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Item 08
Date: August 15, 2016 Item No. Frontier Communications Qualifications Report For Competitive Franchising Proposed Action Staff recommends adoption of the following motion: Move to adopt a resolution regarding application of Frontier Communications of Minnesota, Inc. for a Cable Communications Franchise Note: The City Council is not considering the award of a cable franchise to Frontier at the August 15, 2016 City Council meeting. The Council is only considering whether Frontier possesses the qualifications to own and operate a cable system in the City. If the City concludes that Frontier does possess the qualifications and adopts the attached resolution, City Administration will then proceed with franchise negotiations with Frontier and a separate public hearing will be held to determine if the terms of a proposed franchise are acceptable. Overview In March of 2016, Frontier Communications of Minnesota, Inc. ("Frontier") requested a cable franchise from the City of Lakeville. State Statute requires the City to following certain steps when considering a cable franchise. The first step was to publish a "Notice of Intent to Consider Applications" for a cable franchise and request for proposals, which the City completed in April. Frontier responded by submitting an application in May. The second step was to hold a public hearing to obtain public input regarding Frontier's application. The City completed this step at the June 6'h City Council meeting. The next step in the process is for the City to evaluate the applicant's qualifications as a cable provider and prepare a report for consideration by the City Council. Attorney Brian Grogan, with Moss and Barnett, is assisting the City through the franchising process to help insure compliance with all State and Federal statutes and has, with direction and input from City Administration, prepared the attached memo which includes the City Administration's recommendations for City Council's consideration. Primary Issues to Consider Does Frontier meet the qualifications for franchising? • The attached memo from Brian Grogan outlines the City Administration's assessment of the qualifications of Frontier and recommendation that the City Council direct staff to continue franchise negotiations with Frontier. What are the next steps in the process? • The next steps in the process includes negotiating a franchise agreement with Frontier and holding a public hearing at an upcoming City Council meeting to consider the award of a franchise agreement Frontier, assuming agreement can be reached. Supporting Information • Resolution: Frontier Communications of Minnesota, Inc. for Cable Communications Franchise • August 9, 2016 memo prepared by Brian Grogan of Moss & Burnett as well as all attachments to that memorandum and other supporting information included with this agenda item. Financial Impact:$ n/a Budgeted: Y❑ N❑ Source: Related Documents: (CIP, ERP, etc.): Envision Lakeville Community Values: Good Value for Public Services Report Completed by: Justin Miller, City Administrator and Allyn G. Kuennen, Assistant City Administrator CITY OF LAKEVILLE, MINNESOTA RESOLUTION NO. Regarding Application of Frontier Communications of Minnesota, Inc. for a Cable Communications Franchise RECITALS: Frontier Communications of Minnesota, Inc. ("FCM') requested that the City of Lakeville, Minnesota ("City') commence proceedings to consider the award of a cable communications franchise to FCM. 2. Minnesota Statutes Section 238.08(a) mandates that a city require a franchise for any cable communication system providing service within the city. 3. Federal law at 47 U.S.C. Section 541(a) provides that a city "may not unreasonably refuse to award an additional competitive franchise." 4. The City retained the law firm of Moss & Barnett, a Professional Association, to assist the City in conducting the procedure required under Minnesota Statutes Section 238.081 and the review of any applications submitted to the City. 5. The City followed the franchise procedure required by Minnesota Statutes Section 238.081 by publishing once each week, (April 22, 2016 and April 29, 2016) for two successive weeks in the Lakeville Sun Thisweek, a Notice of Intent to Franchise a Cable Communications System C'Notice'�. 6. In addition to the published Notice, the City provided copies of the Notice and the Request for Proposal to FCM and to the City's existing cable operator, Charter Cable Partners, LLC (" Charter'). 8. 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 Section 238.081, Subd. 4 and the City Code Section 3-11-1.15. 9. The City's closing date for submission of applications was set for May 16, 2016 which complied with the statutory minimum of twenty (20) days from the date of first publication. 10. Upon the deadline for submitting applications, May 16, 2016, the City received only one application, from FCM. 11. The City Council determined to call a Public Hearing to consider the application received from FCM at its regularly scheduled June 6, 2016 meeting. 12. Prior to the Public Hearing Charter submitted a letter to the City setting forth Charter's position regarding FCM's application. 13. All interested parties were provided an opportunity to speak to the City Council and to present information regarding this matter, including Charter. 14. The City carefully reviewed all information and documentation presented to it regarding FCM's proposal and qualifications to operate a cable communications system within the City. 15. Based on information and documentation made available to the City and the letter and attachments, dated August 4, 2016, prepared by Moss & Barnett with respect to FCM's application, the City Council has reached conclusions regarding FCM's legal, technical and financial qualifications. NOW THEREFORE, the City of Lakeville, Minnesota hereby resolves as follows: The City hereby finds that FCM's application of May 16, 2016 complies with the requirements of Minnesota Statute Section 238.081. 2. The City finds that FCM possesses the requisite legal, technical and financial qualifications to operate a cable communications system within the City. 3. City staff is authorized to continue negotiations with FCM to attempt to reach mutually acceptable terms for a cable television franchise to be introduced to the City Council for consideration. 4. The City finds that its actions are appropriate and reasonable in light of the mandates contained in Chapter 238 of Minnesota Statutes and applicable provisions of federal law including 47 U.S.C. Section 541(a). PASSED AND ADOPTED this day of , 2016 ATTEST: Its: CITY OF LAKEVILLE, MINNESOTA Its: 2 +*** Moss & Barnett MEMORANDUM To: Justin Miller, City Administrator Allyn Kuennen, Assistant City Administrator From: Brian T. Grogan Date: August 9, 2016 Re: City Administration Report - Competitive Cable Franchising Per your request and direction, below please find a written description of the City administration's position regarding the competitive franchise application submitted by Frontier (defined below). The conclusions and recommendations set forth herein are those of the City administration after careful review and analysis of the relevant City Code provisions and other relevant laws and regulations. Procedural Backaround In March of 2016, Frontier Communications of Minnesota, Inc. ("Frontier') requested a cable franchise from the City of Lakeville, Minnesota (''City'. At the April 18, 2016 council meeting, in accordance with Minnesota Statutes Chapter 238, the Lakeville City Council ordered the publication of a Notice of Intent to Consider Applications for a Cable Franchise ("Notice's as well as a Request for Proposals ("RFP'. The Notice was published twice in the official newspaper and copies of the Notice and RFP were sent to Frontier and to Charter, the incumbent cable operator. On May 16, 2016 the City received Frontier's application for a cable franchise. On May 16, 2016, the City Council set a public hearing date of June 6, 2016. The purpose of the public hearing was to receive comment regarding the application received from Frontier. The public hearing was held and closed on June 6, 2016. Both Frontier and Charter presented information for consideration by the Council. A copy of correspondence submitted by Charter has been attached hereto as Exhibit A. Criteria Title 3, Chapter 11, Section 1.16 of the City Code sets forth requirements for the consideration of an initial application for a cable franchise. Specifically, Section 3-11-1.16 of the Code requires the following: 1. Upon receipt of any application for an initial Franchise, the City Administrator shall prepare a report and make his or her recommendations respecting such application to the City Council. 150 South Fifth Street I Suite 1200 Minneapolis, MN 55402 P:612-877-5000 F:612-877-5999 W:LawMoss.com August 9, 2016 Page 2 2. A public hearing shall be set prior to any initial Franchise grant, at a time and date approved by the Council. After the close of the hearing, the Council shall make a decision based upon the evidence received at the hearing as to whether or not the Franchise(s) should be granted, and, if granted subject to what conditions. The Council may grant one (1) or more initial Franchises, or may decline to grant any Franchise. This memorandum, together with the attached exhibits and additional information provide with this agenda item, constitutes the City Administrator's report to the City Council in compliance with Section 3-11-1.16 of the Code. The City has already held one public hearing to receive input regarding Frontier's application and the City intends to hold a second public hearing at such time as a proposed franchise is negotiated between Frontier and the City. The purpose of holding two public hearings is to ensure all interested parties have ample due process to provide input to the City so the Council can review and consider the award of a competitive cable franchise in the City. Criteria for Evaluation and Selection The criteria for evaluating Frontier's application and priorities for selection are set forth in the City's Notice and are as follows: 1. The completeness of application and conformance to the RFP; 2. The legal, technical, and financial qualifications of the applicant; and 3. The proposal for community services, including public, educational, and governmental access in accordance with state law. Section 3-11-1.14 of the City Code also provides that the City, when considering the grant of one or more franchises may, in its sole discretion, limit the number of Franchises granted, based upon, but not necessarily limited to, the requirements of Applicable Laws and specific local considerations; such as: 4. The capacity of the public rights-of-way to accommodate multiple coaxial cables in addition to the cables, conduits and pipes of the utility systems, such as electrical power, telephone, gas and sewage. 5. The impact on the City of having multiple Franchises. 6. The disadvantages that may result from Cable System competition, such as the requirement for multiple pedestals on residents' property, and the disruption arising from numerous excavations of the rights-of-way. 7. The financial capabilities of the applicant. City administration has set forth below its position regarding each of the above criteria. 1. The completeness of application and conformance to the RFP; Recommendation: Frontier's application provides the minimum information required by applicable law and the RFP. Please see attached Exhibit B regarding the financial information provided by Frontier. August 9, 2016 Page 3 2. The legal, technical, and financial qualifications of the applicant; and Recommendation: A separate report has been prepared (attached as Exhibit B) regarding the financial qualifications of Frontier. Similar financial reviews were performed for each of the transfer applications submitted by Charter over the past several years. 3. The proposal for community services, including public, educational, and governmental access in accordance with state law. Recommendation: Specific details regarding system build out and commitment to local programming will be addressed in any negotiated franchise between the City and Frontier and must comply with all applicable laws. The Council will have an opportunity to review such requirements when and if an agreed upon cable franchise is presented for consideration. 4. The capacity of the public rights-of-way to accommodate multiple coaxial cables in addition to the cables, conduits and pipes of the utility systems, such as electrical power, telephone, gas and sewage. Recommendation: Frontier is the local exchange carrier in the City and has provided telephone service and DSL service in the City for a number of years. As a result, Frontier already has existing communications facilities in place in the City's rights-of-way (ROW). Frontier will utilize its existing facilities in the ROW and minimal disruption is anticipated as Frontier enhances and improves its system to provide video services. Even without a cable franchise, Frontier has a legal right under state law to upgrade and enhance its telephone system in the City's ROW. 5. The impact on the City of having multiple Franchises. Recommendation: City administration believes competition in the marketplace for cable television services will benefit Lakeville residents and result in a positive impact on the City. 6. The disadvantages that may result from Cable System competition, such as the requirement for multiple pedestals on residents' property, and the disruption arising from numerous excavations of the rights-of-way. Recommendation: As previously stated, Frontier already has facilities in place in the City's ROW and City administration does not foresee a disadvantage to the City or its residents if Frontier leverages those same facilities to provide cable (video) services. 7. The financial capabilities of the applicant. Recommendation: A separate report has been prepared (attached as Exhibit B) regarding the financial qualifications of Frontier. August 9, 2016 Page 4 At the August 15th City Council meeting City administration recommends the following: • Brian Grogan will present a brief overview of the status of the franchising process and the Frontier's qualifications. • Additional comments will be accepted regarding the Applicant's qualifications. • If Charter seeks to provide input, City administration recommends that the Council allow Charter an opportunity to speak and to present any information for Council consideration. Supporting Information: • Exhibit A - Frontier's Cable Franchise Application dated May 16, 2016 • Exhibit B - Information provided by Charter • Exhibit C - August 4, 2016 letter to City regarding Frontier's financial qualifications • Exhibit D - PowerPoint Presentation 3323865v2 Exhibit A Frontier's Cable Franchise Application dated May 16, 2016 Jack Phillips Director- Gov't and External Affairs Frontier Communications (v) 952-435-1373 (t) 952-435-2111 iack.phillips(�;,ftrp-)m DELIVERED VIA COURIER AND E-MAIL May 16, 2016 Susanna Palin Communications Manager City of Lakeville 20195 Holyoke Ave. Lakeville, MN 55044-8339 Re. Application of Frontier Communications of Minnesota, Inc. for Cable Communications Services Franchise in City of Lakeville, Minnesota Dear Ms. Palm: In response to file City of Lakeville's Notice of Intent to Franchise and Request for Proposals, please find one original copy of Frontier Communications of Minnesota, Inc.'s notarized application for a cable communications franchise in the City of Lakeville, Minnesota. Frontier reserves the right to make and redact any information it determines to be Trade Secret information. Your counsel Brian Grogan has also been sent an electronic copy. Also enclosed is a check in the amount of $25,000 payable to the City of Lakeville in full pavrnent of its application fee. This application fee constitutes the City's "entire reasonable and necessary costs of processing a cable communications franchise" as contemplated in Minn. Stat. § 238.081Subd.(8). Very truly yours, Ja71S {00214918.DOCX / 1} 1 1 ci g E cc: CITY OF L.AaKE17IL.LE APPLICATION OF FRONTIER COMMUNICATIONS OF MINNESOTA. INC. FOR A COMPETITIVE CABLE FRANCHISE Frontier Communications of lVI.1.1111eSo1:a, It1c., ("F, o,1$ier", eSpectfLilly filestl;1S application fora competitive cable conlill'unicatlons franchise wit11 the City ol.' I-akevilie plirstlant to the City of Lakeville's published Notice of Intent to Franchise and Request fol -Proposals this 16th. clay of May, 201 G. Background: nd: Overview of Frontier Frontier's Motto is "We can help!" Frontier goes the extl'a tulle for our customers and Is extreIllel.y proud to serve our co111nlunities. Local engage111ent is more tllan a strategy to Frontier. It is ill our DNA. Broadband and communications are, central Barts of daily life and are require111ents for otu• conlnlunities to fuive and grow. Frontier takes seriously our respoll.sibility to reliably deliver these services to the Millions of eLlstomel-s A-vc serve. Frontier's parent company is Frontier Communications Corporation, Frontier C0111"ll-Inications Corporation is an S&P 500 company and is included ill Clic Fol -t .Tw 1,000 list of Amorica's largest corporations. Frontier serves predominantly a mix of urban, suburban., and rural areas in 29 states across the United ;3t.ates. Frontier offers a variety of services to customers over its fiber-optic and copper networks, including video, high-speed Internet, advanced voice and Frontier Secure digital. protection. solutions. Frontier Business :Edge offers communications solutions to small, mecli um, and enterprise businesses. Frontier's Values Fro.nticr is committed to Its core value of being the leader in providing communications services to residential and business customers in its markets by putting our customers first, treating our customers, business partners, and employees with respect, lceepirlg oL+r commitments, bci.l.lg accovintable at all tinges, being ethical in all of ours dealings, being innovative and taking the initiative, being a team player, being active 111 OLII' 130111.1-1111111 ties, doing rlglit the first time and contl.iluOLSly 1111p1-ovlllg, using resources \visely and always having a positive attitude. t0021491$.DOCk / 11 2 Overview of Frontier in Minnesota Frontier is one of Minnesota's largest incumbent local exchange carriers and our Minnesota infrastructure is essential to the success of businesses large and small, educational institutions, healthcare facilities and public safety agencies in the communities we serve. Frontier's network is also critical to the support of other teleCOMMUnications (such as wireless carriers) and information service providers. All Frontier products and services offer 24/7/365 support from a 100% U.S.-based workforce. Frontier employees live and work in the Minnesota communities they serve. They are our customers' friends and neighbors and the subject matter experts on the best communications technology for home and business. They are customer -focused and empowered to make the right decisions for the customer. Employees support programs and initiatives important to their communities and live Frontier's values every clay. Recent examples include: o A contributing business for the Farmington Veteran's Memorial. ® The lead (incl original) sponsor of the Farmington all -female robotics STEM team. Sponsor of Dakota County Fair events ® Participant in South Metro home and art shows m Provide professional guidance to students, mentoring students on career opportunities. ® Active members in local chamber of commerce organizations including: Lakeville, Farmington, Burnsville and Rosemount. o Active with the Dakota County Technical College in. establishing the new Telecom Technician certificate program. Contributing sponsor supporting Burnsville's Arnes Center, since 2005. © Major sponsor of the Burnsville International Fest. a Creator and supporter of the America's Best Cities program, which gives an opportunity for communities to win money to support their local initiatives to improve their communities.. Frontier's Commitment to Our Customers Each of Frontier's markets across the 29 states we serve has a General Manager who is personally accountable for delivering extraordinary service. Decisions are made at the local level taking into account local deeds and interests. In the Mouth Metro Minnesota area, the General Manager is Darrell Hansen. Frontier's regional Vice President handling Minnesota is George Meskowski. Frontier's regional, state and local leadership are actively involved in day-to-day operations and personally see to it that customers in their {00214918.DQCK / 1} 3 1 P a g e markets are receiving our best. From the CEO doevn, �,irc are all accountable to ou]- custon.ers every day. When stor•Ills or natural disasters strike our regions, Nve are among the first to respond, and have the Rational resources to call upon. When members of aui: community fall on tough times, we pride ourselves oil being there to support thein. 0131. technicians wor1c around the clock in sollle tough conditions to keep your serv' ices running smoothly. Know that when a person becomes a Frontlet' CUStOnler, they are signlna up for Over 28,600 employees at then' back. Every day, our employees put the customer first, Frontier's Collijititrllellt to Nt eterans Frontier is also an award-wilaning Veteran employer and proud to support those who served our nation. More than 1 Out of every 10 Frontier employees is a veteran, reservist, and/or the spouse of a veteran. Frontier is a member of The Military Spouse Elllployment Partnership, The 100,000 .Yobs Mission, The Employer Partnership of the Ar.Ined Forces, Donor and Remember, and Joining Forces. frontier C011.1.11u11icat]O11s of -Minnesota, Inc., the applicant, is a. Minnesota CoiIaoration in good standing and authorized to do business in the State of Minnesota. The follor.rillg responds directly to tate requested information set forth in tate Request for Pt'0130sals Pursu,111t to Minn. Stat. § 283.081 (4): A. Plans for channel capacity, including botil the total number of channels capable of tacirtg ea�ergized in the system and the number of chtlnrtels to be elleri;ized ininiediately. Frontier's underlying technology allows for an almost unlimited channel capacity. While a final channel lineup has not been finalized at this time, please see "Exhibit A - channel lineup and prOgran11111ng packages" from another jUr1Sd1Cti011 Frontier offersseI'vice. Frontier will provide the City with a copy of the actual channel lineup prior to laculcl.ing service. Frontier also provides a robust library of Video on Demand content. B. A. statement of the television and radio broadcast signals for 1 -r -Mich perlltission to carry will be requested from the Federali Conlmunicatiorls Commission. Frontier will make all appropriate filings and preparations prior to the till-11upof its video service including (1) filing a community registration with the FCC via FCC Form 322; (2) providing notice to local broadcasters and requesting either must -carry or retransmission consent election.. (00214918.DOCX /'1) 4 In. its existing markets, Frontier complies with many additional federal regciirenaents in provicling its service, including all of the FCC requirements applicable to .multichaiulel video prog-anirning distributors (sash. as equal erilploymet�t opportunity and set-top box requirements), the :FCC r'equiren-ients applicable to EAS participants that are wireline video service providers, other FCC .requirements applicable to provision of Vantage TV (Frontier Broadband Service in Minnesota) (such as receive-oilly earth station license recluirerraents and arnoual regulatory fees for IPTV providers), and the Copyright Office reguiretneiats for cable systems filing seri-annual copyright statements of accounts and paying statutory license fees. Frontier sloes not file an FCC Form 327 relating to CARS microwave facilities because Frontier does not use such f,Iciliti.es in comaection with the provision of Vantage TV. Similarly, Frontier does not file FCC roma 320 and FCC Form 321 as they relate to the use of aeronautical frequencies that are not applicable to the IPTV technology. In these areas where Frontier offers service, area, Frontier will negotiate retransmission or must carry agreements with the following stations: K.TSP (ABC) wCCO (CBS) 1<34SP (FOX) KA RE (NBC) WFTC (My Netwwk) wUCW (Cw) KSTC (This/Antenna) KTCA (PBS) WUMN (Univision) K.PXM (ION) The planned carriage of the stations identified above could include both primary and multicast signals ofeacll station. C. A description of the proposed system desibit and phinncd operation, includnab at least the folloNving items: The t'oliawing provides a general description of the technology and infrastructure: Frontier Communications' Vantage TV video offering is powered by Ericsson's MediarOO111 software platform. Niediaroom is the �vorlcl's 11 IPTV platform — one that is proven and widely adopted by Network Service Providers worldwide — over 16.4 naiilio.n subscriber households and 32 million coivaected devices running the software to date. Vantage TV is all innovative, scalable, and highly reliable video service designed to run over aur .[P enabled networks (xDSL, FTTP/FTTN, etc.). OLlr customers' satisfaction. has been extremely high to date — relative to our competitor's video offerings in the same Markets in which we are deployed. Vantage TV's Core product features include.: {00214918.Docx / 1} 5 Secure delivery of SD (Standard Definition), HD (High Definition) and 4K/UHD (Ultra High Definition) content — via integrated Digital Rights Management — to set-top Boxes on each TV, a Superior HD, SD &, UHD Picture quality. m WiFi-enabled set-top boxes are also a deployment option allowing our customers to place their TVs 'wherever they want in their homes. ® Live TV broadcast with. instant channel change a11o1v frig super -Cast navigation through our Interactive Programming Guide. ® Video On -Demand library that will contain more than 100,000 movies and sho\vs. a Total Home DVR records up to 6 shows at once and lets our customers pause, rewind and play back live TV and store over 170 hours of FID prooranztnill.a. We provide our customers Nvith up to 1 Terabyte worth of on -premise storage capacity. w N'�cxt generation. EPG (Electronic Program Guide) and enhanced search functionality deliver real time results with a rich, new, visual poster -art driven exPerienee that allows oLu• customers to easily discover and consume content on their terms. p 1Integrated interactive applications include Social TV (access to Twitter and Faeeboolo, Weather, Interactive \A/orkout, Home Shopping Network and interacti,rc games. It is i.mPor-tant to note that Vantage TV is more than just a "middleware" or a User Interface; it is a.n end-to-end platform that covers a.11 video functional dependencies starting from Content Acquisition all th.e way through to Service Consumption. These are described below: Content. AUuisitlon: Frontier processes Live and On-Dernand content throe<< 11 encoders and content packaging tools at our Video Headend in Fort Wayne, Indiana. ,and Video Serving Offices (VSDs) in markets that we serve. Acquisition Se.rvet•s (A - Servers) in our service delivery architecture encrypt streams, encapsulate in .RTP anal/or Smooth. Streaming format, and put multicast streams Out on our network for devices to seamlessly connect to and consume content, C:orrtent PlItection: Frontier secures all of the content it received throubll lcveraued Digital Rights Management (DRM) and Public Key Infrastructure (PKI) systems, Which in turn, establishes trust across its entire server c"virownent and its set-top Box clients. (00214918.DOCX / 1) 6 1 ' Se"ice Vantage TV leverages a complex TV Services Managelllent tool to configure and manage subscriber information, Live TV Services; Channel Line - Up / Ch:annel Maps, and Video On. Demand Services all from a �veb-based interface that our Video Operations team controls. Subs' -Tiber Managemen : Frontier -Integrates Vantage TV with our internal Billing and Provisioning systellls (OSS/BSS) in a seamless fashion to ensure the most efficient customer experiellce. We continuously monitor the system end to eild and tallage subscriber groups, entitlements, and user authentication to all content and packages, while at all tinjes pyotecting customer infoilllation A subscriber group is essentially a category to which one or more client set-top boxes are associated with. For exan plc, a single client device might be in the following subscriber groups: "HD -capable," "Premium Content Package," and/or "Suburban :Illinois metro area." Subscriber groups also have Server clusters associated with them (for VOD rind Linear TV Services). For exalllple "South \Metro" illig1 be; used to associate a subscriber group to a set of live channels, public -access charinels, and correlated to a specific set of video distribution servers that provide content. The TV Services Management tool then offers the ability to associate clusters of Servers with a subscriber group and to associate subscriber groups �vitll client devices (propagating associated content rights and entitlements). Service Deliverf Frontier detivers high-quality Live and Video -ori -Demand content over our Managed IP Net\vork to the customer premise. Distribution Servers (D -Servers) it, our service delivery architecture buffer streaills, generate instant channel change bursts, and do forward en -or packet correctioll. Service C011SUmPtion: Frontier presents content to 01:11• custoulcrs' TVs ill a secure and reliable manner through Vantage TV's client softi-vare. That software, m1hich decrypts the stream (via SOC / System oil a Chip), resides directly on our customers' set-top boxes. M214918.DOCX / 11 7 1 . i Live a Media Y✓�""-� . -....�..�'...Y',1v v.w..i.i S. _.� f.-?ro• "HAV:S4YJ � �. . '7,. On -Demand Media Frontier's Access Vantage N Network Headend located in Fort Wayne, iN M214918.DOCX / 11 7 1 . i In summary, Vantage TV is an end to end software solution that enables Frontier to deliver next -generation TV experielices including standard and high-dcfillitioll/t:ltra-high- definitioil I've TV channels, video-oll-demand (VOD), digital video recording (DVR) and connected entertainment experiences to our customers. The fO11O1Vin;; responds directly to the requested inforillatioll set forth in the Request fol - Proposals 1'Ce.:1 iflg a description of'tlle proposed system design aimed planned operation: f. The general area for location of antenna and headend, if kno�� n; Frorlti.cr has a "super head end" in Fort Wayne, Indiana which has a satellite "fartll" used to download national content. This super head end has redundancy to receive terrestrial secondary feeds from Verizon, i.e., should all emergency interrupt service fl'olll one of Its national content soul'ces. The national content is encoded, and then deployed over diverse 10 GIG circuits to the local head where the local content, including public, educational and government access channels, is inserted .for delivery to encI users. Customers in the City of Lakeville will be served out of the head end in Apple Valley. Frontier will pick up the local broadcast signals via fiber circuits talc]/or will also capture tl.lose signals by antennae located at the local ]lead end and /or as a back-up, precautionary measure. ?. The schedule f'ol' a.ctivatilig cable and two-,vvay capa�cit�; While all exact launch date has yet to be determined, Frontier is wo.rkiilg dgently to colllplete all necessary work, and required testing and operational readiness reviews to offer service to cllstOrnel-s upon successful execution ofa Franchise Agreement. Frontier will sleet with Col11n1iSsi.011 and appropriate member jurisdictions to share the actual launch date when it becomes i'tnaltzed. 3. The type of automated services to be provided; As noted in Section B above, Frontier ]las provided a san.1ple challnel lineup. See Exhibit A. This illustrates the vast selection of content available to subscribers. Vantage TV offers: • Inc:redibl.e 100% digital. picture and sound. • Total -hone DVR with ability to record up to six Shaws at once and view 011 any TV with a set-top box. • Instant channel change and super -fast navigation through Dur interactive program guide and Video otl Demand. • The ability to watch up to six different channels at once with N/lulti-View, 00214918.DOCX / 1) 8 The ability to Pause, Fast Forward, Rewind live or recorded shows on up to eight TVs in your house. Next: generation enhanced search which delivers real-til»c results by program name, actor/actress and other key,vords across Live TV, Video On Demand and DVR recordings. Introducing Channel Pecks which maintains full-screeil vie�viIl� lA 11110 "pe'eking" into other programming 0 Recent & DVR Peek allows you to preview and tune to any of'the last five channels or DVR recordings. 4. The number of channels and services to be made available for access cable broadcasting; and Frontier will carry the same number of PEG stations as the incumbent. 5. A schedule of charges for facilities and staff assistance far access cable broadeasting; Frontier will make all franchised cities' access channels available to its subscribers, For purposes of acquiring the signal, Frontier will pick Lip the particular City's access channel signals at the Point(s) of origination via fiber facility and transport such content back to the local VSO for insertion in the channel .lineup. At the point(s) of origination, Frontier will need rack space and power for its equipment to recei+ie the signals) handed off by the City to Franchisee. Franchisee will pay for all facilities and equipment located oil its side of the demarcation point where the City will hand off its content to Franchisee and as is industry practice the City Will be responsible for all equipinellt on Its side of the demarcation point. .D. rierms axid conditions under which particular sei•Vice is to be provided to governmental and educational entities. Frontier will provide at no charge expanded basic service to all govei7lnlent 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 proviclilig service at such locations. E. A schedule of proposed rates in relation to the services to be provicled and a proposed policy regarding unusual or difficult coni,iection of services. Final rates have yet to be determined, please see ":Exhibit B- sample rates" which are Offered licre for illustrative purposes. t00214918.Docx / rl 9 F. A time schedule for- constrrsction of the ekatiE•e systecl,i 1� ith the time for wviriljg the afar iobrs l3a> is of tl�c area requested to be served. Frollticr is still finalizing its initial footprillt forthe deployment of cable services within the City of Lakeville service area. Frorlticl-'s planlleci deployrllca.lt is ilighly confidential, Pursuant to all executed franchise agTeenlent(s), Frontier will meet regularly \vitll the City and the Corillnissioll to discuss where service is available and any plans for additional deployrZlent. 1"rontleT is the second entrant into the wireline Video market ill the City of Lakeville. As a second entrant, investment in and expansion of Frontier's cable systemshould be driven by market success, and not a contractual requirement for ubiquitous coverage. Tile following sets forth some critical background with respect to employment of both telecorllmurlications and cable infi•astructure. Initially, local telephone companies were granted Monopolies over local exchange service in exchange for taking on a provider of last resort obligation- a duty to provide service - to customers in its service territory. Similarly, with respect to video services. The incumbent video provider (and its predecessors) operated as a monopoly over- facilities -based video. In exchange for making the capital investment to deploy facilities, the incuil�bent cable cam all 100 percent of the customers Who wanted cable television. company {* mot Subsequently, with respect: to telephone services, the federal and local governments effectively eliminated the local telephozlc monopolies and fostered robust competition. It should be noted that in doing so, the telecom second entrarlt ilad absolutely no obligation to build any facilities or to serve any particular location(s) at all. As t11e FCC noted, i.Mposing build -out i ecluireillents on new entrants ill the telecommunications industry would constitute a barrier to entry (13 FCC Red 3460, 1997). Cable companies were: free to enter the telecom Market on terms that made business and economic sense to them. This very c.nViror1illent was the catalyst for robust wireless and Wireline competition and the proliferation of higher broadband speeds. C01191-css became concerned about the lack of competition in the video Nvorld and in 1992 amended federal law to prohibit a local :franchising authort) fi•o111 "unreasonably[y] refusing] to award an additional competitive :franchise." 47 U.S.C. ¢' 541(a)(1) provides a direct avenue for federal court relief in the event of such an urlreasonable refusal. 47 U.S.C. § 555(a) and (b). Until the advent, however, of state statutes'?ranting statewide cable frarlchises without a mandatory build requirelrlcilt (e.g Florida.) or progressive cities willing to grant competitive franchises, cable monopolies continued to the detriment of cor.1sulners and competition. Level playing field requirements arc just one example of barriers to competitive entry erected by cities at the behest of the cable nlorlopolies. Courts have ruled, however, that "level playing field" provisions CIO not require identical terms for nev✓ entrants. See, for example, frt.,si;h.t Coraanaanziccrrinras I,% City of Louisville, 2003 WL 21473455 (Ky. Ct. App, 2003), where the court found: There will ]lever be an apple -to -apple comparison for Insight and other franchisee simply because (0021.4918. DOCx / 7) 10 1 � , . Insight is the incumbent wllich in its own right and tiarough its predecessors has beets the exclusive provider of cable services in tlae City Of Louisville for almost tllll'ty )/cars. No nese cable icanchisee call ever 'be in the same position as a thirty-year veteran. Scc� cclso, In Cclble TI/ -rued 14-A, Ltd: v. Cith OfNcchervrlle (1497 AVL 209692 (N.D.:111); and ,Mery Lnglcr.�7cl Cable lelei rsic�r�. l-lss'r1., Il`- v. Cn7zr?eetrcut DPUC 717 A.2d 1276 (199b). In shall) contrast to the monopoly provider, a second entrant faces a significa"t capital outlay with absohttely no assurance Of aecluiriug customers; rather, it must compete With the naono;poly incumbent and win each and every customer over. As Professor Thomas Hazlett of George Mason University has explained, "[i]ncuualbents advocate bund -out requirements precisely becaltse such rules tend to linlit, rattler than expand, comPetition." The federal Departnaent of Justice has also noted that "...consitlnel-s generally are best served if market forces detcl.11irle when and where competitors enter. Regulatory restrictions and conditions on entry tend to shield incumbents from competition and are associated with a range of economic inefficiencies including higher Product' costs, reduced innovation, and distorted service choices." (Department of Justice Ex Parte, May 10, 2006, FCC MC DLit 05-;11) The fact is that the incumbent cable provider has (1) an established market position; (2) all oI'the cable customers; and(3) an existing, in -Place infrastructure. These disparate market positions lilalce imposing a build -out requiremeilt on a. competitive entrant bad public policy. Under the guise of "level playing field" clainis, incumbent cable operators seek to require neW entrants to duplicate the networks the incumbents built as monopolies, knowing that such a requirement �yill greatly reduce, if not eliminate, the risk of competitive entry. In 2007, tlae FCC issued its findings with respect to facilities based video cotilpetition and held as follows: (1) with respect to level playing field requtirerllents, the FCC stated that such mandates "unreasonably impede conapetitive entry into the multichannel video marketplace by regrtiring local frail clais ill g authorities to grant fialachises to competitors on substantially the same terms imposed on the incumbent cable operators (Para. 108); and (2) �Yith respect to mandatory build out, the FCC held that "an LFAs refasal to grant a cOtllPetltlVe franchise because of an applicant's r.t"u ilIir)gness to agree to unreasonable build Out mandates constitutes an unreasonable refusal to award a competitive f%•anchise %vithin the measling of �>ectiatl 691 (a)('1) [� 7 U.S.C. §541(a)(1)]." Those tWO FCC holdings alone should put this entire "latter to rest - level playing field requirements and utnreasonable mandatory build requirelaaents are barriers to competitive entry in the cable market and violate the federal Cable Act and the FCC's order-. Minnesota, hoivevel, codified its requirezllents in a. state law and the FCC expressly decliaaed to "preempt" state laves addressing file cable franchising process. It is cleat•, however, that the FCC did not intend to protect tlae .Minnesota statute which mandates the imposition of barriers to entry on each and every local fi-ancllising authority. As vat ions providers were trying to enter the competitive cable market and {00214918.DOCX / 1} 11 calcountering batTie1-S such as level playing field requirements and mandatory build out provisions, many states passed statutes to facilitate competitive entry and to prevent local franchising authorities from erecting barriers to entry. Such]al�-s were passed In 26 states including Florida, \ilissouri and North Carolina., where incumbent video providers have taken advantage of the streamlined process to enter a market without a Mandatory build obligation. These laws have facilitated competitive entry as evidenced, for example, by the presence of four facilities based. competii:ors in the Orlando., Florida market, including CeilturyLink and Comcast. As such, these state laws are aligned and not in conflict with the FCC's and Congress' policies for promoting competition in the video distribution market. Minnesota's cable law, however, is quite the opposite. \d.in.nesota's cable act dates back to the 1970s and directs each local franellisiilb authority to impose not on]), a level playing field across a broad range of.issLles (many ofwllich Frontier does not oppose) but also a five year mandatory build out requirement. Botll of these provisions llave been decl'led to be barriers to entry by the FCC. Tile incontrovertible fact is that the law has beer extremely successfLll 111 barring cable communications competition in the City of Lakeville: The City of Lakeville has not experienced any facilities -based competition because of tile barriers to eiltry Minnesota codified in Chapter 238. 111 S11ppOrt Of this position, that the FCC's 2007 Order preeillpts Minn. Stat. Chapter 238, Franchisee notes the folloNving: Conflict preemption: State law may be preeniptecI Ivitlloilt express Congressional authorization to the extent it actually conflicts with federal law lk/here state law "stands as all obstacle to tele accomplishment and execution of the full purposes and objectives of Congress." Ea7glis/t. ,. Genei-cal Elec. Co., 496 U.S. 72, 79 (1990). 'A"llctller state law constitutes a sufflclent obstacle is a matter of i'udgment to be informed by examining the federal statute as a whole and identifying its purpose and intended effects. CrosbY v, Xol.`/ l=oreigan Tracle Council, 530 U.S. 363 9372 (2000). Minn. Stat.§ 238.08 mandates terms that eac1111111nicipality must Implement in granting a new Or renewed cable frailc]1.1Se. Minn. Stat.5S 2;8.084 sets forth the required contents of a franchise ordinance and sets fort]' very precise requirements in all initial franchise about the build: commence build withiI1 240 days; 1llllst construct at least 50 plant Hailes per year; construction tl'roughout the franchise area must be substantially completed within 5 years of granting the franchise; and these requirements call be waived by the franchising authority only u13011 occuu-rence of unforeseen events or acts of God. Section 621(a)(I) initially gave local authorities the aLit],onty to grant fa0214918.DOcx/1) 12 1 ;. franchises, but this broad grant resulted in exclusive franchises/monopolies. Congress "believe[d) that exclusive franchises are contrary to federal policy ... which is intended to promote the devetopnlent of competition." H.R. Conf. Rep. No. 1.02-562, at 77 (1992). Legislative history clearly supports that Congn•css was focu, on fostering competition when it passed the 1992 Act. Owes/ Brocaelbancl Serl"s. 17-7c. )". CitY of BO -t der, 151 F. Supp. 1236, 1244 (D. Colo. 2001). In its 2007 order, the FCC found that "an LFA's refusal to giant a competitive f7•anchise because of an applicant's un�a itlingness to agree to unreasonable build out mandates constitutes an unreasonable refusal to award a competitive franchise within the meaning of Section 621(a)(1)." The FCC order, however, targeted local and not state laN.�;s. Arguably, the Minnesota build requirements set forth in Section 235.054(nl) are in conflict with Section 621(a)(1) and are, therefore, preempted. ® in the Boulder case, the court applied Section 621's prohibitioal, on unreasonable refusals to grant franchises to find conflict preemption 'Where local rules required voter approval for a.ii.y ne\v franchises. The mandatory build out in the Minnesota statute could be considered a de facto "unreasonable refusal" to grant a franchise and thus conflict with the pro-eoiupetition purpose set forth in Section 621(a)(]), In upholding the FCC's ruling, the Sixth Circuit stated that "while the [FCC] characterized build out requirements as 'eminently sensible' under the prior regime in which cable providers were granted community -wide monopolies, -under the Current, competitive regime, these requirements make entry so expensive that the prospective ... provider withdraws its application and simply declines to serve any portion of the comrijunitV.,, Alliance fnr C17 -11y Afeclia v. FCC, 529 F.3d 763, 771. (6th Cir. 2005). The FCC ruling targeted local rules and actions and the FCC refrained fi•ol-1Z preempting state regulation because it lacked "a sufficient record to eValuat:e whether and ]low such state laws may lead to unreasonable refusals to award additional competitive franchises." FCC Cable Franchising Order (FCC 06-150, at n.2 &126). That is not to say, however, that upon full consideration, the FCC would not find the Minnesota mandatory build requirements to constitute all tmreasonable refusal under Section 621. o The franchising laws NA11iich were being enacted about the (D0214918.DOCX / 1) 13 time of the FCC order facilitated competitive entrants into tale facilities based video market. O I'll sharp contrast, the Minnesota statutes mandates individual cities and commissions to include Onerous build out schedules wl1ich, standing alone; IN,ould ruin afoul of the FCC's order. It should also be doted that at least gyro cities in Mil-inesota have chosen to award competitive frailehises to second entrants without satisfying all the mandates of Chapter 23 S. Sec' �leclic�cor��. llllhi iesoki., LLC V. Cite OfPrior Lake, "N i ln. Ct. of Appeals, .A09-1;79 (Unpublished decision, 1~iled June 22, 2010), In October 2014, the City Of Owatonna awarded a competitive franchise to a second provider, and the franchise did not contaill the five year build requirement set forth in Chapter 238. Railer, it contained a market success model expressly endorsed by the FCC. The conTipetitor �� i11 Provide service to 25 percent of the City of Owatonna at -id grill have no further obligation to enable the provision of cable con1111Lill i(,itions services until 45 I)C:I-Ce"t of households ill the footpri_ilt subscribe to its serVlc(4. Finally, 1lotlling ill the FCC's Order on Reconsideration released in January of this year alters the above analysis. (00214915.eocx11 i} 14 G. fl statement indicating tiie applicalit's qualifications and experience in the cable collimanications field, ifany. Frontier' Colllrllunications is all S&P 500 company and is i:rIclucied Ill the l70rturlo W()() I ist of America's lamest corporations. General Itlanager, Southeast Minnesota (inchiding South Metro): Darrell Mansen is c urrcntly the general manager overseeing Frontier's Southeast Minnesota operations. He has overall responsibility for the operations organization Serving this area, including customer service and community relations. Ile began with one of our predecessor companies, Contel, in 1972 on a facility construction crew. He held various technical positrons frolll 1972 to 1979 \ellen lie was promoted to a manager position, lie retired in 2006 and returned a year later for a special project and was shortly thereafter promoted to his current General Manager position. IIe will be retiring at the end of April 2016 and a successor will be named in the near future. Area General 'Manager, Minnesota, Kowa and Nebraska: George M.eskowski is Frontier's Area General Manager with overall operations responsibility for the states of Minnesota, Iowa and Nebraska. He lives and has his office in the South Metro area. 1-1e has overall responsibility for the entire operations organization ill the three states and is responsible for all customer service and community relations for these areas. George was formerly a. general manager with Frontier ill Michigan and Indiana prior to being promoted to his current position in 2014. president and Chief Executive Officer: Daniel J. McCarthy became a lnenlber of the Frontier Board of Directors in May 2014. He ]las been President and Chief Operating Officer since April 2012 and ,vas Executive Vice President and Cllief,Operating Offcer from January 2006 to April 2012. Before this, he was Senior Vice President, Field Operations from. December 2004 to December 2005, Senior Vice President, Broadband Operations from January 2004 to December 2004, and President and Chief Operating Officer of Electric Lightwave from January 2002 to December 2004. Nft. McCarthy has been with Frontier COMM Lill] eatl0llS Corporation Since 1990, tivllen Ile joined the company's Kauai, Hawaii, electric division. In 1995, he moved to Flagstaff. Arizona, and assumed responsibility for the company's energy operations. In 2001 lie was promoted to President and Chief Operating Officer of Citizens Public Services sector, responsible for the colllpaily'S energy and water operations. He earned a bachelor's degree in marine ellginee-ing frons the State University of New Yolk Maritime College at Fort Schuyler, and holds an M.B.A. frons the University of Phoenix. In October 2013, he was appointed a. Trustee of The Committee for Economic Development, a nonprofit, nonpartisan, business -led, public policy organization that combined with The Conference Board, a nonprofit bilsiness membership and research group Organization. In December 2013, Mr. McCarthy was elected to the Board of Trustees Of Sacred ;Heart University in Fairfield, Connecticut. He is also a meniber of the Western Connectliaut Health Network Corporate Advisory Council, 00214918.DOcx / 11 15 Executive Vice President and Cilief Financial Officer: John M. Jureller is Executive Vice President and Chief Financial Officer. He joined Frontier Conilllullicall ons in January 2013 as Executive Vice President and Chief Financial Officer—Elect and because Chiefl~immela] officer- on February 27, 2013. From ?QOb through 2012, Mr. Sure}ler was Scnior Vice President, :Finance and Operations for the Resources Group of General Atlantic LLC, a global urlow,tll private equity filen managing $17 billion around the dobe. Be[ore this, lie was Chief Financial Officer of Westpoint International, Inc., �� itll overall financial responsibility for a $90() zllillion company. He was responsible for all financial matters, including public financial reporting, taxation, internal audit and corporate finance. From 2003 through 2006, Mr. Jureller was a member of the Corporate Turnaround & Restructuring practice of AlixPartllers, LLC. His responsibilities gave 111111 Wide exPOSLire to telecommunications, inc}udillg cable, Wireless and intern et se> vices. Previously, he was Chief Fila.ancial Officer of Trans -Resources. Inc.; Senior Vice President; Corporate Development at Gartner, Inc.; and Senior Vice President, Finance and Corporate Developlllent at Caribiner International, Inc, Early in his career, Nl:r. Jureller held increasingly senior financial roles at PepsiCo World Trading Company, Inc., Emcor Group, Inc., and General Electric Capital Corporation. Mr. Jureller began his career in finance at Bankers Trust Company. Mr. 7ureller earned a B.S. with Distinction and all M.B.A. in Finance from Conie.11 University. He sits on the Board of Directors of White Plains Hospital in White Plains, New fore: and is a member of the hospital's Finance cornillittee. ExecutivcVice President, )('rolltiej- Secul-e and Administration: Cecilia K. Nieltellley 1S Executive Vice Presiclellt, Frolltic;I• Secure and Adlll.Inlstratrorr, responsible for Frontier Secure, Human Resources, Marketing, and Product Developn.lent. Before this, she wasresponsible for I�.'Ulllall ReSol'ilCeS, Sales Operatlo1lS, Corporate Coill7llLt111CatIC1Il8 cUld Public Relations, She was Executive Vice President, Hunlan Resources and Call Centel - Sales & Service from. February 2008 to May 2012. N/Is. McKenrley joined the company as Senior Vice President; Human Resources in February 2006. She is a nlenlber of the company's Senior Leadership Team and reports to the CEO. Frontier Secure, a service of Frontier Comilaunications, offel•s products and services to Protect every aspect of digital life, Including ConlpLrter security, cloud backup & sharing, the con.nect'ed honk, identity protection, equiplllcllt Protection and 24/7 U.S,-based prerlli'tnll technical support. Its products and services are sold nationwide directly to c011su111ers and small businesses, and wholesale through strategic; partnerships. Prior to Frontier, :Ms. McKenney was Group Vice President of Headquarters Hunlan Resources Ior the Pepsi Bottling Group, Inc. (PBG) in Somers, New Yorlc, :responsible for all Eluman Resources functions supporting PBG's worldwide operations. tiler- organization supported .PBG's headquarters and call center in addition to providing lonb term. strategic direction and clay -to -clay business Support for Staffing, Conlpczlsation and Benefits, Diversity, Training, Talent Development and Human Resources Systems. toazr.4918.cocx; it 16 Ms. McKenney joined the Pepsi-Cola Company in 1989 in its headquarters -based employee benefits group. She became Human Resources Manager in Pepsi -Cola's Northeast Business Unit in 1992. In less than two years, Ms. McKen.ney transferred to Northern. California to manage HR issues for the company's San Francisco market. In 1995, she was appointed Director of Human Resources for PBG's California Business Unit. When PBG became an independent company near the end of 1995, ,Vis: M.cKenney «vas appointed Vice President, Staffing and Diversity at Company's headquarters. In 2000, she was promoted to Vice President, Headquarters Human Resources and ",as named Group Vice President, lleacjquarters Human Resources, in 2004. Prior to Pepsi, Ms. McKeaney worked for• Mutual of New York and L.F. Rothschild III Hui}pan Resource and Management roles. She earned a bachelor's clegree in business administration from Franklin & Marshall College and is a Certified Employee Benefits Specialist. Ms. McKenney is a member of The Leadership Council of Franklin & ) 4arshafl College and a member of the Board of Directors of The Child Care Council of Westchester County, Inc. In ivlay 2014, she was honored with the HR Leader Award in the Large Company category at the 2014 Fai.rlie.ld County HR People ofthe Year Awards. The awards are given each year by The Southern Connecticut Chapter of the Society for human. Resource Mana ement to recognize individuals whose performance and contriblrtions have significantly benefited their organizations, the Duman ResourCeS profession and the conlmunity. EXL'cutive Flee Presiclent, External :affairs: Kathleen Quinn Abernathy is Executive Vice President, External Affairs, responsible for the company's governmental and regulatory affairs. From March 2010 to June 2012, she was Chief Legal Officer and Executive Vice President, Regidatory, and Governmental Affairs. Prior to joiriiiig Frontier, she was a Partner at Wilkinson Barker Knauer LLP, advising clients on a m" de range of legal, policy and regulatory issues related to telecanununications and the media. Before this, she was a Partner at the law firm of Akin Gump Strauss Ff auer & Feld, LLP. Ms. Abernathy served as a Conamissi oiler with the Federal Con -un unicatioils Commission (FCC) from 2001-2005. \Vh.ile a Commissioner, she chaired the Federal -State Joint Board on Universal Service and participated as a U.S. representative in nLunerous international bilateral and multilateral i..iegotiations, including the 2002 International Telecommunication Union (ITU) Plenipotentiary Conference and the 2003 ITU World Radiocommunications Conference. She was appointed by the ITU to chair the 2004 ITU Global Symposium for Regulators. Prior to joining the FCC, Ms. Abernathy was Vice President for Public Policy at BroadBand Office Communications; Vice President for Regulatory .Affairs at US West, and Vice President for Federal. Regulatory Affairs at AirTouch. Communications. Earlier in her career; she was Legal Advisor to two FCC commissioners and a Special Assistant to the agency's General Counsel. 100214918, DOU / 1} 17 Ms. Abernathy has received numerous honors and awards in. recognitioll of leer contriblrtions to the profession. In 2011 she was Named one of the "Top Ten Womcrl ill Telecom" by Fierce Telecom and honored by Legal M011lentulll With 711 Ainliu01 nigh Award." She was featured in Chambers USA's "Leaders ill their Field" ill the Tclecom, Broadcast & Satellite: Regulatory category (2009); included in the Washington, DC edition of Super Lawyers (2009, 2010); and named one of Washington's Top Lawyers by Washingtotlian magazine (2007, 2009). Ms. Abernathy served oil Frontier C0111111unicatloils' board of directors from April 2006 ary 2010. She is currently on the boards of tl.le John. Gardner Fellowship throtrgll Febrl,r Association, which is affiliated with U.C. Berkley, and Stanford University and Children Now. She also serves oil the board of ISO Ne1v England .Inc., the operator of Ne\v England's bull< power and wholesale electricity 11lal'1<ets. Ms. Abernathy received her B.A. nl.agna cunt laude from Marquette University and her J.D. from Catholic University of Ameol"ca'S Columbus School of Law, tivilere she Nvas a Distlrlgruished Practitioner in Residence. She is a member of the District of Columbia Bar and the. Federal Conullutlications Bar Association, of which shr; is a Past -President, and IMS served as arl adjunct professor at Georgetowil University Law Center and The Columbus Scl.lool of Law. Selli01• Vice President, General Counsel Sec1•etary:.Matic D. Nielsen joined Frontier in March 2014 as Senior Vice President, General Counsel, ,ilei Secretary. Pi'ioi' t0 this, he was Associate General Counsel and Chief Compliance Officer for Danbury Conn. -based Praxair Inc. From 2007.to 2009, he was a Vice President and Assistant General Counsel of defense contractor Raytheon Co, Before that, 1Mr. Nielsen served as Chiel"Legal Counsel; and then Chief of Staff. to Massachusetts Governor Mitt Ronlilcy (2004-2007). Mr. Nielsen began his legal career in 1990 as an Dissociate with the Ftartford law fir111 of Murtha, Culiina LLP. He also served three Nio-year terms ill the Connecticut Legislature, one tern, in the .House (199;-1995) followed by two te1111s ill tll,e Senate (1995-1999). Mr. Nielsen graduated fr•onl Harvard College magna cunt laude and Phi Beta lappa. lie earned his law degree, cum laude, firo.nl Harvard Law School. II. An identification of the municipalities (including contact illfor111atioll 1,01 - the municipal officials in each community) in which the applicant either 01i'11s 01' opel-aces a cable communications system, directly or indil-ectly, of has outstanding franchises for 1N'llich no system has been built. iOO214918.DOCX / 1} 18 1 Please see Exhibit C for a list of jurisdictions Frontier or an affiliate of Frontier bolds a cable franchise agreement pursuant either to local agreement or Statewide franchise authority. I. Plans for financing the proposed system, NN-hich moist indicate every significant anticipated source of capital and significant limitations or conditions with respect to the availability of the indicated sources of capital. This information should include: f. Current fina-rzcial statement Frontier's uItlmate parent company Is Frontier Communications Corporation. Frontier C077111111]?7Cat'()I's COrp07'atron's most recent Form 10-K (alone; with all other SCC filings) may be found here: 2. Proposed sources and uses of funds for the construction project Frontier's parent company is Frontier Communications Coi-poration. Frontier Coil ,,III Lill] catiOils Corporation is all SRP 500 company and is included in the Fortune 1000 list of America's largest colporations with reported fourth quarter 2015 revenue of $1,41.3 million and operating income of $182 million. Frontier does not require any unique or additional funding sources (i.e. special notes or bonds) in order to deploy its Vantage TV service in this, or any other rr"rarlcet. 3. financial budgets for the next three (3) years Please see response to Section I (4) below. 4. Documentation regarding the comrnitntent of funds, arrcf As a publicly traded. company, Frontier releases a very limited .amount of forNvard- looking .infbrniation for the company as a whole, but it does not provide forward- looking information at the individual market level because it could lead to i71COITeCt or inapproprialc assumptions or conclusions by its current and potential investors regarding the business as a whole. Given the extremely sensitive nature of the information contained in the requested pro forma, Frontier cannot file this inform.a.tion as ,Dart of its application. 5. Any other- information that applicant determines vvould be useful in cvraluating its financial qualifications. Please see response to Section I (1) above. {00214918.Docx/3.} 19 J. A st ttenlC1lt of ownership detailing the corporate organizatioll of the applicant, if any, including the nactaes 211d addresses of officers and directors and the number of shares held by each officer or director, and intercompany relationship, including the pa1'ent, subsidiary or affiliated compally. Frontier Conurlunications of Minnesota, Inc. operates as a subsidiary of Frolntiei, Comilu nlcations Corporation. Fro.l.Itier C0111IIILlllicatioils Corporations Board of'Directors believes that the purpose of corpol-ate governance is to ensure that Frontier ma.xilllize stocicltolder value In a manner consist,.rlt with legal requirements and the highest standards of:integrity. The Board has adopted and adheres to corporate governanec practices t-vhich ti -,ie Board and senior management relieve promote this purpose, are sound and represent best practices. We continually review these governance Practices, Delaware law (the state in which %ve are incorPol-atedl, the rules and listing standards of the NASDAQ exchange and SEC regul"itions, as well as best practices suggested by recognized governance authorities. Frontier's Board of Directors' Code of Business Conduct and Ethics reflects frontier's COM lnitill ent to niaintain a culture Ofintegl-ity, honesty and accountability when dealing Wit11 oUr business partners, ou.I' CLlstoIII el -S, our stockholders and each other. It is intended to help Us focus on areas of ethical risk, recognize and Ileal with ethical issues, and to provide us wit11 the resources and Procedures. The code applies to all of Frontier's directors, officers and employees, including those at Frontier's subsidiaries and affiliates. Directors: Palncla D, Reeve, Chairman Leroy T. Barnes Jr., Director Peter C.B.:Bynoe, Director Diana S. Ferguson, Director Edward Fraioli, Director Daniel J', McCarthy, Director Virginia 'P. Ruesterllolz, Director 110%,vard L. Schlott, Director Larraine D. Segil, Director Mark Shapiro, Director Myron A. Wick, 11.1, Director {00214918.eocx / i} 20 Officers: C.11ief Executive Officer and President Executive Vice President, External Affairs Executive Vice President and Chief Financial Officer EAEC11t1Ve Vice.1 resident, and Chief Custom Office Executive Vice President, Field Operations Executive Vice President and Chief Tec}vlology Officer Senior Vice President, General Counsel, Secretary Executive Vicc President and Clliefpeople Officer Daniel McCarthy Kathleen Quinn Abernathy J01111 M. jureller Cecilia K'McKenney John Lass Stevc Gable N11ark D. Nielsen Kathleen Wcsiock C011ta.ct inr`Ornlatl011 for the members of Frontier's Board Of Directors mid Mznagement, as Nvell as their profiles, may be found at►�°it T } �'t E 11cllId Frontier's Management's profiles fOLlnd at Ilitli: t ti �s ,a,i,11,1c I. G' sit l' !f 4iii 11 1 Fal. :For i.nformat.ion concerning the number of shares held by each officer or director of Frontier, please see Frontier Communications Corporation's most recent Form 10-K (along with all other SEC filings) found at t1�1� r N c'• ut f1wvjg,.cc�'�z 1<C:. A Notation amid explaiiation of otltissians or other variations I4gtll respect to the requirements of the proposal. None at this time. The fatlolVillg responds directly to the requested informationj set forth iii the Request for Proposals pul'smant to Lakeville City Code at Section 3-11.-1.5 B: l A statement as to the proposed service area; As set forth in Section F above, Frontier is still finalizing its initial fbotprint for the deployulcnt of cable services within the City of Lakeville service: area. :Frontier's planned deployment is highly confidential. Pursuant to an executed franchise agrcenlent(s), Frontier will sleet regularly with the City and the Commission to discuss �� here service is available and arty plans for additional deployment, As further explained above, Frontier is the second entrant i11to the wireline video market in the City of Lakeville. As a second (00214918.DQCX / 1) 21 entrant, investment in and expansion of Frontier's Cable System should be driven by 111a1'11(et Success, and not a contractual requirement foI" ubiquitous coverage. 2• A resu3ne of prior history of applicant, including the lef;al, technical and financial expertise of applicant in the cable television field; Please see responses to Section G and T above. A list of the general and limited partners of the applicant, if a partnersliip, or the shareholders, If a col'poration; Please see; F ronticr Communication's Col-poratlon.'s "lost recent Fon-, 10-K (alom, with all otl1El` SEC f31ll1gS) fOL1I1d at: lLP. ii;'si'C:�tU;t 4. Tllc l)ercerl.tage ownersilq) of the applicant of each of .its part,,ers, SI) arelloIders or Other equity ONvilers; Please see .Frontier Conlmunicatioils Corporatioll's,lost recent Form 10-1t (along vNi' all otller SEC filings) found at: iii;~`til �• A list of officers, directors and managing enllaloyees of applicant or its gene] al partner, as applicable, together with a description of the b person; acl:gi`ound of eac11 such ]'lease see response to Section .1 above. Piease also see Frontier's Board of Directors' Profiles found at s t�l� 7 IY ,sir}i �I';}IIi.IC['.t;i1� ' _ ___.-,___.Clir£Ltj3ti.CIalldF1'Ol1t1E1''SJ\lalla. eillent's I?1"Ot11C-;S found at i ti�:�:' 131t t�`s��i 1�r<)?ll'"r. GE) la Ili:xll�cej,L��11i i't.t.t;tli}.. b. The nallles and addresses of any parent or subsidiary of applicant or any other business entity owning or controlling applicant in whole or in part, or owned or controlled in whale or in hart by appl.ic�int; Please see Frontier Communications Corporation's ,lost recent Form I 0-K. (along witll all Other SEC`.:tilings) found at: 11tty_ ili.e titc.:._zg scc:.c 7. A Gu relit fiu.ancial Statement of applicant verified by an audit or otherwise certified to be true. complete and correct to the reasolla.ble satisfaction of the City; Please see Frontier Conanlunica.tioi's Corporation's "lost recent Form 10-1( (along �A!ith all other SEC filings) found at: htlL tc?r.fr.z lt;c:l".cc)nli' S. Proposed constructioll and service schedule; Please see response to Section F above. Any additional information that the City deems applicable. {00214913.DOCX / 1) 22 1 None at this Lillie. Subs cribed and sworn to befol-e m this 0 L) Notar"y pUblic MY Conliniss.ion Expires: LIE� Y PUIBLI H NOTARY PUBLIC K �S2T� IINNESOTA C P. 1: , r J n.31 y commission Cxplres Jan. 31,2017 J00214918,DOCX 23 it A (00214918.DOCX / 1} 24 7 Ali, W �Z j,� {00214918.DOCX / 1} 25' r . Ie r,coI'll (00214918.000X / 1 } 26 ft214913.DOCX / 1} 27 1 ccml he Ipce rite r -Ot, . wt (00214918.DOCX / 1) 28 1 Exhibit B {00214918.DOCX / 1) 29 . . . . . . . . . . . . . . . . Vantage TV 0 Lasso 100 In! Ow", mi, a—, bon iE. 10%gh xr propam Pak c- Demiu-.d 'T tO A MOW chamul: at once n7t 1hyllm. .!: -: rJe j in ami TJ. Cn Demalld,,Lld DI -P. MOOS CLEM,-] in c F 't a k DIT Pal ahwqua w pwW,,,d j,, C'r {0023,4918.[)OCX 30 - 1 - innovat.;on to the. ne.:<t ie�vesi nsVlor <114 ;men m v.�rlpwm mtm OL C to us' Fstj z I; y, fj I go uj emr www we UQI nawd Cranial s1i ep:&Qe p5ek :Iq3w, t,N 4,, 0, rlr fl*e. -- 200+1 Almot I many fwsm wnrammmmel 21'd w5s P21OPS 3nd Mo'7 no in; low r! 7V an! es 0+ Over 30C,91yiss a, p51_', c - Chun& AWMIX OR {00214918.DCCX / 1} 31 1 Qua COSAWar so !,a Tyr " -nL I% yem, E SIT c nor n&5 a; :=MWOOks, 7:" poor X0 Vj%, nay inn, Z >I 'or s7exy, on. e CA "-E It Msa 7Z U,T iz! Ian" "'Sol top ainvix- 147"4d? x.v ic. r -Is tu' iz 7mwNx As soon Ew"nav"O, un wv:_�' OVUM, -a is 1v yy; nil Yowl a A ZA, SO" fG0214919.D0CX / 1� 32 1 Exhiblot C Cable Franchises Held by Frontier Communications Affiliates {0021491S.DOCX/ 1} 33 State Area Covered Indiana State -issued franchise Oregon Beaverton Oregon i Cornelius Oregon Durham Oregon Forest Grove Oregon ! Hillsboro l Oregon King City Oregon Lake Oswego Oregon Rivergrove Oregon Tigard Oregon Tualatin Oregon Washington County Oregon Fairview Oregon Gresham Oregon Troutdale Oregon Wood Village Oregon City of Damascus Oregon City of Dundee Oregon City of Happy Valley Oregon City of McMinnville Oregon City of Newberg Oregon City of Sherwood Oregon City of Wilsonville Oregon Clackamas County Oregon Clackamas County Oregon Multnomah County Washington Bellevue Washington I Bothell Washington Brier Washington Camas Washington City of Bothell Washington City of Edmonds Washington City of Everett Washington City of Kenmore Washington City of Lynnwood (00214918,00cx 1) 34 EXHIBIT B Correspondence from Charter to City of Lakeville Chart�rIM C.A 1 10NS 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 Ordinance'. 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 Leeal, Technical and Financial Oualifications. 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. ' Title 3, Chapter 11, Lakeville City Code, adopted November 2, 1998 ("Regulatory Ordinance") 608-467-9219 15133 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 aU 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 ofproposed 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 I* 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, g-7 Tom Bordwell Senior Director Regional Government Relations Charter cc: Brian Grogan, Esq. 608-467-9219 5133 West Terrace Suite 100 Tom.BordwelI@chartercom.com Madison, WI 53718 SheppardMullli" June 6, 2016 VIA E-MAIL AND U.S. MAIL Mr. Brian T. Grogan Attorney at Law Moss & Barnett 150 South Fifth Street Suite 1200 Minneapolis, MN 55402 Sheppard Mullin Richter & Hampton LLP 2099 Pennsylvania Avenue, NW, Suite 100 Washington, D.C. 20006-6809 202.747.1900 main 202.747.1901 main fax www.sheppardmullin.corn Gardner F. Gillespie Partner 202.747.1905 direct 202.747.3815 fax ggillespie shepP4E0 uLin.om J. Aaron George Associate 202.747.2196 direct 202.747.3849 fax ageorge shep.pardmullin.com File Number; 36EX-219155 Re: Frontier Communications Application for Cable Franchise in Lakeville, MN Dear Mr. Grogan: We write on behalf of Charter Communications ("Charter") with regard to Frontier Communication's ("Frontier's") application for a competitive cable franchise with the City of Lakeville ("City"). Charter does not oppose Frontier's entry into the City, but has asked that we address important level -playing field considerations and respectfully requests that the City pursue modifications to the application to ensure fair competition and to comport with requirements under applicable state law, the Lakeville Regulatory Ordinance' and Charter's franchise. Frontier's application, which argues that Minnesota state law is preempted, is not compelling. Frontier does not point to any authority that would allow the City to disregard state law. Minnesota state law defines and circumscribes municipal authority to grant cable franchises. See Minn. Stat. 238.01 et seq. All franchises granted pursuant to state law must contain "a provision that the franchise ... compi[ies) with the Minnesota franchise standards contained in [Section 238.084]." Those standards require a schedule showing commencement of construction within 240 days, a reasonable rate of construction, and substantial completion of construction "throughout the authorized franchise area ... within five years of the granting of the franchise." Minn. Stat. 238.084(m)(1)-(3). Title 3, Chapter 11, Lakeville City Code, adopted November 2, 1998 ("Regulatory Ordinance") ShepparrdMullln Brian Grogan June 6, 2016 Page 2 State law also forbids the City from "grant[ing] 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." Id. 238.08(1)(b). Charter's existing franchise and obligations under the Regulatory Ordinance comply with Minnesota state law and identify the authorized franchise area as the City's corporate boundaries. Regulatory Ordinance at 3-11-2. In Section F of its application, however, Frontier asks the City not to require it to provide coverage throughout Frontier's service area in the City, or to specify a schedule for construction or rewire completion of construction within 5 years. Frontier's application acknowledges that the franchise terms it seeks would be less burdensome than the requirements imposed on Charter. While Frontier attempts to assuage the City with a five page argument about federal preemption, it nowhere addresses the fundamental question the City must ask: May the City disregard state law or declare it to be invalid? The answer is no. Charter is not seeking Frontier's withdrawal of the application as its franchise and state law clearly contemplate non -exclusivity in granting rights to provide cable service. However, in order to comply with law, the application as presented is deficient and must be modified. Minnesota municipalities "have no inherent powers and possess only such powers as are expressly conferred by statute ...." City of Morris v. Sax Investments, Inc., 749 N.W.2d 1, 6 (Mn. 2008) (quoting Mangold Midwest Co. v. Village of Richfield, 143 N.W.2d 813, 820 (Mn. 1996)). The state "may limit the power of a city to act in a particular area." Id. The state also may "fully occupy a particular field of legislation so that there is no room for local regulation." Mangold, 143 N.W.2d at 819. Where the state has limited the City's power and occupied a particular field, as it has with cable franchise regulation, the City "cannot enact a local regulation that conflicts with state law." Sax Investments, 749 N.W.2d at 6; see also State v. Steele Cnty. ed. of Comm'rs, 232 N,W. 737, 738 (Mn. 1930) ("[Local officials'] authority is the command of the statute, and it is the limit of their power."). Minnesota's cable franchising provisions do not allow the City discretion with respect to construction requirements or competitive equity. The statute specifies that any franchise granted by the City "shall comply with the Minnesota franchise standards" and "shall" include terms related to area served that are no "more favorable or less burdensome" than an existing franchise. Minn. Stat. 238.08 & 238.084 (emphasis added); see Madson v. Overby, 425 N.W.2d 270, 277 (Mn. Ct. App. 1998) (statute directing that cities "shall" take specified action "is mandatory" and "does not involve discretion"). The City cannot "refuse to perform" its duty "on the ground that the existing law is [invalid]." Steele Cnty., 232 N.W. at 738. And the City is "not clothed with judicial authority" to declare a state law invalid. Id. If the City were to assert that authority and disavow its statutory obligations, as Frontier invites it to do, its action would be "ultra vires, beyond the limits of the power granted to (it], and ... without legal force or effect." Lilly v. City of Minneapolis, 527 N.W. 2d 107, 113 (Mn. Ct. App. 1995). Nor should the City accept Frontier's invitation to assume the substantial cost and risk of adopting Frontier's federal preemption argument. See Steele, 232 N.W. at 738 (holding that attacks on the validity of a statute should be leveled by the private interests "asserting invalidity" who are "peculiarly and particularly affected thereby," not by cities or public officials). Frontier acknowledges that whether a state law is preempted "is a matter of judgment," App. at 12, which, as discussed above, Minnesota's SheppardMullin Brun Grogan June 6, 2016 Page 3 cable franchising law does not afford to municipalities. Even if the City were able or inclined to assume that mantle, Frontier has fallen far short of establishing that the requirements of Minnesota law would create an actual barrier to entry for Frontier in the City, particularly in light of Frontier's substantial resources and existing plant in the City. If Frontier believes the state law to be preempted, Frontier must make its case in the courts, not ask the City to spurn its statutory obligations. For the reasons stated above, the City must consider Frontier's application against the requirements of state law, the Regulatory Ordinance and Charter's valid franchise. The City ultimately may not grant a franchise to Frontier that violates state law or imposes terms that are more favorable or less burdensome than the terms contained in Charter's franchise. If the City choses to grant a competitive franchise, such franchise must be on a level playing field and any application pursuant thereto must meet the requirements of applicable law. Therefore, before taking such action to approve Frontier's entry, therefore, the City should require them to amend the application in accordance with the concerns raised herein. Thank you. Sincerely, Gardner F. Gillespie J. Aaron George for SHEPPARD, MULLIN, RICHTER & HAMPTON LLP G FG/gs CC' Councilmember Doug Anderson Councilmember Bart Davis Councilmember Colleen LaBeau Councilmember Kerrin Swecker Mayor Matthew Little Mark Brown Suzanne Curtis Tom Bordwell LeeAnn Herrera SMRH:225417559.1 EXHIBIT C Report regarding the Financial Qualifications of Frontier ♦*i*. Moss & Barnett August 4, 2016 Mr. Justin Miller City Administrator 20195 Holyoke Ave. Lakeville, MN 55044 Re: Frontier Communications of Minnesota, Inc. — City of Lakeville, Minnesota Dear Justin: Frontier Communications of Minnesota, Inc., ("FCM) has requested a cable communications franchise from the City of Lakeville, Minnesota ("City's to provide cable services in the City. The City contacted Moss & Barnett seeking input regarding the appropriate procedure to be followed to consider the award of a cable communications franchise to FCM or any other applicant. Moss & Barnett reviewed applicable law (attached hereto as Exhibit A) with City representatives and developed a comprehensive franchise procedure for the City to follow. In accordance with Minnesota Statutes Section 238.081, City Council authorized publication of a Notice of Intent to Franchise a Cable Communications System ("Notice'. The Notice was first published in the Lakeville Sun Thisweek on April 22, 2016, and was thereafter published on April 29, 2016. The Notice referenced the City's Request for Proposals - Official Application Form that was made available on request at the office of the City Clerk. Copies of the Notice and Official Application Form were sent to FCM as well as the incumbent cable operator, Charter Communications ("Charter'). Pursuant to Minnesota Statutes Section 238.081 the City established a deadline for submitting applications on May 16, 2016, at least twenty (20) days following the first date of publication as required by Minnesota Statutes Section 238.081. The City received only one application - from FCM. Pursuant to Minnesota Statutes Section 238.081, the City published Notice of Public Hearing. The Public Hearing was held on June 6, 2016 at 7:00 p.m to receive input from interested parties regarding FCM's application. Testimony was given by Ms. LeeAnn Herrera, Director of Government Affairs, Charter Communications. Below is a listing of the information received and reviewed by Moss & Barnett. Each document listed below was reviewed and considered in the preparation of this letter, and are hereby incorporated into this letter by reference. The information contained within these documents should be considered part of the City's record on which the City's decision is based. 150 South Fifth Street 1 Suite 1200 11 Minneapolis, MN 55402 P: 612-877-5000 F: 612-877-5999 W: LawMoss.corn Mr. Justin Miller *+4t* Moss & Barnett August 4, 2016 Page 2 1. Notice by the City of its Intent to Franchise a Cable Communication System published on April 22, 2016 and April 29, 2016. 2. The City's Request for Proposals -Official Application form. 3. Official Application submitted to City by FCM, dated May 16, 2016. 4. Correspondence from Gardner F. Gillespie and J. Aaron George for Sheppard, Mullin, Richter & Hampton, LLP to Brian T. Grogan, Attorney at Law, Moss & Barnett, dated June 6, 2016. 5. Correspondence from Tom Bordwell, Senior Director Regional Government Relations, Charter Communications to Mayor Matt Little and Members of the Lakeville City Council, dated June 6, 2016. 6. Minnesota Secretary of State/Good Standing. FCM filed with the Office of the Minnesota Secretary of State, pursuant to Minnesota Chapter 302A, on March 14, 1991 and is in good standing as of May 26, 2016. The Certificate of Good Standing from the Minnesota Secretary of State is attached hereto as Exhibit B. 7. Minnesota UCC/Tax Lien/Judgment Search. FCM is not subject to any UCC filing/tax lien in the State of Minnesota as of May 26, 2016. Minnesota Business and Lien System, Office of the Minnesota Secretary of State UCC/tax lien filing record search attached hereto as Exhibit C. 8. Minnesota Judgment Search. FCM was subject to judgments in the State of Minnesota, all of which have been satisfied as of May 26, 2016. Minnesota Judgment record search results attached hereto as Exhibit D. 9. Civil Actions. FCM has been a party to the cases listed on the PACER Case Locator summary for periods from formation to May 26, 2016 attached hereto as Exhibit E. I. Scope of Review As mentioned above, FCM is an applicant for a competitive cable franchise agreement (hereinafter referred to as the "Franchise Agreement') from the City. Frontier Communications Corporation, a Delaware corporation, ("Frontier'), is a publicly -traded company and ultimate parent company of FCM. Frontier operates cable television systems that provide cable services in limited markets in the United States. At the request of the City, Moss & Barnett has reviewed selected financial information that was provided by FCM and Frontier or publicly available to provide assistance in the City's assessment of the qualifications of FCM to operate a competitive cable television system in the City. Mr. Justin Miller August 4, 2016 Page 3 **i*i Moss & Barnett The financial information that was provided or available through other public sources and to which the information in this report has been limited, consists solely of the following financial information (hereinafter referred to collectively as the "Financial Statements'): 1. Application of Frontier Communications of Minnesota, Inc. for a Cable Communication Services Franchise dated May 16, 2016, along with such other exhibits as provided therewith' (the "Application"}; 2. Form 10-K for Frontier Communications Corporation filed with the Securities and Exchange Commission on February 25, 2016, for the fiscal year ended December 31, 2015; 3. Form 10-Q for Frontier Communications Corporation filed with the Securities and Exchange Commission on May 5, 2016 for the three-month period ended March 31, 2016; 4. The audited financial statements of Frontier Communications Corporation and subsidiaries as of December 31, 2015 and 2014, including Consolidated Balance Sheets as of December 31, 2015 and 2014, Consolidated Statements of Operations, Cash Flows and Equity for the years ended December 31, 2015, 2014 and 2013, and the Independent Auditors' Report of KPMG LLP dated February 25, 2016; and 5. Such other information as was publicly available as set forth herein. Moss & Barnett's procedure is limited to providing a summary of the Financial Statements in order to facilitate the City's assessment of the financial qualifications of FCM to operate a competitive cable television system in the City. II. Overview of FCM and Frontier Since 2009, Frontier has been providing cable services and currently provides cable services under the FiOS, Vantage, and Frontier TV video brands directly and via DISH satellite in four states in the United States,2 including holding franchises with local jurisdictions or statewide in the States of Indiana, Oregon and Washington.3 Frontier's affiliates provide a broad range of other communication services including: broadband -enabled services, network access to 1 Neither FCM nor Frontier submitted any trade secret or non-public data with the Application. No portion of the Application was redacted by FCM, Frontier or the City. Z Form 10-K for Frontier Communications Corporation filed with the Securities and Exchange Commission on February 25, 2016 for the fiscal year ended December 31, 2015 ("Form 10-1<'� at p. 5. 3 Application of Frontier Communications of Minnesota, Inc. for a Cable Communication Services Franchise dated May 16, 2016, along with such other exhibits as provided therewith (the "Application's at Exhibit C. Mr. Justin Miller August 4, 2016 Page 4 **i*i Moss & Barnett interexchange carriers, data and Internet services, and voice services to residential and commercial customers in various markets in 29 states in the United States.4 FCM was formed on March 14, 1991 and is a wholly owned subsidiary of Frontier.5 As of December 31, 2015, Frontier served approximately 242,000 cable customers and 311,700 DISH Satellite video customers.b The number of Frontier cable (also referred to as video) subscribers has increased by over forty percent (40%) between 2014 and 2015 due to acquisitions.' As of March 31, 2016, Frontier employed approximately 20,400 employees.8 Many members of Frontier's executive team have a long-term history with Frontier.9 On April 1, 2016, Frontier acquired certain wireless operations of Verizon Communications, Inc. in California, Texas and Florida for approximately $10.5 billion.10 The purchase price for the Verizon transaction was funded with additional debt and a securities offering." As a result of this transaction, Frontier acquired an additional 1.2 million ROS video connections based upon the December 31, 2015 market data.lz Cable providers and telecommunication companies operate in a competitive environment and the financial performance of cable television operators, like Frontier and FCM, is subject to many factors, including, but not limited to, the general business conditions, programing costs, incumbent cable operators, digital broadcast satellite service, technology advancements, changes in consumer behavior, regulatory requirements, advertising costs, and customer preferences, as well as competition from multiple sources, which provide and distribute programming, information, news, entertainment and other telecommunication services. 13 FCM has a long operating history but is a new entrant in the cable service market and is dependent upon Frontier for all of its funding and the financing of its operations. 14 The cable business is inherently capital intensive, requiring capital for build -out and maintenance of its communications systems. Frontier anticipates spending approximately $150 million over the next three to four years for cable service infrastructure which is estimated to allow Frontier to pass approximately 7 million potential cable customers.15 Each of these factors could have a significant financial impact on FCM and its ability to operate a cable system in the City. 4 Form 10-K at p. 4 and Application at p. 2. 5 Application at pp. 19-20. 6 Form 10-K at p. 5. Id. at p. 31. 8 Form 10-Q for Frontier Communications Corporation filed with the Securities and Exchange Commission on May 5, 2016 for the three-month period ended March 31, 2016 ("Form 10-Q') at p. 25. 9 Form 10-K at pp. 47 and 48. 10 Form 10-Q at p. 9. 11 Id 12 Id 13 Form 10-K at P. 16-18. 14 Application at p. 19. 15 Form 10-Q at p. 24. Mr. Justin Miller �•�,� Moss & Barnett August 4, 2016 Page 5 III. Findings Based upon the above information, we have analyzed the historical financial statements of FCM's parent entity, Frontier, in evaluating the financial qualifications of FCM. FCM did not provide us with its stand-alone financial statements or projected financial information for its future operations and the cost to integrate its cable service offering into its existing infrastructure in the City. FCM specifically stated that, "Frontier does not require unique or additional financing sources (i.e., special notes or bonds) in order to deploy its Vantage TV service in this, or any other market.i16 With respect to projected financial information, FCM stated "Given the extremely sensitive nature of the information contained in the requested pro forma, Frontier cannot file this information as part of its application" due to the fact that Frontier is a publicly -traded entity.17 Frontier's historical audited financial statements do not separately provide the financial information for FCM. As such, we are reporting our Findings hereunder based upon Frontier's historical financial information. 1. Analysis of Financial Statements. Federal law and FCC regulations provide franchising authorities, such as the City, with limited guidance concerning the evaluation of the financial qualifications of an applicant for a cable franchise or a competitive cable franchise. In evaluating the financial capabilities of a cable operator, the City may wish to consider the performance of an applicant based on the applicant's historical performance and its projected or budgeted financial information along with its financial capabilities (for funding and financing its entire operation). The City was not provided with such information for FCM. However, a general review of Frontier's financial information may provide some insight into the general financial operations of Frontier with respect to the Application, but we note that there are many unanswered questions regarding FCM's operations going forward. Many large cable operators have multiple operating subsidiaries that hold groups of franchises and operating systems and do not provide or disclose separate subsidiary financial information. Frontier's and its subsidiaries' operations include both cable television services and non - cable television services. According to Frontier's Financial Statements, cable servicer$ revenue represents a small portion of Frontier's overall revenue.l9 The Frontier financial information discussed below includes all of the Frontier operations, including the non - cable television services. We are providing the following information as included in Frontier's Financial Statements as of March 31, 2016 and as of December 31, 2015 and 2014 in this Section. 16 Application at p. 19. 17 m.. 18 Also referred to as "video service" 19 Form 10-Q at p. 7. Mr. Justin Miller *'�♦� Moss & Barnett August 4, 2016 Page 6 2. Specific Financial Statement Data and Analysis. a. Assets. Frontier had: (i) current assets of $1,224 million, $1,687 million, and $1,415 million (this excludes approximately $8.4 billion of restricted cash as of March 31, 2016 and December 31, 2015 20 that was on hand for the April 2016 Verizon acquisition); (ii) working capital of a negative $510 million, a negative $206 million, and a negative $97 million; and (iii) total assets of $26,454 million, $27,084 million, and $18,810 million as of March 31, 2016 and December 31, 2015 and 2014, respectively.21 Working capital, which is the excess of current assets over current liabilities, is a short-term analytical tool used to assess the ability of a particular entity to meet its current financial obligations in the ordinary course of business. The working capital trend shows a decline in working capital from December 31, 2014 to March 31, 2016, which potentially suggests that Frontier's operating cash flow, may not be sufficient to meet its current obligations without additional debt or equity funding. Frontier's current ratio (current assets divided by current liabilities) as of March 31, 2016, of 0.71/1.0 is below the generally recognized standard of 1:1 for a sustainable business operation.22 As of March 31, 2016, Frontier had $500 million of cash on its balance sheet excluding the restricted cash for the Verizon acquisition.23 As noted above, FCM did not provide the City with any budget of cash flow or cost with respect to its expansion of the cable services or any of its other potential cash capital needs. As such, it is difficult to predict what amount of free cash on hand is needed to bring the cable system online in the City (and other cities in which Frontier is rolling out its cable service). We also note that approximately twenty seven percent (27%) of Frontier's assets are comprised of its intangible goodwil1.24 b. Liabilities. Frontier's Financial Statements report: (i) current liabilities of $1,734 million, $1,893 million and $1,512 million; (ii) long-term debt, net of the current portion, of $15,496 million, $15,508 million and $9,393 million; and (iii) deferred taxes and pension obligations of $3,729 million, $3,829 million and $4,009 million as of March 31, 2016 and December 31, 2015 and 2014, respectively.25 According to Frontier, there is $750 million available for general corporate purposes on its revolving credit facility as of March 31, 2016 (which matures on May 31, 2018).26 Frontier's credit facilities include affirmative and negative covenants, which if violated, could result in a cascade of defaults under " Id. at p. 9. 21 Form 10-K at p. F-5 and Form 10-Q at p. 2. 22 Form 10-Q at p. 2. 23 Id. 24 IQ: 25 Form 10-K at p. F-5 and Form 10-Q at p. 2. 26 Form 10-Q at p. 13. Mr. Justin Miller August 4, 2016 Page 7 **iii Moss & Barnett its debt obligations and immediate cash and/or financing needs.27 According to the Financial Statements, as of March 31, 2016, Frontier is not in default of these requirements .2' Frontier has in excess of $1.6 billion of debt maturing in the next 3 years which if not paid or refinanced could have a significant impact on the financial viability of Frontier .2' Any additional debt, including by drawing on its available revolving credit facility, will require Frontier to generate additional cash flow, including through its operations, to fund its debt service. In order to bring the cable system online in the City, FCM claims that no additional financing is needed and the FCM operation will be funded by Frontier.so C. Equity. The Financial Statements report that as of March 31, 2016, the Frontier Balance Sheet Total Equity was in excess of $5 billion.31 d. Income and Expense. Frontier's Statement of Operations report: (i) revenue of $1,355 million, $5,576 million and $4,772 million; (ii) operating expenses of $1,297 million, $4,831 million and $3,952 million; (iii) net income (loss) of ($186) million, ($196) million and $133 million for the three-month period ending March 31, 2016 and the years ending December 31, 2015 and 2014, respectively,32 Frontier is reporting net losses in 2015 and for the first quarter of 2016.33 The ability to generate cash is important for Frontier due to its significant debt obligations. Frontier's average interest rate on its more than $16 billion of debt as of March 31, 2016 was 8.74%.34 Of this debt, ninety-six percent (96%) has a fixed interest rate.35 The annual interest expense, simply calculated, on this debt is approximately $1.4 billion. With the expansion of its cable services, Frontier may be required to incur significant expenditures for the assimilation of its cable services and other services into its existing platform along with additional programing costs to obtain and maintain its programming in the future. In 2015, Frontier expended $863 million on capital expenditures, which Frontier stated would increase to $1.25 billion to $1.4 billion in 2016 due to acquisitions.36 In 2015 and 2014, Frontier generated cash flow from operations of about $1.3 billion.37 Frontier will need to generate additional cash flow from its expanded operation to cover its debt service and capital expenditures in the future. 27 Form 10-K at pp. 19-20. 28 Form 10-Q at P. 33. 29 Id at p. 31. 30 Application at p. 19. 3' Form 10-Q at p. 4. 32 Form 10-K at p. F-6 and Form 10-Q at p. 3. 33 Id 34 Form 10-Q at p. 12. 35 Form 10-K at p. 45. 36 Form 10-Q at p. 31. 37 Form 10-K at p. F-8. Mr. Justin Miller 44 Moss & Barnett August 4, 2016 Page 8 IV. Summary We are not aware of any state or federal standards by which to assess the financial qualifications of a competitive cable operator seeking a Franchise Agreement in the City. The FCC has provided minimum standards to consider when assessing the qualifications of a prospective transferee when a cable system is sold or control of the franchise changes. This FCC financial qualification standard is found in FCC Form 394. Using the FCC Form 394 to establish an absolute minimum standard of financial qualifications that a proposed applicant must demonstrate in order to be qualified to obtain and operate a cable system, FCM has the burden of demonstrating to the City's satisfaction that FCM has "sufficient net liquid assets on hand or available from committed resources" to obtain and operate the system in the City, together with its existing operations, for three (3) months. This minimum standard is not easy to apply to a company that is in an aggressive growth and acquisition mode and expanding its operations. Moreover, as stated above, the financial information presented in this report relates solely to FCM's parent entity, Frontier. Based solely on Frontier's (FCM's parent entity) financial information, Frontier has had sufficient funding to finance, operate and expand Frontier's operations in the past. Due to the many uncertainties and lack of information regarding the proposed funding and future operations, there is not enough information that has been made available to make any conclusions regarding the financial qualifications of FCM to own and operate a system serving the City. A determination using the Financial Statements will be based solely upon the Frontier Financial Statements. In the event the City elects to proceed with approving the issuance of a Franchise Agreement, the assessment of FCM's, and its parent entity Frontier's, financial qualifications should not be construed in any way to constitute an opinion as to the financial capability or stability of FCM or Frontier to (i) operate under a competitive cable television system in the City, and (ii) operate their other operations. The City is solely responsible in determining the assessment of FCM's and Frontier's financial qualifications and its capability to operate a competitive system in the City. Consequently, we make no representation regarding the sufficiency of the financial information provided or used either for the purpose for which this analysis of financial qualifications was requested or for any other purpose. Lastly, in order to ensure compliance with its obligations to operate the cable system in the City and since the financial information in this report is the Frontier Financial Statements, the City may wish to consider a corporate parent guaranty or other security in a form acceptable to the City as a condition of issuing a Franchise Agreement to FCM. Mr. Justin Miller August 4, 2016 Page 9 **i*i Moss & Barnett After you have had a chance to review this information, please contact me with any questions you may have or if I can provide any additional information. Very truly yours, Brian T. Grogan Attorney at Law P: (612) 877-5340 F: (612) 877-5031 Brian.GroganC@lawmoss.com Yuri B. Berndt Attorney at Law P: (612) 877-5267 F: (612) 877-5013 Yuri. BerndtCa) lawmoss.com 3286202x2 EXHIBIT A APPLICABLE LAW Statutory Requirements: A. 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 38 Furthermore, 47 U.S.C. Section 541(x)(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 notgrant an exclusive franchise and may not unreasonably refuse to a ward an additional competitive franchise.39 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 Section 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. Section 541(a) provides that: in awarding a franchise, the franchising authority - a. shall allow the applicants cable system a reasonable period of time to become capable ofproviding cable service to all households in the franchise area; b. may require adequate assurance that the cable operator will provide adequate public, educational, and governmental access channel capacity, facilities, or financial support; and C. may require adequate assurance that the cable operator has the financial, technical, or legal qualifications to provide cable service. When Congress passed the 1992 amendments to the Cable Act, Congress suggested that it favors competition in the delivery of cable communications services. The Senate report that accompanied the amendments concluded that: 38 47 U.S.C. Section 521(b). "47 U.S.C. Section 541(a)(1) (emphasis added). A-1 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 According/y, [the Cable Act as amended], prohibits local franchising authorities from unreasonably refusing to grant second franchises 40 B. Federal Communications Commission Observations on Competition in the Cable Television Industry The Federal Communications Commission's (" FCC's' annual competition reports in video markets have found that subscribers have generally benefited from "head-to-head" competition in the delivery of cable services. Benefits enjoyed by consumers as a result of the increased competition include: a, lower monthly charges for services and equipment, b, additional program offerings, C. access to alternative sources of telecommunications and.Internet services, d, new digital services; and e. better customer service from the incumbent cable operator, The FCC completed rulemaking proceedings on competition in the video marketplace resulting in the FCC's issuance of what is now known as the FCC 621 Order .41 The Sixth Circuit affirmed the FCC 621 Order in 2008.42 In the 621 Order the FCC summarized the evidentiary record in the following manner: The record indicates that in today's market, new entrants face "steep economic challenges"in an 'industry characterized by large fixed and sunk costs, "without the resu/ting benefits incumbent cable operators enjoyed for years as monopolists in the video services marketplace. According to commentators, 'a competitive video provider who enters the market today is in a fundamentally different situation "from that of the incumbent cable operator, '[wJhen incumbents installed their systems, they had a captive market, "whereas new entrants 'have to 'win'every customer from the incumbent"and thus do not have "anywhere near the number of subscribers over which to spread the costs " C. Minnesota Statutory and Judicial Treatment of Competition in the Cable Television Industry Minnesota Statutes 90 (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, 41 See In the Matter of Implementation of Section 612(a)(I) of the Cable Communications Policy Act of 1984, 22 FCC Rcd 5101 (Mar. 5, 2007). 42 See Alliance for Community Media v. FCC, 529 F. 3d 763 (6th Cir. 2008). A-2 In addition to the requirements contained in the 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. Further, Minnesota Statutes Section 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 Section 238.08 and Section 238.081 is set forth below to provide the City with the exact requirements of state law on this matter. Minnesota Statute Section 238.08, Franchise Requiremen4 provides in pertinent part: Subd, 1, Requirement; conditions, (a) A municipality shall require a franchise or extension permit of any cable communications system providing service within the municipality. (b) No municipality 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, orgovernmental access requirements; or (3) franchise fees The pro visions 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 system holding a franchise for the area. Nothing in this paragraph prevents a municipality from imposing additional terms and conditlons on any additional franchises Subd, 2, Other requirements, 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. Municipal operation, Unless otherwise prohibited by app/icable law, any municipality may construct, purchase, and operate cable communications systems or operate facilities and channels for community television, including, but not limited to, public, educational, and governmental access and local origination programming, Any municipal system, including the operation of community to%vision by a municipality, is subject to this chapter to the same extent as any nonpublic cable communications system. Subd, 4, Fee, tax or charge. Nothing in this chapter shall be construed to limit the power of any municipality to impose upon any person operating a cable communications company a fee, tax or charge. Minnesota Statute Section 238.081, Franchise Procedure, provides in pertinent part: A-3 Subd. 1, Publication of Notice. The franchising authority shall have published once each week for two successive weeks in a newspaper ofgeneral circulation in each municipality within the cable service territory, a notice of intent to consider application for a franchise other than a franchise renewal pursuant to the United States Code, Title 47, Section 546, Subd. 2, Required information, The notice must include at least the following information; (I) 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 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 ofnotice. 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 franchising authority shall require that proposals for a cable communications franchise be notarized, and contain, but not necessarily be limited to, the following information: (d) 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; (2) A statement of the television and radia broadcast signals for which permission to carry will be requested from the Federal Communications Commission; (3) 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; (4) the terms and conditions under which particular service is to be provided to govemmental and educational entities; (5) a schedule ofproposed rates in relation to the services to be provided, and a proposed policy regarding unusual or difficult connection of services; A-4 (6) 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; (7) a statement indicating the applicant's qualifications and experience in the cable communications field, If any, (8) an identification of the municipalities 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, (9) plans for financing the proposed system, which must indicate e very significant anticipated source of capital and significant limitations or conditions with respect to the availability of the indicated sources of capital; (10) 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 (11) a notation and explanation of omissions or other varlations with respect to the requirements of the proposal. 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. Subd. 7. A ward of franchise. Franchises may be awarded only by ordinance. Subd. 8. Cos& ofawarding franchise. Nothing in this section prohibits a franchising authority from reco vering from a successful applicant the reasonable and necessary costs of the entire process of awarding the cable communications franchise. The existing franchise between the City and Charter and Minnesota Statutes Section 238.08 both include provisions requiring some form of level playing field obligation which the City must consider before the award of a second, competitive cable franchise. Specifically, the Charter Franchise at Section 2.5 and the City Code at Section 3-11-1.14 contain requirements related to the grant of a competitive franchises: Section 2.5 Franchise Not Exclusive. The Franchise renewed pursuant to this Agreement shall not be construed as limiting the right of Grantor, through its proper offices, and in accordance with the Ordinance and Applicable Law, to grant other Franchises containing terms and conditions that are no more favorable nor less burdensome than those imposed on Grantee in the same A-5 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 Grantee herein and shall be in accord with the provisions of the Ordinance. Section 3-11-1.14. MUL TIPLE FRANCHISES: a. Grantor may grant one or more Franchises for a Service Area. Grantor may, in its sole discretion, limit the number of Franchises granted, based upon, but not necessarily limited to, the requirements ofApplicable Laws and specific local considerations; such as. 1. The capacity of the public rights-of-way to accommodate multiple coaxial cables in addition to the cables, conduits and pipes of the utility systems, such as electrical power, telephone, gas and sewage. 2. The impact on the City of having multiple Franchises 3. The disadvantages that may result from Cable System competition, such as the requirement for multiple pedestals on residents' property, and the disruption arising from numerous excavations of the rights-of-way. 4. The financial capabifties of the applicant. b. Each Grantee awarded a Franchise to serve the entire City shall offer service to all residences in the City, in accordance with constructlon and service schedules mutually agreed upon between Grantor and Grantee, and consistent with Applicable Laws The City should carefully review the above criteria when determining whether to grant a competitive franchise. A-6 i i I EXHIBIT B MINNESOTA SECRETARY OF STATE BUSINESS RECORD DETAILS Office of the -N irtncii ,ttt Secretary of State Cer'tiiicate of Good Standing 6, SCcvc 5i1r�E�11 5cc�.tar} �f'Statc of tvfinmsou, do certify that: The bul` ne&i entity listed below a.N file tlunmant to t1te Aii.ut rta Chaptcr listed below with the Office caf the Secr`ta*� of Crate on Elie date Bi_•::ted bekm and. that this bclSellCS,R t3111ty is rcgister,:d iCJ do bt'isetlCEs awl is irl g,>txt,;m10ieig at 01e limit Ells ceruflimle Iti is,$uedi NslElli': Daw Fils•li: Fil.c. Nl1mbet:. 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I - r t r.. s.rco�lt a :h Kim..m n Rwv Lt• -!moo', - asl PAFJ'`•Q ;4r•3 •+:;a^� :.-e:rxh ip�r JUJASNOWT iC&S& Tit- I 9AV-CV;A J -3333 "rkrhtm Ssx,sa Pvw Co.. a AWT"gb Cum, 04" Kuo � IAN r5pa, TMracry J4ornlr%t Et zrgly, tire. F'Tut�l;sr Curhi,iun{crriunrc ed Mismu`ma > 5 LXz1kc • DaWlaAppit• k'at►trp _,_,,._,__"__" ,._.� �-�...,�.�.,��.�.�IIUCI'�I.'lliT �YT.�•71�--.�„-,.,-.-,�--._ ...••.-...r,.�-,moo - --..m,...�>.w«...�.�.�.. ... .....n..�.•...�«,...w�.�-,�..�.,.�.��.� UWor;sl FroriliarCommuniraklansd Wxvirrahta 8u:n-Me MN S530C Ercmad DAM., Cddlli72011 D�10'eted: ICii'WUI1 9.5' .+VA Dria.Amotdmi: 57,57 47 Cqur, PYirfotqN' $''i 40 'Kidiciai Officer 0 VU R'2.C•121 P u I ,fk71si;60 1(f'4 IM DrrsG.0or(si ►ia t�cm 31�.-�s��n r Cu.. a TyF,: Ldq�-ara Stature :+2,451.wlj EXHIBIT E PACER CASE LOCATOR SUMMARY PACER C T_ Browse Aloud si$@ C1CciCCJI BankruptcyPartySearch Thu May 26 10:06:26 2016 4 recede foulA user. mI)W66 CI1ehL• 27661.13 Search: Bankruptcy Party Search Name Frontier Communications of PhInnesota All Courts Page: 1 Party Name Court Case Chi (]ata Filed g Disposition t Frontier Communications of Minnesota Inc (dl) ilnbke 1:03 -fro -01723 04122/2003 07111312005 Olsmissed or Sallied Without Entry of Judgment bVodtl Access ]nc Et Al and Cttizeng Telecommunications Company 0710612005 2 FRONTIER COMMUNICATIONS OF MINNESOTA mnbke 4.03�ao-04184 0711=003 11/202003 131"swd or So Wed Wrthoat Entry of Judgment INC (dft) STOF8NER and FRONTIER COMMUNICATIONS OF AMERICA INC 3 Frontier Communications of Minnesola, Inc. (dro sdbka 4'00-813-04061 10!'04/2006 12/052006 Judgment Entered by Default Fuller and Fron6ar Communications of Minnesota. Inc. s Frontier Communications of Minnesota inc (44) alsbke 1.02-ao-01026 02!0712002 04292002 001¢s and Frontier Columunlcations of Minnesota Inc Receipt 0526.2016 1 ¢06.27 227757364 User mbo066 Client 27651.13 Daaoriptlon SankfW y Party Ssarrh Name Fronber Commcnir%dons of mkmnowta Aa Coxu Page -1 Pages 1(50.10) E-1 Illinois Northern Bankruptcy Live System Page 1 of 2 03-01723 World Access Inc Et A] et al v. Citizens Telecommunications Company et al Case type: ap Related bankruptcy: 01-14633 Judge: Susan Pierson Sonderby Date filed: 04/22/2003 Date of last filing: 07/1312005 Date terminated: 07/13/2005 Case Summary Office: Chicago .Filed: 04/22/2003 County: Terminated: 07/13/2005 Fee: Paid Discharged: Origin: 1 Reopened: Dismissed: 07/08/2005 Lead Case: 01-14633 Pending status: Case Closed Flags: CLOSED Party 1: Citizens Telecommunications Company (Defendant) Party 2: Citizens Communications Company (Defendant) Party 3: Frontier Communications Of Breezewood In (Defendant) Party 4: Frontier Communications Of Ausable Valle (Defendant) Party 5: Frontier Communications Of New York Inc (Defendant) Party 6: Frontier Communications Of Rochester Inc (Defendant) Party 7. Frontier Tel Of Roch (Defendant) Party 8: Frontier Communications Of Seneca Gorham (Defendant) Party 9: Frontier Communications Of Osxvayo River (Defendant) Party 10: Frontier Communications Of Mississippi (Defendant) Party 11: Frontier Communications Of Mondovi Inc (Defendant) Party 1.2: Frontier Communications Of Orion Inc (Defendant) Party 13: Frontier Communications Of Sylvan Lake (Defendant) Party 14: Frontier Communications Of Michigan Inc (Defendant) Party 15: Frontier Communications Of The South Inc (Defendant) Party 16: Frontier Communications Of Illinois Inc (Defendant) Party 17: Frontier Communications Of Pennsylvania (Defendant) Party 18: Frontier Communications Of Minnesota Inc (Defendant) Party 19: Frontier Communications -Midland Inc (Defendant) Party 20: Frontier Communications Of America Inc (Defendant) Party 21: World Access Inc Et Al (Plaintiff) Party 22. Levine, Morton P (Plaintiff) Atty. Kelly Aran Represents party 21: Plaintiff Phone: 404 231-4567 Fax: 404 231-4618 Email: karanCostrieklandlawgroup.com Atty: Morton Levine Represents party 21; Plaintiff Phone: 404-231-4567 Location of case files: E-2 Illinois Northern Bankruptcy Live System Volume: CS 1 The case file may not be available. Page 2 of 2 PACER Service Center Transaction Receipt 05/26!2016 10:07:15 PACER Login: nb0066:2592544:0 i�CHent Code: P7651.13 Description: JjCaseSummiry Search Criteria: 03-01723 I.B111able III Cost: U.iO E-3 03-04184 STOEBNER v, FRONTIER COMMUNICA'T'IONS OF AMERICA INC et al Case type: ap Related bankruptcy: 01-81201 Judge: Robert J Kressel Date filed: 07/15/2003 Date of last filing: 11/26/2003 Date terminated: 11/26/2003 Case Summary Office: Minneapolis Filed: 07/15/2003 County: Terminated: 11/26/2003 Fee: Discharged: Origin: 1 Reopened: Dismissed: Lead Case: 0.1-81201 Pending status: Case Closed Flags: DISMISSED Party 1: STOEBNER, JOHN R (Plaintiff) Party 2: FRONTIER COMMUNICATIONS OF AMERICA INC (Defendant) ]Party 3: FRONTIER COMMUNICATIONS OF MINNESOTA INC (Defendant) Atty: John R Stoebner Represents party l.: Plaintiff Phone: 612-338-5815 Email: jstoebner@lapplibra.com Atty: KEVIN J SAVILLE Represents party 2: Defendant Phone: (952) 491-5564 Atty: KEVIN J SAVILLE Represents party 3: Defendant Phone: (952) 491-5564 Location of case files: Volume: CS 1 The case file may be available, PACER Service Center Transaction Receipt 05/26,12016 10:07:50 PACER Login: mb0066:2592544:0 Client Code: 27651.13 Description: ase Summary Search Criteria, 3-04184 !Billable Pages; ]Fli�� Cost: ,IO E-4 06-04081 Fuller et a] v. Frontier Communications of Minnesota, Inc. et al Case type: ap Related bankruptcy: 05-42375 .fudge: Charles L. Nail, Jr. Date filed: 10/04/2006 Date of last filing: 11/22/2006 /late terminated: 12/05/2006 Case Summary Office: Southern (Sioux Falls) County: Fee: Origin: 1 Lead Case: 05-42;75 Pending status: Awaiting Answer to Complaint Flags: CLOSED Filed: 10/04/2006 Terminated: 12/05/2006 Discharged: Reopened: Dismissed: Party 1: Fuller, Tristan Mark (Plaintiff) SSN/ITIN: xxx-xx-1932 Party 2: Fuller, Nicole Sue (Plaintiff) SSN/ITIN: xxx-xx-9299 Party 3: Frontier Communications of Minnesota, Inc. (Defendant) Party 4: Credit Bureau of Rochester (Defendant) Party 5: National Collection (Defendant) Party 6: Hawkeye Adjustment (Defendant) Party 7: BMSI Credit Services (Defendant) Party 8: FJM Collection Agency (Defendant) Party 9: Direct TV (Defendant) Atty: Wesley D, Schmidt Represents party 1: Plaintiff Phone: 605-334-8437 Email: wdsaschmidt@yahoo.com Atty: Wesley D. Schmidt Represents party 2: Plaintiff' Phone: 605-334-8437 Email: wdsaschmidt@yahoo.coin Location of case files: Volume: CSl The case file may not be available. PACER Service Center Transaction Receipt 05/26/2016 10:08:16 I'ACF,R Lo in: mb0066;2592544.0 Client Code: 7651.13 Description: Case Summary 11search Criteria: 6.04081 E-5 02-01028 Soles v, Frontier Communications of Minnesota Inc et al Case type: ap Related bankruptcy: 00-13466 BANKRUPTCY JUDGE: MARGARET A. MAHONEY Date filed: 02/07/2002 Date of last filing: 04/29/2002 Date terminated: 04/29/2002 Case Summary Office: Mobile Filed: 02/07/2002 County: Terminated: 04/29/2002 Fee: Discharged: Origin: I Reopened: Dismissed: Lead Case: 00-13466 Pending status: Case Closed Trustee: Lynn Harwell City: Fairhope Phone: (251) 929- Email: Andrews 7922 andrewstrustee@mchsi.com Party 1: Boles, Betsy Diane (Plaintiff) PACER Logi►r: SSN / ITIN: xxx-xx-0639 Party 2: Frontier Communications of Minnesota Inc (Defendant) Party 3: Frontier Communications of the South Inc (Defendant) Party 4: Risk Management Alternatives Inc (Defendant) Atty: Lionel C, Williams Represents party 1: Plaintiff Phone: (251) 209-0515 Email: wiltelco@aol.com Atty: Lawrence B. Voit Represents party 2: Defendant Phone: (251) 343-0800 Email: lvoit@silvervoit.com Atty: Lawrence B. Voit Represents party 3: Defendant Phone: (251) 343-0800 Email: lvoit@silvervoit.com Atty: Donald F. Pierce Represents party 4: Defendant Phone: (251) 344-5151 Atty: Lawrence B. Voit (T) Represents party 4: Defendant Phone: (251) 343-0800 Email: lvoit@silvervoit.com Location of case files: Volume: CS1 The case file may be available. 3286202v2 PACER Service Center Transaction Receipt 05/26/2016 10:08:41 PACER Logi►r: mb0066:2592544:0 Client Coder 765 L l3 E-6 Exhibit D PowerPoint Presentation Competitive Franchising City of Lakeville, MN August 15, 2016 Presented by: Brian T. Grogan, Esq Moss & Barnett Procedure • Purpose of tonight's Council meeting • Further review Frontier's qualifications • Consider resolution approving qualifications ■ Or direct staff to prepare alternative findings • Authorize staff to continue franchise negotiations with Frontier ■ The City is not considering the award of a franchise to Frontier tonight • Any franchise consideration will occur at separate Council meeting • Following second public hearing ■ City has followed the MN Stat. procedure • Regarding consideration of Frontier application • Specific steps/dates set forth is Council agenda materials e•••* Moss & Barnett 1 Applicant ■ Parent • Frontier Communications Corporation ■ Applicant — Grantee • Frontier Communications of Minnesota, Inc. 4Vo Moss & Barnett Frontier Legal Qualifications ■ Frontier Communications of Minnesota, Inc. • Incorporated on March 14, 1991 • In good standing as of May 26, 2016 • Is not subject to any UCC filing/tax lien in the State of Minnesota as of May 26, 2016 • All judgments satisfied in the State of Minnesota as of May 26, 2016 "* Moss & Barnett 4 4 Frontier Technical Qualifications ■ Offers a fiber-optic based IPTV service ■ Uses existing infrastructure in ROWS • May require additional construction • Will require end user equipment • Requires broadband speed to deliver video content • Vantage TV - 4 states • 40% increase in cable subscribers between 2014- 2015 es*i Moss & Barnett 5 Frontier Financial Qualifications • No objective criteria to rely upon • We are not aware of any State or federal standards • To assess the financial qualifications of a competitive cable operator seeking an initial franchise in the City. No financial information for Frontier (grantee) • Frontier declined to provide City with — Stand-alone financial statements — Projected financial information for its future operations — The cost to integrate cable service offerings into its existing infrastructure in the City. #V* Moss & Barnett 3 Frontier Financial Qualifications ■ Findings based upon Frontier's parent company, Frontier Communications Corporation • Historical financial information — February 25, 2016 SEC 10-K — May 5, 2016 SEC 10-Q — December 31, 2015 and 2014 audited financial statements ■ Report provides detailed review of financials • Frontier Communications Corporation appears to have sufficient funding to finance, operate and bring its cable system online in the City • No assurance of future success - risk factors are considerable • Determination is based solely upon the Frontier Communications Corporation Financial Statements •�ii� Moss & Barnett 7 Resolution ■ City to consider adoption of Resolution: 1. Establish findings of fact regarding ■ Frontier's qualifications • Legal • Technical • Financial 2. Authorize staff to negotiate proposed franchise with Frontier ■ Any agreed upon Franchise will come back before Council for consideration • Public hearing will be called **e* Moss & Barnett M Questions Brian T. Grogan, Esq. Moss & Barnett, A Professional Association 150 South Fifth Street, Suite 1200 Minneapolis, MN 55402 (612) 877-5340 phone / (612) 877-5031 facsimile E-mail: Brian.Grogan(cblawmoss.com Web site: www.lawmoss.com 4N.4 Moss & Barnett 9