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HomeMy WebLinkAboutItem 10 Date: Item No. Public Hearing to Consider the Application of Frontier Communications of Minnesota, Inc. Proposed Action Conduct a public hearing to consider the application of Frontier Communications of Minnesota, Inc. After the public hearing, the Council may move to: • Close the public hearing, or • Continue the public hearing until a future date for further input. No other action is required of the Council at this time. The Cable Ordinance does require that the City Administrator prepare a report and make a recommendation to the Council respecting the application to the City. Overview Brian Grogan of Moss & Barnett will provide a brief presentation of the franchise application process. The main purpose of this process is for the Council to receive input from interested parties regarding the application. Following Brian Grogan’s presentation, Jack Phillips will make a presentation on behalf of the applicant, Frontier Communications of Minnesota, Inc. Other comments from the public will then be heard. Primary Issues to Consider Minn. Stat. 238.081 Subd. 6 requires that the City conduct a public hearing affording reasonable notice and a reasonable opportunity to be heard with respect to all applications for a franchise. Supporting Information Frontier of Minnesota, Inc. application Financial Impact: $ Budgeted: Y☐ N☐ Source: Related Documents: (CIP, ERP, etc.): Envision Lakeville Community Values: Good Value for Public Services Report Completed by: Sue Palm, Communications Manager 6-6-16 N/A 608-467-9219 5133 West Terrace Suite 100 Tom.Bordwell@chartercom.com Madison, WI 53718 June 6, 2016 Mayor Matt Little and Members of the Lakeville City Council City of Lakeville, MN 20195 Holyoke Avenue Lakeville, MN 55044 Re: Frontier Communications Cable Application Dear Mayor Little and Members of the City Council: Thank you for providing Charter Communications (“Charter”) with the opportunity to participate in the June 6 public hearing and provide comments regarding the application (“Application”) submitted by Frontier Communications (“Frontier”) to provide cable television service in the City of Lakeville (“City”). We look forward to reviewing and commenting on the actual franchise ordinance once it becomes available and want to emphasize again that Charter does not oppose Frontier’s entry into the video market in the City. However, as stated in our comments at the hearing and outlined below, we seek to ensure that the City’s application comports with applicable law and the level playing field protections afforded in our franchise agreement (“Charter Franchise”) and the Lakeville Regulatory Ordinance1. We face franchised competition in communities around the country and do not object as long as the process is fair and maintains a level playing field. In Minnesota, the Legislature has established the requirements for competitive entry. Additionally, the City must honor the competitive equity requirements of the Lakeville Regulatory Ordinance and the Charter Franchise that we negotiated with the City and relied upon in providing community benefits. Currently, Frontier’s Application fails to meet its obligations under the statute and the Charter Franchise, and Charter’s concerns are further set forth below: A. The Content of the Application is Deficient under State and Local Law and Fails to Show the Applicant’s Legal, Technical and Financial Qualifications. Minnesota law requires specific information regarding the legal, financial and technical qualifications of the applicant. Among other information, a franchising proposal must contain (i) a schedule for construction of the entire system; (ii) a schedule for activating the cable system and two-way capacity; (iii) the terms and conditions for service to governmental and educational entities; (iv) a schedule of proposed rates; and (v) plans for financing the system. The Frontier Application provides almost none of the critical information required by Minnesota law: (1) A time schedule for construction of the entire system with the time sequence for wiring various parts of the area requested to be served. 1 Title 3, Chapter 11, Lakeville City Code, adopted November 2, 1998 (“Regulatory Ordinance”). 608-467-9219 5133 West Terrace Suite 100 Tom.Bordwell@chartercom.com Madison, WI 53718 In its Application, Frontier states: “Frontier is still finalizing its initial footprint for the deployment of cable services with the City of Lakeville service area. Frontier’s planned deployment is highly confidential. Pursuant to an executed franchise agreement(s), Frontier will meet regularly with the City and the Commission to discuss where service is available and any plans for additional deployment. Frontier is the second entrant into the wireline video market in the City of Lakeville. As a second entrant, investment in and expansion of Frontier’s cable system should be driven by market success and not a contractual requirement for ubiquitous coverage.” Following this statement, the next 5 pages of its abbreviated Application sets forth Frontier’s arguments about why it should not have to provide service in compliance with Minnesota law. Frontier’s response is wholly unresponsive and ignores the statutory mandate to provide service throughout Frontier’s telephone service area, which encompasses the vast majority of the City. The separate letter from Charter’s outside counsel explains why the City cannot ignore these state law obligations. (2) The schedule for activating cable and two-way capacity. Frontier’s application also fails to provide a schedule for its cable television activation plan. Frontier’s response states: “While an exact launch date has yet to be determined, Frontier is working diligently to complete all necessary work and required testing and operational readiness review to offer service to customers upon successful execution of a Franchise Agreement. Frontier will meet with Commission and appropriate member jurisdictions to share the actual launch date when it becomes finalized.” This response does not meet the obligations for a complete application. (3) Terms and conditions under which particular service is to be provided to governmental and education entities. With regard to the application requirements for Frontier to set the terms and conditions of service to government and education entities, its response is as follows: “Frontier will provide at no charge expanded basic service to all government buildings, schools, and public libraries located within its service footprint so long as those locations are capable of receiving service from Frontier and no other cable provider is providing service at such locations.” As Charter provides service to most public buildings and Frontier will not commit to any build-out, this is both unresponsive, unclear and in violation of the level playing field provision of our franchise with the City. (4) A schedule of proposed rates and plans for financing the proposed system. In both of these instances, Frontier fails to provide information responsive to the application requirements. As to rates, Frontier simply indicates that rates have not been determined (even though the application only requires a scheduled of proposed rates) and with regard to its financing plans, simply refers the City to Securities and Exchange Commission filings for the ultimate parent entity. B. The City Must Honor the Competitive Equity Provisions In State Law, the Regulatory Ordinance and Charter’s Franchise. State law does not allow the City to grant an additional 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.” For telephone 608-467-9219 5133 West Terrace Suite 100 Tom.Bordwell@chartercom.com Madison, WI 53718 companies like Frontier, state law specifies that “[a]n area for an additional cable franchise is not more favorable or less burdensome if . . . the area of the franchise is no less than the area within the municipality in which the telephone company offers local exchange telephone service.” Similarly, Section 2.5. of Charter’s Franchise requires the City to grant additional cable franchises “containing terms and conditions that are “no more favorable or less burdensome than those imposed on Grantee in the same Franchise Area the Grantee is entitled to occupy by this Agreement, permit or otherwise; provided, however that such additional grants shall not operate to materially modify, revoke or terminate any rights granted to the Grantee herein and shall be in accord with the provisions of the [Regulatory] Ordinance.” The Regulatory Ordinance mandates similar competitive equity, giving the City the right to grant additional franchises “on terms and conditions nor more favorable or less burdensome than those imposed in previously granted Franchises, subject to Applicable Laws.” Thus, any franchise granted by the City to a competitive provider must abide by this mandate. The Frontier Application, however, is devoid of important commitments on substantive terms and conditions that must parallel those in the Charter Franchise. For example:  The Charter Franchise requires service throughout the City to all areas with at least forty (40) homes per mile as the City chose to assure service availability to as many residents as possible. The Frontier Application includes no such commitment.  The Charter Franchise includes the option for a per subscriber EG Fee to fund educational and governmental programming. The Frontier Application offers no commitment to fund EG.  The Charter Franchise require complimentary service to numerous public buildings. The Frontier Application proposes only that it will provide service to those public buildings that are within its (yet undefined) service area and only if the building is not currently served by Charter. Similarly, the Regulatory Ordinance includes material provisions which the Frontier Application ignores. Importantly, the Regulatory Ordinance requires compliance with the construction obligations imposed by Minnesota law to substantially complete construction within 5 years. The Frontier Application ignores this requirement and goes to great lengths to argue why it is preempted by federal law. The competitive equity requirements of Minnesota law, the Regulatory Ordinance and Charter’s Franchise are clear: any franchise granted by the City to Frontier must contain substantially similar substantive terms and conditions as the Charter Franchise. C. There Are Substantial Pubic Policy Reasons for Competitive Equity. Beyond the legal and contractual mandates, the City must follow, sound public policy reasons exist for competitive equity among cable service providers. Charter and other providers currently operate in a very competitive environment. DirecTV (now owned by AT&T) is a significant competitor, as well as other direct-to-home satellite program distributors like Dish that transmit video programming, data and other information by satellite to customers via satellite. Other companies also currently provide a wide variety of services that compete with cable – i.e. Netflix, Amazon, Roku and Apple TV among others. 608-467-9219 5133 West Terrace Suite 100 Tom.Bordwell@chartercom.com Madison, WI 53718 Allowing Frontier to enter the market under a different set of rules and standards would confer unwarranted preferential treatment on Frontier, at great expense to the City and its residents. This not only would create disparities between wireline competitive and non-competitive areas in the City, but would sanction an unfair and anticompetitive situation in contravention of federal, state, and local policies. Moreover, if Frontier were allowed to “cherry-pick” only the areas of the City it chooses to serve, it is highly unlikely that other facilities-based providers would consider competing there in the future. If Frontier can ignore the less economically attractive parts of the City and serve only what it chooses, that makes the market less attractive to the next potential provider. We do not believe that the City seeks such a result from this application process. Accordingly, given these governing laws and policies, the City should require modifications to the application and not permit a franchise that bestows competitive advantages on new entrants. We reiterate that Charter neither opposes competition nor a fully compliant application from Frontier. If Frontier cures the identified deficiencies in its Application and the franchise was truly level and fair, Charter remains confident that its superior products and services will lead to our continued success in the marketplace. We look forward to working constructively with the City and all interested parties during this process and would be happy to respond to any questions you may have. Thank you. Sincerely, Tom Bordwell Tom Bordwell Senior Director Regional Government Relations Charter cc: Brian Grogan, Esq.