulsa,
Oklahoma, in addition to the Minneapolis/St. Paul metropolitan area.
A. STANDARD OF REVIEW
Neither federal law nor FCC regulations provide franchising authorities with any
guidance concerning evaluation of the financial qualifications of an applicant for a cable
franchise. It is customary to base a financial analysis, in part, on industry standards
which are generally accepted and uniformly applied in making such a determination.
Due to the fact that Everest does not currently own or operate any cable systems, and
Everest (through its affiliates) has only recently been granted franchises to commence
the construction and operation of a cable system serving the Kansas City, Missouri
metropolitan area (which construction commenced on July 19, 2000), the absence of an
operating history makes the application of such standards in the present case generally
moot. However, the application of such standards has been used by Everest for the
purpose of substantiating the reasonable basis upon which its assumptions in its
financial projections are based. As such, the financial qualifications of Everest to
construct, develop and operate the System serving the City must be based solely on
Everest's present financial condition, its business plan and an analysis of future
prospects for additional equity and the potential for obtaining debt financing.
We provide no assurance as to the likelihood that any of Everest's projected
amounts or assumptions will be realized and do not provide any conclusions as to
whether Everest or any of its affiliates will be successful in implementing their strategic
plan of financing, constructing and operating the System and related cable system
operations throughout the urban communities which it is currently targeting; the success
or failure of which could have a material diverse result on the overall ability of Everest to
successfully construct and operate the System. See comments in Paragraph D.
B. OVERVIEW OF STRATEGY; OPERATIONAL CAPABILITIES
AND NETWORK DEVELOPMENT
Everest (which is a subsidiary of Everest Global Technologies Group, LLC)
desires to construct a network throughout the Minneapolis/St. Paul metropolitan area
consisting of approximately fourteen thousand eight hundred (14,800) miles of aerial
353554/1 20
and underground plant and related electronics and equipment. Everest projects that the
construction and development of the network will be accomplished in approximately 48
to 60 months from inception to completion, although the timing of the completion of a
particular portion of the network will vary on a community by community basis. For
example, Everest has indicated that it intends to commence development, subject to
obtaining all applicable consents and approvals, in Plymouth or Maple Grove areas of
the Minneapolis/St. Paul metropolitan area. As a result, Everest's array of services
would be made available to residents in those communities much earlier in the
projected completion time-line. The total cost of constructing Everest's systems in the
Kansas City, Minneapolis and Tulsa metropolitan areas is projected to cost in excess of
$2.0 billion.
Everest's projections for the Minneapolis/St. Paul metropolitan area network
assumes an aggressive construction schedule of approximately four thousand (4,000)
miles per year. Based on the general terms of a recent construction contract entered
into between Par Electrical Contractors, Inc., to construct the fiber network for the
Kansas City, Missouri market, the average cost per mile is approximately $36,364,
compared to industry statistics which indicated that approximately $38,000 per mile is
average. Although no data was provided which would substantiate the ability of Everest
to generate such favorable commercial rates for the construction of its network serving
the City, the existence of favorable construction rates is one means of Everest
demonstrating its ability to successfully negotiate the cost-effective construction of its
network.
C. FINANCING; SOURCES AND PLANS
Equity Financing Prospects. Everest has represented that it has
entered into an agreement with UtiliCorp United, Inc., a major publicly
traded utility based in Kansas City, Missouri, which will result in a $300
million equity commitment from UtiliCorp. According to information
provided in UtiliCorp's 10-Q filed with the Securities and Exchange
Commission on March 31,2000, UtiliCorp's commitment is subject to
Everest's ability to meet various performance targets and, if required by
the board of Everest's parent company (50% of which is controlled by
UtiliCorp), UtiliCorp will provide such funding.
In addition, Everest has further represented that it is very close to solidifying
vendor financing commitments of approximately $450 million. No description of the
nature or timing of the investment or the source or sources was disclosed.
As a final means of obtaining equity financing, Everest disclosed that it
anticipates a second round of equity financing will be accomplished by the end of the
current calendar year. Everest projects that an additional $600 million in additional
equity would be available as a result of this offering. No details as to the nature of the
offering or its current status were disclosed.
353554/1 21
2. Debt Financing; Prospects and Plans. In order to complete the
construction and development of its networks in the various markets identified above,
Everest has acknowledged the need to seek additional capital resources through debt
financing. Although no formal plans were disclosed by Everest regarding its prospects
in successfully identifying and securing required debt financing, Everest has disclosed
that it believes the equity commitments and prospects described above together with its
positive working relations with major lenders will support Everest's ability to secure
sufficient financing to construct and operate the System. It appears that Everest's
strategy with respect to debt financing is to attempt to defer any debt repayment until
Everest's projections demonstrate that there will be sufficient cash flow from operations
to fund the debt service payments; the effect of which is to enable Everest to obtain the
use of financing to construct the system and initiate operations well in advance of any
mandatory debt service payments.
D. GENERAL DISCLAIMER ON FORWARD LOOKING STATEMENTS
Information, including projected financial results, provided by Everest include
statements regarding expected revenues are based on belief of Everest's management
as well as assumptions made by and information which was stated as being currently
available to Everest. Although Everest has disclosed that it believes that the
expectations and assumptions used in its projections and forward looking statements
contained in the application are reasonable, no assurance can be given that such
assumptions or expectations will prove to have been correct, accurate or reasonable.
Such statements are subject to certain risks and uncertainties, including the ability of
Everest to secure essential contracts and agreements essential to the construction of
the System, as well as general risks related to the industry in which Everest operates.
Should one or more of the foregoing risks materialize, actual results could vary in
material respects from those projected.
E. SUMMARY OF FINANCIAL PROJECTIONS
Everest has provided, under seal of confidentiality, financial projections for the
Minneapolis/St. Paul network, a pro-forma balance sheet as of March 31,2000,
together with certain summary information providing a comparison of Everest's
assumption to industry data (cross referenced to the 1999 Cable TV Databook
regarding industry benchmarks compiled by Paul Kagan Associates, Inc.). Due to the
confidential nature of the financial projections and related data, no detailed analysis is
included in this report. However, we offer the following observations regarding
Everest's projections, generally. In each of the categories for which Everest provided
comparative information to Kagan statistical data, Everest's projections were more
conservative, with the only exception being its fiber optic deployment. In all other
categories listed, including (i) telephone penetration; (ii) telco revenue per line; (iii)
average long distance revenue per line; (iv) business CATV penetration; (v) business
CATV revenue per subscriber; (vi) high-speed modem access (as a % of HP); and (vii)
annual cable rate adjustments, Everest's projected results of operation were, in all
353554/1 22
cases more conservative and in several categories, significantly more conservative than
the industry statistical data would suggest.
F. SUMMARY
Based upon the foregoing and limited strictly to the analysis of financial
projections and other information provided by Everest submitted with its application, we
believe there is a reasonable basis upon which the City could approve or deny Everest's
request for a franchise based upon its financial qualifications to construct and operate
the System. With respect to denial, a reasonable basis exists to support a
determination by the City that Everest has failed to conclusively demonstrate that it has
committed financial resources which have been identified as available to construct and
operate the System serving the City. Although Everest has identified substantial funds
as having been contributed or are committed for future contribution, Everest has
acknowledged the need to generate substantial additional equity and/or debt financing
to complete the fulfillment of its strategic plan. As Everest's success in its ability to
meet its capital requirements is uncertain, this constitutes a reasonable basis for denial.
However, Everest has demonstrated its ability to obtain equity financing and is in
the process of moving forward with its planned construction of its franchise operations in
other areas for which franchises have previously been granted. Investor confidence
remains high and the current market conditions for the industry support Everest's
assertions that there is a substantial likelihood that it will in fact be successful in raising
additional equity financing as well as obtaining debt financing. There is, therefore, a
reasonable basis to conclude that Everest has or will be able to obtain sufficient capital
to construct and operate the System serving the City.
We do not provide any analysis as to the positive or negative effects of having
more than one cable franchise operation serve the City, or the ability of such franchise
operations to achieve or maintain shod or long-term profitable operations within the
City, although Everest's pro-forma financial analysis indicates that Everest has made a
determination that it will ultimately be successful in achieving positive cash flow in such
a competitive environment.
In the event the City determines that Everest possesses the requisite financial
qualifications, we recommend that the City seek methods of ensuring that Everest
performs its obligations. To that end, we recommend that if the City determines to grant
Everest a cable communications franchise, the City enforce a franchise requirement of
a construction bond sufficient to provide the City with security in the event damage to
rights-of-way or other issues arise which may require restoration at the City's expense,
assuming that Everest is unwilling or unable to financially perform. While the
construction bond will not provide the City with assurance of Everest's financial stability,
the construction bond will provide an added layer of protection for the City.
353554/1 23
Section 8.
Compliance with State Requirements.
Notice of Intent to Franchise.
A franchising authority must publish
notice of its intent to franchise a cable
operator once each week for two
successive weeks in a newspaper of
general circulation within the cable
service territory.
Notice must include:
°
°
The name of the municipality.
The closing date for submission of
applications
Information regarding the application
fee and method for its submission.
A statement regarding the system
design desired by the City and the
services desired by the City.
A statement regarding the criteria and
priorities against which applicants will
be evaluated.
A statement informing the public that
franchise applications must contain, at
minimum, the information required by
Minn. Stat. Section 238.081 ,Subd. 4.
The date, time, and place of a public
hearing at which proposals from
applicants will be heard.
The name, address, and telephone
number of City officials who may be
contacted for further information.
Yes
Yes
Copies of notice as
published attached as
Exhibit A to this Report.
See Exhibit A to this Report
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Exhibit A
Exhibit A
Exhibit A
Exhibit A
Exhibit A
Exhibit A
Exhibit A
353554/1 24
Proposals must contain the following
information:
o
o
Plans for channel capacity, including
both the total number of channels
capable of being energized in a
system and the number of channels to
be energized immediately;
Television and radio broadcast signals
for which permission to carry will be
requested from the FCC;
A description of the proposed system
design and planned operation,
including at least: (I) the general area
for location of antenna and head end,
if known; (ii) a schedule for activating
two-way capacity; (iii) the type of
automated services to be provided;
(iv) the number of channels and
services to be made available for
access cable broadcasting; and(v) a
schedule of charges for facilities and
staff assistance for access cable
broadcasting;
The terms and conditions under which
particular services are to be provided
to governmental and educational
entities;
Schedules of proposed rates in
relation to the services to be provided,
and a proposed policy regarding
unusual or difficult connection of
services;
A time schedule for construction of the
entire system with the time sequence
for wiring various pads of the area
requested to be served;
Yes
Yes
Yes
Yes
Yes
Yes
Everest Application,
Page 1
Everest Application,
Page 2
Everest Application,
Page 3-4
Everest Application,
Page 5
Everest Application, Page 6
and Attachment 3
Everest Application, Page 7
and Attachments 4-6
353554/1 25
A statement indicating applicant's
qualifications and experience in the
cable field, if any;
Identification of the municipalities in
which the applicant either owns or
operates a cable system, directly or
indirectly, or has outstanding
franchises for which no system has
been built;
Plans for financing the proposed
system, which must indicate every
significant anticipated source of capital
and limitations or conditions with
respect to the availability of the
sources of capital;
10. Ownership detailing the corporate
organization of the applicant, including
the names and addresses of officers
and directors and the number of
shares held by each officer or director,
and the intracompany relationship
including a parent, subsidiary, or
affiliated company; and
11. Notation and explanation of omissions
or other variations with respect to the
requirements of the RFP.
12. Plans for construction and use of right-
of-way
Notice to Other Interested Parties. In
addition to the public notice, a franchising
authority must mail copies of the notice of
intent to franchise to any person it has
identified as being a potential candidate
for the franchise. Minn. Stat. § 238.081,
subd. 3.
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Everest Application, Page 8
and Attachments 7-10
Everest Application, Pages
9-10 and Attachments 11-14
Everest Application, Pages
11-12 and Attachments
15-17
Everest Application, Page 13
and Attachment 18
Everest Application, Page 14
and Attachment 19
Everest Application, Pages
15-18
353554/1 26
Notarized. All franchise proposals must
be notarized. Minn. Stat § 238.081, subd.
4.
Deadline for Submitting Proposals.
Any deadline set by the City must occur
at least twenty (20) days after the date
notice is first published regarding the
City's solicitation of franchise
applications.
Public Hearing. The franchising
authority must hold a public hearing
affording all applicants reasonable notice
and an opportunity to be heard. This
hearing must occur at least seven days
(7) before introduction of any franchise
ordinance.
Franchise By Ordinance. All franchises
must be granted by ordinance. Minn.
Stat, § 238.081, subd. 7.
Yes
Yes
Yes
To be completed
Everest Application,
Page 19
Notice first published ;June
22, 2000. Deadline for
applications was July 12,
2000 (20 days)
Public hearing scheduled for
August 14, 2000
Consideration of Everest's
qualifications scheduled for
August 14, 2000
consideration of Franchise, if
applicable, to follow at
subsequent City Council
meeting.
353554/1 27
Section 9.
Recommendations.
Based on our review of Everest's legal and technical qualifications we believe
that the City cannot reasonably withhold approval of Everest's request for a cable
communications franchise. If the City determines that Everest possess the requisite
financial qualifications then the City should consider adoption of the attached resolution
which will establish findings of fact regarding Everest's application.
If the City adopts the resolution attached as Exhibit D, the City will then be in a
position to consider the grant of a franchise to Everest at a future City Council meeting,
no sooner than seven (7) days following the close of the public hearing.
353554/1 28
Exhibit A
Notice of Intent to Franchise
353554/1 A-1
Exhibit B
Request for Proposals Official Form
353554/1 B-1
Exhibit C
Letter to the City dated July 12, 2000
from Jane Bremer, Esq., of
Larkin Hoffman Daly & Lindgren, Everest's legal counsel
353554/1 C-1
Exhibit D
Proposed Resolution
353554/1 D-1
City of Chanhassen, Minnesota
Resolution No.
Regarding findings of fact with respect to
Everest Connections Corporation's
proposal for a cable communications franchise
Recitals
Minnesota Statutes § 238.08(a) mandates that the City require a franchise for
any cable communication system providing service within the City.
Federal law at 47 U.S.C. § 541(a) provides that a city "may not unreasonably
refuse to award an additional competitive franchise."
The City carefully followed the franchise procedure required by Minnesota
Statutes § 238.081 by publishing once each week (June 22, 2000 and June 29,
2000) for two successive weeks in the Chanhassen Villager a Notice of Intent to
Franchise a Cable Communications System.
4. The Notice stated all eight (8) criteria outlined in Minn. Stat. § 238.081 Subd. 2.
In addition to the published Notice, the City mailed copies of the Notice of Intent
and the Official Application Form to Everest Connections Corporation ("Everest")
as well as other interested parties.
The City's Official Application Form required that proposals for a cable
communications franchise contain responses to each of the items identified in
Minnesota Statute § 238.081 Subd. 4.
The City's closing date for submission of applications was set at July 12, 2000
which complied with the statutory minimum of 20 days from the date of first
publication.
The City Council determined to call a Public Hearing to consider the application
received from Everest at its regularly scheduled July ,2000 meeting.
All interested parties were provided an opportunity to speak to the City Council.
The City Council imposed no time limitations or other constraints on presenters,
and interested parties had every opportunity to present information regarding this
matter.
10.
The City carefully reviewed all information and documentation presented to it
regarding Everest's proposal and qualifications to construct, own and operate a
cable communications system within the City.
353554/1 1
11.
12.
NOW
1.
The City retained the law firm of Moss & Barnett, a Professional Association to
assist the City in conducting the procedure required under Minnesota Statutes
§238.081 and reviewing the application submitted by Everest as well as
comments and information from interested parties.
Based on information and documentation made available to the City, the report
dated August 7, 2000, prepared by Moss & Barnett with respect to Everest's
application, is incorporated in this Resolution by reference, the City Council has
reached conclusions regarding Everest's legal, technical and financial
qualifications.
THEREFORE, the City hereby resolves as follows:
The City hereby finds that Everest's application of July 12, 2000 complies with
the requirements of Minnesota Statute § 238.081.
The City finds that Everest possesses the requisite legal, technical and financial
qualifications to construct, own and operate a cable communications system
within the City.
The City has determined that an ordinance awarding a franchise to Everest
should be introduced to the City Council for consideration and action.
The contents of the franchise should be substantially the same as the franchise
ordinance currently held by the City's existing cable television operator,
Mediacom Minnesota, LLC, throughout the existing term of Mediacom's franchise
which will expire on or about July 9,2013.
A construction bond should be required of Everest as part of any franchise award
to provide the City with security in the event damage to the City's rights-of-way
should arise which Everest is unwilling or unable to cure.
Subject to all applicable laws, the City shall regulate the provision of cable
television services within the City in a competitively neutral manner and shall
enforce the terms and conditions of all cable communications franchises in
accordance with all applicable laws and regulations in a consistent manner
against all franchised cable operators so that no one operator is given an unfair
competitive advantage over the other.
The City finds that its actions are appropriate and reasonable in
mandates contained in Chapter 238 of Minnesota Statutes and
provisions of federal law including 47 U.S.C. § 541(a).
light of the
applicable
PASSED AND ADOPTED this
day of ., 2000:
353554/1 2
CITY OF CHANHASSEN, MINNESOTA
By:
Mayor
ATTEST:
By:
City Clerk
353554/1 3