HomeMy WebLinkAboutAgenda - 08-22-1995 - V-B t '
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ORANGE COUNTY
BOARD OF COMMISSIONERS
Action Agenda
Item No. -B
ACTION AGENDA ITEM ABSTRACT
Meeting Date: August 22, 1995
SUBJECT: Resolution - Granting Cablevision Industries the
Consent to Transfer Cable System To Time Warner, Inc
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DEPARTMENT: County Manager PUBLIC HEARING YES: NO: X
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ATTACHMENT(S) : INFORMATION CONTACT: Albert Kittrell
Report
Revised Resolution TELEPHONE NUMBER-
Resolution Adopted 6-26-95 Hillsborough -732-8181
Chapel Hill -968-4501
Mebane -227-2031
Durham -688-7331
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PURPOSE: To adopt a revised resolution approving the CATV Franchise
transfer from Cablevision Industries to Time Warner.
BACKGROUND: Cablevision Industries has requested the transfer of its
CATV franchise and control of its cable system to Time
Warner. Cablevision Industries ' Franchise with the
County requires Board approval before transfer can be
executed. The Board must assure that there will be no
adverse impact upon subscribers as a result of the
transfer.
On June 26, 1995, the Board adopted a resolution
approving the transfer from CVI to Time Warner.
Although the resolution was adopted, CVI expressed
concerns regarding several conditions within the
resolution. CVI has also expressed similar concerns
with other local governments in the Triangle J
Council of Governments CATV Consortium. CVI officials
have met with County staff and TJCOG to resolve
the outstanding issues. To date, all concerns have been
addressed to the satisfaction of CVI except the density
requirement for the extension of cable service.
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CVI objects to the Board adopted resolution which
requires cable service extension to occupied residential
buildings when the density reaches 10 homes per mile.
Discussions with CVI officials, TJCOG CATV Consortium
and the County Cable TV Advisory Committee resulted in
the revised resolution on pages 13-16 requiring no more
than 15 homes per mile. CVI ' s position is that the
density requirement for cable service extension should
be atleast 25 homes per mile. The density requirement
in CVI ' s Cable TV Franchise is 30 homes per mile.
The Cable TV Citizen Advisory Committee discussed issues
surrounding the transfer on August 9, 1995. Bob Gwyn,
Chair, of the Cable Committee will comment on behalf of
the Committee and a representative from the TJCOG Cable
TV Consultants will be present for additional
clarification of issues.
RECOMMNDATION(S) : The Manager recommends that the Board adopt the
revised resolution granting the consent of
Orange County to the transfer of control of
Alert Cable TV of North Carolina, Inc. and its
cable television system from Cablevision
Industries Corporation to Time Warner, Inc.
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City Of Raleigh
5Vorth (3arolina
CVI/TWC TRANSFER REVIEW
July 27, 1995
TO: Albert Kittrell, Assistant Manager, Orange County
BY: Robert F. Sepe, City of Raleigh, Information Access Manager
SUBJECT: Cablevision Industries' request to transfer control of Alert Cable of North
Carolina to Time Warner Incorporated (TWI)
The consultants have reviewed the Company's filing, supporting documents furnished by the
company, conducted fact finding discussions with company representatives and responded to
inquires from the Federal Trade Commission. The information and the financial data
provided about Time Warner Incorporated in the Transfer of Ownership filing are the
responsibility of the management of Companies involved.
The record were reviewed to determine whether the company provided sufficient information,
consistent with that prescribed by the Federal Communications Commission. Discussions
with the Federal Trade Commission and representatives of CVI were conducted by the
consultants and compared against known information about the Companies. We believe that
the documents submitted by the company are free of material misstatements and that the
accompanying report provides a reasonable basis for our recommendation.
OFFICES•110 SOUTH McDOWELL STREET•POST OFFICE BOX 590•RALEIGH,NORTH CAROLINA 27602
Recycled Paper
SUMMARY
The franchise documents prohibit the transfer of control, in various ways without the prior
approval of the franchise authority. The proposed transaction will not result in the assignment
of the franchise to a new entity. The transfer will alter the ownership [stock] and control
[management] of Alert Cable of North Carolina's. Time Warner will be Alert's new owner
and will become responsible for the day-to-day management.
Therefore, it is imperative that the franchise authority secure certain assurances from the new
operator that there will be no adverse impact upon current and future subscribers, the cable
distribution system, Company business practices, customer service policies and that line
extension concerns are adequately addressed by the new operator.
The franchise and FCC-394 documents direct the Company to furnish the franchise authority
with full identifying particulars of the proposed transaction. Also, by supplying copies of all
documents pertaining to the transfer, the Company is in compliance with transfer of ownership
terms of the franchise. The material change in the ownership and management structures of
Alert Cable require that the franchise authority approve the new business arrangement: the
transfer of ownership.
To evaluate the proposed sale of CVI and acquisition by TWI, the consultants considered:
1. information gathered during meetings with Cablevision Industries'
representatives;
2. information from discussions with attorney's for the Federal Trade Commission
and US Department of Justice regarding the effect of the transaction upon local
competition;
3. the purchase agreement between the parties;
4. whether TWI agreed to be bound by the terms and conditions in the franchise
agreement;
5. the completed FCC-394 Application For Franchise Authority Consent To
Assignment or Transfer of Control of Cable Television Franchise;
6. outstanding issues the franchise authority seeks to resolve as a consequence of
the ownership transfer; and,
7. the findings and recommendations of the Administrative staff.
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The Cable Act of 1992, Section 617(e), stipulates that the transfer request must be
"accompanied by such information as is required in accordance with Commission regulations
and by the franchise authority." It also provides a 120 day review period to allow the
franchise authority to examine the various aspects, such as the financial, legal and management
implications, of the proposed transaction.
The 120 day period commences from the date the cable operator submits the transfer request to
the franchise authority along with the information required by the franchise agreement. The
consultants met with CVI representatives to discuss issues associated with the transfer. Also,
they spoke with attorneys from the Federal Trade Commission who have the responsibility to
assess the impact upon the local competitive environment of the merger. The 120 day period
commenced on April 24, 1995.
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REPORT
CVI/TWC TRANSFER OF CONTROL
BACKGROUND:
Commensurate with the Cable Act of 1992, the Federal Communications Commission
promulgated a transfer of ownership procedure to allow franchise authorities to review the
legal, technical and financial qualifications of the new owner/transferee; and determine
whether or not the transferee is qualified to assume the duties and responsibilities of operating
a cable-telecommunication system.
The FCC-394 form must be completed by the operator and provided to the franchise authority
to disclose the business matters associated with the transfer. It requires the cable operator to:
1) furnish a copy of the document providing for the transfer of control from Alert Cable TV of
North Carolina to Time Warner Incorporated, 2) address whether the transferee is legally
qualified to transact business in North Carolina, 3) address the character qualifications of the
transferee, 4) address the transferee's financial qualifications, and 5) discuss the transferee's
technical qualifications.
As a result of the recent merger between, Time Warner Entertainment [I WE] and Advance/
Newhouse Partnership, Time Warner now has interests in cable systems which serve 8.8 million
subscribers, approximately 14.5% of the subscribers in 34 states. The Partnership's total value is
estimated at approximately$8.4 billion. Time Warner Cable is the second-largest multiple system
cable operator in the United States, owning or operating 22 of the largest 100 U.S. cable systems.
TWE has total assets exceeding $17 billion.
METHODOLOGY:
CVI's submission to the Franchise Authority was evaluated by the consultants to determine
whether the operator provided information about the transferee consistent with the procedures
prescribed by the Federal Communications Commission. Documents provided by CVI about
Time Warner were read carefully. Information furnished by CVI was evaluated against
similar information known by the consultants: information which had been gathered over time
by the consultants about the transferee's [Time Warner] character, legal, technical, financial -
business practices.
On several occasions, the consultants met with CVI representatives and spoke with attorneys
from the Federal Trade Commission [FTC] to discuss issues and concerns related to the
merger. The Federal Trade Commission's attorneys have the ultimate responsibility to assess
the impact upon the local competitive environment by the merger. The acquisition of Alert/
CVI by TWI must be approved by the FTC. Any decision by local franchise authorities
regarding the proposed consolidation may be rendered moot should the FTC decide that the
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transfer is not in the public's interest and disapprove the transaction.
The consultants performed a review of the cable television and media trade journals to seek
information about the principals involved and to become better acquainted with the various
aspects of the transaction.
FINDINGS:
In the recently completed round of FCC-1220 rate making proceedings, CVI used a return on
investment value which exceeded the 11.25% benchmark rate. The program service rate
proposed by the company incorporated rate of return of 15.0%. Alternately, Time Warner
Cable chose to use the benchmark rate calculation rules limiting its rate of return to the
maximum allowable under the FCC benchmark rules, 11.25%.
Consequently, present and future subscribers to the CVI system in the franchise territory may
realize a reduction in equipment and installation rates as a result of Time Warner's acquisition of
the company. Time Warner's Hourly Service Charges for some services are less than those
charged by Cablevision Industries.
Recently approved by the local franchise authority is CVI's FCC-1205; it reflects equipment and
installation costs realized in fiscal year 1994 (each FCC-1205 filing reflects the previous year's
costs). The approved equipment and installation rates will remain in effect until August 1996.
Next August, TWI (not CVI)will file an FCC-1205 reflecting costs realized during the 1995 fiscal
year. This filing may reflect the lower Hourly Service Rates which TWI had been charging in
other franchises. Also, though Time Warner would not be allowed to exceed the maximum
permitted rates as set out in the FCC-1205 calculations, it could charge less.
The FCC-1205 filing cycle would continue in August 1997, when TWI would file another FCC-
1205, reflecting costs from 1996 when CVI was under full control by TWI. The full benefit of
TWI's lower service charges could be realized by subscribers at this time.
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The following table compares relative labor rates, in hours, between TWC and CVI to perform
similar installation activities.
Table A
Installation Rate Comparison
..........
...............I............
.......................... .
. . . ............. ..
....................
M
..... ....
. ... ........ Aow: C. ..........
fim
on" I
Unwired Home 0.95 1.56
Prewired home 0.80 0.93
A/0 @ installation 0.67 0.31
A/0 with truck roll 0.80 1.00
Outlet relocation 0.67 0.50
Outlet relocation w/truck roll 0.80 0.63
VCR @ installation 0.69 0.63
A/B switch @ installation 0.69 1.00
Aerial to underground 2.00 2.50
Financial Aspects of the Deal
The acquisition will require TWI to pay Alan Gerry, $900 million for CVI's equity and
assume $1.8 billion in debt. To finance the deal TWI will issue $600-$800 minion in stock.
Therefore, it is with purpose that Time Warner is attempting to divest itself of assets, such as
its 18-24% share in Turner, to improve its balance sheet. The deal to acquire Cablevision
Industries will cost TWI $2.7 billion. The financial community was reportedly [Multichannel
News February 13, 1995] concerned about the company's ability to absorb $8.5 billion worth
of cable system acquisitions. Time Warner stock on June 28, 1995 traded $2.00 below its 52
week market high, $43.50.
In this area, it is reported that Time Warner is negotiating to purchase Star Cable properties in
North and South Carolina as well as Virginia. Recently completed are purchases of Summit
Communications Group in Winston-Salem and Vision Cable in Charlotte.
Typically, cable television acquisitions are fueled by debt financing. TWC must not only
borrow funds to buy desirable cable properties, but also secure funds to upgrade the cable
distribution network.
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Effect Upon Competition
Presently, three cable television service providers serve Triangle area residents, they are: Time
Warner Cable, Cablevision Industries and Deacon Cable [Holly Springs]. The sale of Alert to
Time Warner [transfer of control] will eliminate any opportunity, ever, for CVI and TWC to
compete for subscribers. The chance for competition will be eliminated, granting a true
monopoly to Time Warner, until such time [5-10 years] that a telephone company may be able
to offer area-wide cable television service, thus establishing a true competitive marketplace.
The CVI acquisition gives Time Warner virtually 100% coverage of the traditional wireline
cable television service in North Carolina.
In May, Bell Atlantic withdrew major video dial tone applications from the FCC, abandoning
earlier plans to serve 3 million households. This has effectively forestalled competitive entry
by the traditional telephone companies into the cable television business nationwide.
Rate regulation was established in 1992 to off-set the absence of competition. The FCC's
competitive differential reduced rates up to 17% and established an orderly process to adjust
rates for channels, services, inflation and external program costs. Because of these and other
related circumstances, the manner in which loss of a potential competitive provider from the
marketplace is offset, must be carefully evaluated.
Clustering
Time Warner, is aggressively pursuing core markets in New York, North Carolina and Florida
because of its wide ranging desire to offer telephone services. Ostensibly, telecommunication
services would be offered to existing cable subscribers as well as new commercial and business
customers [Multichannel News April 17, 1995]. Time Warner has embarked upon a program
to send thousands of local telephone calls to and from multiple dwelling units [apartment and
condo complexes] in Rochester, New York. This action is consistent with TWI's goal of
entering the switched business and residential telephone and telecommunication marketplace
[Multichannel News, February 27, 1995].
Basic Rates
After the acquisition of Alert by TWI, it is unclear whether Time Warner will revalue
intangible assets beyond present levels nor is it certain that Time Warner will submit another
Cost-of-Service rated filing for its Alert franchises. Should Time Warner/Alert submit a
Benchmark rate filing in 1997, intangible assets are not considered in the rate proceeding.
Because 70% of Alert Cable's current rate base includes intangible assets, such as subscriber
lists, a revaluation could increase the basic rate for cable service. Under FCC rate making
rules, the new owner-operator is allowed two years in which to amortize the value of customer
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[subscriber] lists. The ability to revalue intangible assets included in the rate base can be
modified by the franchise authority; under the FCC's cost-of-Service rules, the franchise
authority has the ability to limit intangible dollars applied to the rate base.
During the recent Cost-of-Service rate proceedings, CVI offered to hold rates constant [1993
levels] and limit increases to external and inflation costs allowed under the FCC rules.
Therefore, it is unlikely that basic rates will increase above levels provided under the FCC rate
adjustment rules.
Technology
The Time Warner Cable television engineering unit is recognized internationally as the premier
technology group. This division pioneered and perfected the hybrid fiber optic-coaxial cable
technology presently being deployed by cable television and telephone companies alike.
Technology, able to deliver both cable and telephone services, is being deployed in Durham
and Wake Counties. This technology will eventually be deployed throughout TWC's systems,
distributing 60 to 70 analog television channels and telephony services to the marketplace
Public Bandwidth
The availability of public bandwidth for government communication is a concern to many local
governments. Data communication on modern cable-telecommunication systems is quick and
inexpensive. Many metropolitan communities use the cable system to interconnect government
office buildings to a common computer data network to facilitate the transaction of business by
local government. Therefore, it is recommended that the franchise authority communicate to
the franchisee an interest to lease bandwidth on existing and new cable-telecommunications
systems to transmit public communications [data and telemetry information] between and
among government facilities within the community.
This action is consistent with TWI's goal of offering switched business and residential
telephone and telecommunication services. By stating the intent to lease bandwidth, the
franchise authority declares an interest in establishing itself as one of the Cable Company's
first telecommunication customers.
Franchise Term Alignment
The franchise authority is in the process of refranchising its current CVI/Alert Cable franchise.
The goal of Triangle J COD's cable consortium is to negotiate is a model franchise document,
offering a uniform set of terms and conditions, under which all other franchises fall. To
facilitate this purpose, it is advantageous to consider an extension of these franchises and
provide for a common expiration date. The result will be a cost-effective simplification of
oversight activities pursuant to local regulatory authority.
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Current Alert franchises are due to expire shortly. An extension of the term to June 30, 1998,
to synchronize the Alert Cable franchise with the Time Warner franchises issued by local
governments in this area, is appropriate.
In the absence of any showing by the community or anyone else that approval of CVI's
application to transfer control of Alert Cable's franchise to Time Warner Incorporated would not
be in the public interest, the Consultants recommend that CVI's FCC-394 application be granted,
subject to the following recommendations.
RECOMMENDATIONS
It is the opinion of the consultants that, although the acquisition of Alert Cable of North
Carolina [a/k/a CVI] by Time Warner is not without uncertainty, the potential economic and
technological benefit of an interconnected switched cable-telecommunication network offers
residents, merit the venture.
I. Direct TWI and Alert a)to be bound by the Cable Television Franchise Ordinance and
perform all duties and obligations of the grantee thereunder; b)represent and warrant that
they are able to provide, and shall agree to provide subscribers all services required under
said franchise subject to changes or modifications as permitted under the franchise and
applicable law; c) acknowledge and agree that they were, and shall be subject to the local
regulatory authority as set forth by the Federal Communication Commission; d)
cooperate fully with the franchise authority and to obtain from any governmental agency
all licenses, permits and other approvals necessary for lawful operation and maintenance of
the cable television system; and e) continue to serve all public schools and other
government facilities passed by cable consistent with franchise requirements.
II. Advise Alert that the franchise authority intends to act in an expeditious manner to
commence and conclude refranchising activities with Time Warner Cable.
M. Direct Alert Cable, in an economically prudent manner, to extend service to areas
within the franchise territory where the building-dwelling density is 15 units per cable
mile or greater. The intent is to offset the loss of a competitive provider from the
marketplace which may otherwise have aggressively acted to extend cable service. A
cable mile is measured from the terminus of existing feeder cable.
IV. Require Time Warner Incorporated and Alert to affirm that TWI, as the new
management entity, shall be bound by the terms and conditions in the present franchise
agreement and the transfer resolution.
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V. Advise Time Warner Incorporated and Alert Cable that the franchise authority shall
exercise its rate regulatory prerogatives pursuant to the Cable Act of 1992 to ensure
that the current value placed upon the intangible assets of Alert Cable shall not increase
as a result of the transfer and adversely impact subscriber rates.
VI. In an economically prudent manner and using existing and any newly developed signal
transportation networks, ask that Time Warner Incorporated and Alert Cable
interconnect adjacent systems within a county to ensure that regional programs [LO &
PEG access] are available to subscribers on systems with sufficient channel capacity to
distribute these programs on either a full-time or shared channel basis.
VII. Recognize that Time Warner Incorporated has filed with the Public Utility Commission
to provide advanced telecommunication services and that the franchise authority may
desire to purchase telecommunication services from TWI to facilitate the transaction of
public business via the cable-telecommunications system.
VIII. Extend existing Alert Cable/CVI franchises to provide for a common expiration date
and to simplify the franchise authority's oversight activities pursuant to its regulatory
authority. Franchises expiring before this date are to be extended to June 30, 1998.
The objectives are to a) to provide a common expiration date with other Triangle J
COG communities, b) provide the new management company [TWI] an opportunity to
interconnect their systems serving area residents and c) monitor TWI's performance
as a monopoly provider of cable television services.
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REVISED RESOLUTION 13
drafted 8/10/95
RESOLUTION #
A RESOLUTION GRANTING THE CONSENT OF ORANGE COUNTY TO THE
TRANSFER OF CONTROL OF ALERT CABLE TV OF NORTH CAROLINA, INC. AND
ITS CABLE TELEVISION SYSTEM FROM CABLEVISION INDUSTRIES CORPORATION
TO TIME WARNER INC.
WHEREAS, Alert Cable TV of North Carolina, Inc. ("Alert") has
the right to install, construct, own, operate and maintain a cable
television system ( "the System") within Orange County ("the
County") pursuant to a cable television franchise issued by the
Town (the "Franchise") ; and
WHEREAS, Alert is currently controlled by Cablevision
Industries Corporation ( "CIC") and CIC Is principal shareholder, Mr.
Alan Gerry, an individual residing in Liberty, New York ("Principal
Shareholder") ; and
WHEREAS, Time Warner Inc. ("TWI") and CIC and the Principal
Shareholder have entered into an Agreement and Plan of Merger in
which a wholly owned subsidiary of TWI will merge with and into CIC
and, upon completion of the transaction, CIC will become a
subsidiary of TWI, and TW1 will then control Alert and the System
(the "Transfer") ; all as set forth in the Agreement and the
Supplemental Agreement, each dated February 6, 1995; and
WHEREAS, TWI, CIC and Alert have jointly submitted to the
County an.application on Federal Communications Commission Form 394
for consent to the Transfer and have submitted such other
information concerning the Transfer as required by the Franchise
and applicable law and as reasonably requested by the County
(collectively the "Transfer Application") ; and
WHEREAS, the County has reviewed the Transfer Application, and
the report from its Cable TV Consultant and has examined the legal,
financial and technical qualifications of TWI, and the County is
aware of the debt load already incurred by TWI and the impact
additional debt from this transfer may have on Alert's ability to
provide service under the existing Franchise, and
WHEREAS, recognizing that TWI already controls other
franchises in the County and if the Transfer is consummated TWI
will be the only cable television operator in the County and
therefore this Transfer may eliminate or reduce competition in the
delivery of cable service in the County; and
WHEREAS, TWI has publicly stated that it intends to cluster
its franchises in regional concentrations in order to provide
multimedia and switched business and residential
telephone/telecommunications services more efficiently and more
effectively; and
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WHEREAS, TWI has filed an application with the Utilities
Commission to provide local exchange and exchange access as well as
intra-LATA, interexchange telecommunications services in North
Carolina; and
WHEREAS, the County recognizes that it may need to purchase
additional telecommunication services for municipal purposes and
that Alert may desire to provide such services; and
WHEREAS, Alert has recently filed, and the County has approved
a cost of service rate increase which was based in part upon
certain intangible assets. Therefore, Alert represents that this
transfer shall not increase the value of Alert's intangible assets
for basic rate calculation purposes, and future increases shall
comply with FCC rate calculation rules; and
WHEREAS, TWI and Alert represent that, notwithstanding this
transfer of control, Alert shall be bound by the performance of
Alert and CIC under the franchise prior to the transfer.
NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners
that Orange County hereby approves the transfer application and
consents to the transfer to TWI, as described in the transfer
application subject to the following conditions which shall become
effective if the Transfer is consummated:
1. TWI and Alert: a) agree to- cause Alert to be bound by the
Cable Television Franchise Ordinance and perform all duties and
obligations of the grantee thereunder; b) represent and warrant
that Alert is able to provide, and shall agree to provide to the
County and its subscribers all services required under said
franchise subject to changes or modifications as permitted under
the franchise and applicable law; c) acknowledge and agree that
they were, and shall be subject to the regulatory authority of the
County as set forth by the Federal Communication Commission; d)
agree to cooperate fully with the County and to obtain from any
governmental agency all licenses, permits and other authority
necessary for lawful operation and maintenance of the cable
television system; and e) agree to cause Alert to provide basic
cable service to all public schools and other government facilities
passed by cable to the extent consistent with existing franchise
requirements; and
2. TWI and Alert agree, subject to availability on an
interconnecting signal transportation network controlled by TWI and
subject to available channel capacity, to interconnect the County
system with other adjacent TWI systems to distribute regional
programs (e.g. ; LO and PEG access]; and
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3. To enable Alert to, recover and earn a return on any
financial investment related to these conditions and to allow the
County time to monitor Alert [TWI's] performance, Alert and the
County agree to extend the Franchise term to June 30, 1998. TWI,
Alert and the County also agree, within six months following the
closing of this transfer, to establish a plan for refranchising
that will include a technology plan for upgrading the system, so
that, to the extent feasible, the systems controlled by TWI in this
region shall have substantially the same mix, quality and level of
services and a time frame for completion of refranchising by June
30, 1997.
4. Alert and TWI agree that it is in the public interest to
serve customers who might otherwise be served in a competitive
marketplace; therefore, service shall be extended as soon as
.reasonably possible and to the extent economically feasible to
areas within the franchise territory where there are fifteen or
more residences per mile; and -
5. TWI and Alert agree that within 24 months TWI will merge
the system it already controls in orange County with the System
which is the subject of this Transfer and that the resulting system
shall serve all of Orange County including Bingham Township in
Western Orange County along the Alamance County line, subject to
the limitations in paragraph 4 above.
6. It is understood that the agreement to extend the term of
the franchise to June 30, 199.8 does not in any way serve to
prejudice any franchise renewal rights of Alert, nor require the
refiling of any notices of intent to renew the instant franchise
that have been ;filed on a timely basis consistent with the term of
the existing, unextended franchise.
BE IT FURTHER RESOLVED that this resolution shall become
effective and continue and remain in effect immediately upon its
passage, approval and adoption by the Board of Commissioners and
consent by TWI and Alert. in the event TWI and Alert do not
consent to this resolution prior to November 11 1995, then the
County denies consent to the transfer.
BE IT FURTHER RESOLVED that this action be entered into the
Minutes of the Board of Commissioiners and that the County Manager
is hereby authorized to notify TWI, CSC and Alert of this action in
writing by furnishing these companies with an executed copy of this
resolution.
ADOPTED this day of 1995.
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ORANGE COUNTY
BY: ATTEST:
Chairman County Clerk
CONSENT:
ATTEST:
TIME WARNER, INC.
Sy: —/—/95 / /95
President Secretary
ATTEST:
ALERT CABLE TV OF NORTH
CAROLINA, INC.
By: / /95 / /95
President Secretary
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ADOPTED BY BOCC - 6/26/95 1T
RESOLUTION #95-
A RESOLUTION GRANTING THE CONSENT OF ORANGE COUNTY TO THE
TRANSFER OF CONTROL OF ALERT CABLE TV OF NORTH CAROLINA, INC. AND ITS
CABLE TELEVISION SYSTEM FORM CABLEVISION INDUSTRIES CORPORATION TO
TIME WARNER, INC.
WHEREAS, Alert Cable TV of North Carolina, Inc. ("Alert") has the right to install,
construct, own, operate and maintain a cable television system("the System")within Orange
County("the County") pursuant to a cable television franchise issued by the County(the
"Franchise"); and
WHEREAS, Alert is currently controlled by Cablevision Industries corporation("CIC")
and CIC's principal shareholder,Mr. Alan Gerry, an individual residing in Liberty, New York
("Principal Shareholder"); and
WHEREAS, Time Warner, Inc., ("TWI") and CIC and the Principal Shareholder had
entered into an Agreement and Plan of Merger in which a wholly owned subsidiary of TWI will
merge with and into CIC and, upon completion of the transaction, CIC will become a subsidiary
of TWI, and TWI will then control Alert and the System(the "Transfer"); all as set forth in the
Agreement and the Supplemental Agreement, each dated February 6, 1995; and
WHEREAS, TWI, CIC and Alert have jointly submitted to the County an application on
Federal Communications Commission Form 394 for consent to the Transfer and have submitted
such other information concerning the Transfer as required by the Franchise and applicable law
and as reasonably requested by the County(collectively the "Transfer Application"); and
WHEREAS, the County has reviewed the Transfer Application, and the report from its
Cable TV Consultant and has examined the legal, financial and technical qualifications of TWI,
and the County is concerned about the level of debt already incurred by TWI and the impact said
debt may have on Alert's ability to provide service under the existing franchise; and
WHEREAS, recognizing that TWI already controls a franchise in this jurisdiction and
other franchises in adjoining jurisdictions and if the Transfer is consummated TWI will be the only
substantial cable operator in the region and therefore this Transfer may eliminate or reduce
competition in the delivery of cable service in the County; and
WHEREAS, TWI has publicly stated that it intends to cluster its franchises in regional
concentrations in order to provide multimedia and switched business and residential
telephone/telecommunications services more efficiently and more effectively.
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NOW, THEREFORE, BE IT RESOLVED by the Board of Commissioners that Orange
County hereby approves the transfer application and consents to the transfer to TWI, as described
in the transfer application subject to the following conditions which shall become effective if the
Transfer is consummated:
1. TWI and Alert: a) agree to be bound by the Cable Television Franchise Ordinance
and perform all duties and obligations of the grantee thereunder; b) represent and warrant that it is
able to provide, and shall agree to provide to the County and its subscribers all services required
under said franchise subject to changes or modifications as permitted under the franchise and
applicable law; c) acknowledge and agree that they were, and shall be subject to the regulatory
authority of the County as set forth by the Federal Communication Commission; and d) agree to
cooperate fully with the County and to obtain from any governmental agency all licenses, permits
and other authority necessary for lawful operation and maintenance of the cable television system;
and
2. TWI and Alert: a) agree, to the extent that this is not already doing so, to provide
service to all public schools and other government facilities passed by cable consistent with
franchise requirements; and b) agree, if requested by the County, to provide interactive public
bandwidth at cost for the County's use; and
3. TWI and Alert: a) agree, to the extent it is not already doing so, to provide
service to commercial, office, and industrial areas of the County in the same manner and to the
same extent that it provides service to residential areas; and b) agree within 24 months to
interconnect the system with systems in adjoining jurisdictions, as directed by the County,
particularly other systems already controlled by TWI and as soon as reasonably possible to
upgrade its System so that all adjoining systems already controlled by TWI and the System in this
County shall have substantially the same level of service, including programming and PEG access
services; and
4. TWI and Alert agree that Alert has recently filed, and the County has approved, a
cost of service rate increase utilizing form FCC 1220. Said filing was based in part upon certain
Intangible Assets, including Organizational and Franchise Costs, Subscriber Lists, Capitalized
Start-Up Losses, and Other Intangibles. Alert and TWI agree that the value of said intangible
assets will not be increased as a result of this Transfer and no increase in the value of intangible
assets as a result of t his Transfer shall be the basis for a rate increase in the future.
5. TWI and alert agree that within 24 months TWI will merge the system it already
controls in Orange County with the System which is the subject of this Transfer and that the
resulting system shall serve all of Orange County including that area of Bingham Township in
Western Orange County along the Alamance County line.
6. In order to serve residents who would otherwise be served in a competitive
environment, Alert and TWI agree within 24 months that service shall be provided to all of
Orange County where there is a density of at least ten occupied commercial or residential
buildings per mile.
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7. In order to allow Alert to recover any financial investment related to these
conditions, Alert and the County agree to extend the Franchise term to June 30, 1998.
BE IT FURTHER RESOLVED that this resolution shall become effective and continue
and remain in effect immediately upon its passage, approval and adoption by the Board of
Commissioners and consent by TWI and Alert. In the event TWI and Alert do not consent to this
resolution prior to August 22, 1995, then the County denies consent to the transfer.
BE IT FURTHER RESOLVED that this action be entered into the Minutes of the Board
of Commissioners and that the County Manager is hereby authorized to notify TWI, CIC and
Alert of this action in writing by furnishing these companies with an executed copy of this
resolution.
ADOPTED this day of , 1995.
ORANGE COUNTY
BY: ATTEST:
an County Clerk
CONSENT: ATTEST:
TIME WARNER, INC.
By: / /95
President Secretary
ATTEST:
ALERT CABLE TV OF NORTH
CAROLINA, INC.
By: / /95 / 95
President Secretary