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Home My WebLink AboutAgenda - 10-07-2008 - 4kORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 7, 2008 Action Agend Item No. ~-~ SUBJECT: Resolution Providin Approval for Spin-Off of Time Warner Cable, Inc. DEPARTMENT: County Manager's Office PUBLIC HEARING: (Y/N) No ATTACHMENT(S): INFORMATION CONTACT: A. Time Warner Cable, Inc. Request Gwen Harvey, Assistant County and Supporting Documentation Manager, 245-2307 B. Proposed Resolution PURPOSE: To present for adoption a resolution providing approval for the spin-off of Time Warner Cable, Inc. from its parent company, Time Warner, Inc. BACKGROUND: Section 16, "Transfer of Ownership or Control", of the Orange County Cable Franchise Ordinance calls for Time Warner Cable, Inc. to notify the County "of any actual or proposed change in or transfer of, or acquisition by any other party of control" and that the County "may inquire into the legal, financial, and technical qualifications of the prospective controlling party". The County received notification from Time Warner Cable in mid-June 2008 of plans to effect a completion separation of Time Warner Cable, its cable television business unit, from Time Warner, Inc. by the end of the calendar year. (See attachment A) The spin-off must receive a favorable IRS ruling as well as other regulatory approvals and local franchise clearances. The 120-day period for statutory review is scheduled to expire on October 11, 2008. As apre-condition to BOCC consideration, County staff and Action Audits, the Triangle J Council of Governments Cable Consortium consultant, have met with Time Warner Cable representatives and agreed on a process whereby the cable operator will provide mapping information that allows the County to verify and monitor compliance with the cable service extension requirement defined in the franchise ordinance. The section of the franchise ordinance is excerpted below: "The Grantee shall extend service within the County to any household where the number of occupied homes and homes for which certificates of occupancy have been issued equals at least eighteen (18) homes per mile with the measurement starting from the closest usable active point on the Cable System. The Grantee shall apply for all necessary permits within ninety (90) days of confirmation that the required density is met. Such extensions shall be completed within six (6) months of notification and receipt of all necessary utility permits and other right of way permits. The Grantor may approve additional time subject to a written request by the Grantee that delineates the case for additional time. If the number of households per mile is less than eighteen (18), the requesting Customers(s) may obtain service by paying a share of the incremental cost of the extension as follows: The Grantee shall pay a share of costs calculated as the fraction derived from the existing density as calculated above divided by eighteen (18) homes per mile; requesting Customer(s)' share shall equal the remainder. For example, if the line extension density is nine (9) homes per mile, the Grantee shall pay fifty percent (50%) of the extension cost and the requesting Customer(s) shall pay the remaining fifty percent (50%)." County management anticipates that the spin-off will have no impact on obligations under the current franchise agreement or cable subscribers within unincorporated Orange County. The proposed resolution (See attachment B) approving the corporate spin-off of its cable unit is presented for consideration and adoption. FINANCIAL IMPACT: There is no fiscal impact associated with the adoption of the proposed resolution. Orange County typically receives franchise related revenues in the annual range of $250,000 under the existing franchise ordinance. RECOMMENDATION(S): The Manager recommends that the BOCC adopt the Resolution Providing Approval for the Proposed Spin-Off of Time Warner Cable, Inc. ~~~ TIME WARNER CABLE June 12, 2008 Ms. Laura Blackmon County Manager Orange County P.O. Box 8181 200 South Cameron Street Hillsborough, NC 27278 Dear Ms. Blackmon: As you may know, Time Warner Cable Inc. ("Time Warner Cable") is the managing parent of the Franchisee providing cable television service in your community. Time Warner Cable is apublicly-traded corporation, with approximately 84% of its common stock currently indirectly held by Time Warner Inc. ("TWX"), itself apublicly-traded corporation, with the remainder widely held by public shareholders. On May 21, 2008, TWX and Time Warner Cable announced a plan to effect a complete separation of Time Warner Cable from TWX (the "Spin-Off'). The end result of the Spin-Off will be the divestiture by TWX of its entire ownership in Time Warner Cable either through (i) an exchange offer whereby TWX stockholders may exchange some or all of their shares of TWX common stock for shares of Time Warner Cable common stock or (ii) a dividend by TWX to its stockholders of the shares of Time Warner Cable common stock held by TWX, or some combination of these mechanisms. Upon completion of the Spin-Ofd', which we hope to occur before the end of this year, 100% of the common stock of Time Warner Cable will be publicly traded. The Spin-Off will not affect the ownership interests held by Time Warner Cable in the Franchisee or any of its other direct or indirect subsidiaries or affiliates, and Time Warner Cable will retain management authority over the Franchisee in your community. The Spin-Off will not result in the assignment or transfer of any of the Franchisee's assets, including the franchise. Moreover, ultimate control of Time Warner Cable will rest with the same public shareholders both immediately before and after completion of the Spin-Off. Based on all of the circumstances, we do not believe that the Spin-Off requires your approval. Nevertheless, if you would like to grant approval, we would appreciate the consideration and prompt adoption of the accompanying Resolution. We are also enclosing the required number of copies of FCC Form 394, which contains the information regarding the Spin- Offand Time Warner Cable, along with contact information if you should have additional questions. June 12, 2008 Page 2 I would like to assure you that this Spin-Off will have absolutely no impact on our cable system or its operations. In particular: • There will be no transfer of the franchise, which will continue to be held by the current Franchisee. • There will be no change in the local management and staff as a result of the Spin-Off. • Time Warner Cable will continue to be solely and exclusively responsible for the day-to-day management and operation of the cable system. • There will be no change in our commitment to provide our customers with the best variety and quality in entertainment and information services, all at competitive rates and with excellent customer care. • This Spin-Off will have no impact on our business policies or practices. We look forward to continuing our valued relationship with your community. Sincerely, ~cr -y~ Carol A. Hevey Executive Vice President Carolina Region Enclosures ORANGE COUNTY BOARD OF COMMISSIONERS A RESOLUTION PROVIDING APPROVAL FOR THE SPIN-OFF OF TIME WARNER CABLE INC. WHEREAS, Orange County, North Carolina ("Franchising Authority") has granted a cable television franchise (the "Franchise") to an entity (the "Franchisee") which is a subsidiary or affiliate of Time Warner Cable Inc. ("Time Warner Cable"); and WHEREAS, Time Warner Cable is apublicly-traded corporation, with approximately 84% of its common stock currently held indirectly by Time Warner Inc.; and WHEREAS, Time Wamer Cable and Time Warner Inc. have entered into an agreement to effect a complete separation of Time Warner Cable from Time Warner Inc. (the "Spin-Off°); and WHEREAS, upon closing of the Spin-Off, one hundred percent (100%) of stock of Time Warner Cable will be publicly traded; and WHEREAS, Time Warner Cable and Time Warner, Inc. have filed FCC Form 394 providing details regarding the Spin-Off; and WHEREAS, the Franchisee has provided documentation indicating construction of over 35 miles of cable lines to serve a total of 1304 homes and lots in unincorporated Orange County since the franchise ordinance was authorized by the Board of County Commissioners in 2005, and WHEREAS, the Franchisee has agreed to an administrative process that will provide the Franchising Authority with mapping information sufficient to allow the Franchise Authority to verify and monitor performance under the service extension requirements as defined by the franchise ordinance, and WHEREAS, the Franchising Authority wishes to grant its approval for the Spin-Off as described above; NOW, THEREFORE, BE IT RESOLVED BY FRANCHISING AUTHORITY: Section 1 The Franchising Authority hereby approves the Spin-Off. Section 2 Upon the closing of the Spin-Off, the Franchise shall remain bound by the obligations under the Franchise. Section 3 This Resolution shall become effective immediately. upon passage by the Franchising Authority. PASSED, ADOPTED AND APPROVED this day of , 2008 By: Barry Jacobs, Chair Orange County Board of Commissioners ATTEST: County Clerk