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HomeMy WebLinkAbout2.a. Evermoor Cable TelevisionCITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION COMMITTEE OF THE WHOLE DATE: NOVEMBER 14, 2001 AGENDA ITEM: Evermoor Cable Television AGENDA SECTION: PREPARED BY: Thomas D. Burt, City Administrator AGE _ . ATTACHMENTS: Minutes of 2/20/01, Letter from City APPROVED Attorney At the February 20, 2001 City Council work session the City Attorney and staff were directed to review the request by Contractor Properties Development Company requesting the City to open an application process for a competitive franchise for cable television in Evermoor. Bob Voss from Kennedy & Graven will be in attendance at the meeting to discuss the procedural steps as well as possible options to this request. NOTES: ROSEMOUNT CITY PROCEEDINGS REGULAR MEETING FEBRUARY 20, 2001 Application for a Cable Communications Franchise City Administrator Burt noted that legal counsel has addressed this cable franchise process. The policy is in place and a $20,000 deposit is required with the application and a public hearing must be held one week from the application deadline. Contractor Property Developers Company (CPDC) has submitted a letter of intent to obtain a limited area cable franchise. Craig Rapp represented CPDC and explained its desire to provide integrated telecommunications services to the Evermoor area of Rosemount. The Utilities Commission recommended that the City Council open the application process for a competitive overbuild. Council Member Klassen remembered the City looking into competitive overbuilds and there wasn't enough saturation to warrant the investment. Klassen did not see the need for this. Attorney LeFevere noted that this is "new ground", the rules have not been written for this yet. If only the "best" part of the city is claimed, then what will be left for the other parts of the city? Economic factors are not determined at this time. The process of a public hearing may bring this kind of information up. Mayor Busho noted that Charter Communication may have an interest in this. Edwards also noted that the full ramifications for cable ,phone, and intemet is not understood at this time. Craig Rapp noted that this infrastructure of fiber optics is critical to the data services Evermoor wishes to provide. CPDC wants to follow city policies and wants to be on the cutting edge of technology as well. Rapp noted they would also like to connect to the surrounding schools. Rapp requested Council to follow the Utilities Commission recommendation to call for the public hearing. Maureen Studeny, 8631 Bernard Path, Inver Grove Heights, Minnesota, is planning to buy a home in Evermoor. Studeny noted how her children need the computer for rewards and education. She and her husband also use the computer for their work. Studeny wants to hook several computers together to use a common printer, FAX, and use new technology. The high speed cable will benefit their home and work. Attorney LeFevere suggested adding 7.j. to the public notice as follows: If the applicant posses to serve a limited area, would it have a negative affect on the rest of the City? Mayor Busho noted it was her goal to have the entire community covered by cable. MOTION by Riley to authorize staff to move forward to gather more information on limited cable franchise, discuss this at a work session, and then proceed with the public hearing process. Second by Cisewski. Ayes: Edwards, Klassen, Cisewski, Busho, Riley. Nays: None. Motion carried. 11,-09-01 08:40 From- KENNEDY & GRAVEN +6123373x10 T -819 P.02/13 F -655 470 Villshvry cuirc, 200 Soah Sixth Strcct Minneapolis MN 55402 (612) 337.9300 [rlcpbonc Graven (612) 337.9310 fax hc[ 1 �www.V ut g,s� G n n R T E R E D ZC( BEK! J. V . v un L A[t=cy :,t Law Direct Dial (612) 337-9275 ctn3,1 rv.�.r(��r cnnctl -ura�rn cam MEMORANDUM TO: Rosemount City Council FROM: Bob Vose DA'R'E: September 10, 2001 RE: Limited Area Cable Franchise BACKGROUND Contractor Property Developers Corporation ("CPDC ") is - developing the Evermoor residential development. Evermoor is located primarily in the City of Rosemount ("City ") although a small portion extends into Apple Valley. CPDC and GateHouse Network, Inc. have jointly formed FTTH Communications LLC ( "FTTIT ). FTTH intends to provide certain telecommunications services to the Evermoor development over a high speed, high capacity network with fiber installed directly to each home. FTTH has requested that the City issue a "limited area" cable franchise authorizing the delivery of cable service to the Evermoor development and the provision free high -speed fiber connections to three schools surrounding Evermoor. Charter Communications ("Charter") currently provides cable services in the City pursuant to a cable franchise. FTTH's cable service would compete with Charter's service in Evermoor. FTTH also intends to deliver telephone and high speed data services within Evermoor. These services would compete with services provided by companies including Frontier Communications. These telephone and data services are primarily regulated by the Minnesota Public Utilities Commission ( "MPUC "), subject to the City's permitting authority where system construction is necessary. On May 2, 2001, FTTH applied for MPUC authority to provide local and long distance phone services. FTTH has not yet received MPUC authorization but MPUC staff has recommended approval. FTTH intends to construct its network if it receives MPUC authorization. This network will be. capable of providing video service with little or no additional investment. However, FTTH has must obtain a City franchise to provide video or cable service under applicable federal and state law. In order to consider issuance of a franchise to FTTH, the City would need to formally open a franchising process similar to a bidding process. In this process, the City would receive and consider applications from M14 and any M - 202493v4 RS220 -94 11 -09 -01 08:41 From- KENNEDY & GRAVEN +6123379310 T-819 P.03/13 F -655 other company interested in providing cable service in the City. This City has not yet determined whether to open the cable franchising process at FTTH's request. ISSUE The City Council directed staff to analyze whether the Ciry is, legally permitted to issue a "limited area" franchise. SHORT ANSWER The City is not prohibited from issuing a second franchise which contains provisions that differ from those contained in Charter's franchise. However, the service area requirement in a second franchise could not be "more favorable or less burdensome" than that contained in Charter's franchise. Neither FTTH or Charter submitted sufficient information to determine whether a franchise authorizing FTTH to serve only the Evermoor development would be "more favorable or less burdensome" than the Charter franchise. FTTH could be required to provide additional information in a franchise application process. Charter would have The - oppomiritty to comment or submit contrary information as part of that process. It is important to note that the City Council must make the final policy decision about whether FTTH shoul receive a cable franchise requiring service to Evermoor alone. This is a different issue than whether FTTH legally could receive such a franchise. ANALYSIS This memorandum addresses whether the City is categorically prohibited from issuing a "limited area" franchise to FTTH. We requested and received legal analysis concerning this issue from both FTTH and Charter. FTTH's analysis is contained in a memorandum dated June 26, 2001 which is attached as Exhibit A. Charter's analysis is contained in a memorandum dated August 21, 2001 which is attached as Exhibit B. In addition, we are aware of several other Minnesota municipalities that have recently received requests to issue "limited area" cable franchises. Although none of these communities have taken final action, the affected incumbent operators and. potential competitors have provided written analysis of the legal issues. We have considered this analysis as well. I. B$ckground CPDC and FTTH advertise the planned Evermoor communications network in this way: Imagine your future with digital quality TV with no satellite dish. Image your future with quality digital voice calls and high speed ITiterriet access with no FJV- 202493Na RS220.9a 11,709-01 08:41 From- KENNEDY & GRAVEN +6123379310 T -819 P.04/13 F -655 modem or dial -up. Imagine your future -- today. Fvermoor, the new intergenerational master - planned community being developed in Rosemount, has set the standard and is leading the way by installing a state -of -the -art fiber - optics network to deliver these services to each home in the community. Fiber to the Home Communications (FTTH) is the ideal fiber - optics architecture. In this architecture, fiber deployment is carried all the way to the customer's home (premises). htTp://www.dangerwebs.com/evr--rmoor/about—fo.htin. FTTH and CPDC indicate that this Type of communications network is planned for other developments around the Minneapolis /St. Paul metro The areas but, if su ccessful , t may be hese advanced nded throughout initially only be deployed in limited the neighboring communities in the future. lncumberit cable operators and their potential competitors seem to agree that if municipalities have no flexibility in determining the terms of a second franchise the likelihood for competition diminishes. Accordingly, some incumbents have argued that municipalities have no discretion in establishing the terms of a second, competitive franchise and must require identical service areas. Potential cable gompetitors argue that municipalities may grant competitive franchises that contain different requirements as long as they bear equivalent benefits and burdens when considered as a whole. Minnesota Level Pla dligFielcl St A_ Statutory Requirement Charter indicates that under Minnesota law the City may not issue a franchise to FTTH that only requires service to the Everinoor development. Ex. B, p. 3. sugbtsts that the customers living in Evermoor will be "better" tha{i customers outside of the development. Charter also suggests that FTTH will incur lower construction costs serving Evermoor than Charter incurred in complying with its franchise. in 1988, Minnesota state law governing municipal cable franchising was amended to require a "level playing field" between incumbent and competitive cable television providers. As amended, applicable law states: 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, or governmental access requirements; or (3) franchise fees. Minn. Slat. §238.08, subd. 1(b). There is an exception to this "level playing field" requirement. The requirement does not apply "when the area in which the additional franchise is being sought is not R1v- 242493Y4 RS22 U-9a 11 -09 -01 08:41 From- KENNEDY & GRAVEN +6123379310 T -819 P.05/13 F-655 actually being served by any existing cable communications company holding a franchise for the area." Id. Charter's franchise requires 3 e or l system more. Although service to new developments if There are Thirty ( O homes ) P neither company provided information concerning the density of homes planned for Evermoor, it appears that Charter will serve Evermoor. FTTH has not asserted that this exception applies. Therefore, we do not address it here. State law simply requires that the terms and conditions of a second franchise not be "more favorable or less burdensome" than the first franchise regarding the area served. Requiring service within differing boundaries could, theoretically, be equally burdensome. Therefore, identical service areas are not required by the statutory level playing field provision. In addition, the level playing field provision applies to "an additional franchise for cable service for an area included in an exis ina franchise This language implies that the legislature contemplated and authorized the issuance of an additional franchise with a franchise area that is different than provided in the incumbent's franchise. Specifically, the language suggests that the legislature contemplated and authorized the issuance of a second franchise for an area that is smaller than, but "included in," the incumbent's franchise area. Accordingly, the Minnesota level playing field requirement does not flatly prohibit a municipality from authorizing competitive cable service within a portion of the incumbent's franchise area. This interpretation of the Minnesota level playing field language < is not new. FTTH cites several cases where courts have concluded that incumbent and competitive franchises need not be identical under other states' "level playing field" statutes. Cable TV Fund 14 -A, Ltd. v. Ciry of Naperville, 1997 WL 280692, 4 12 (N.D.111.1997) Cable Systems of Southern Connecticut, Ltd. v. Connecticut Department of Public Utility Control, 1996 WL 661818,' (Conn. Super. 1996) We conclude that statutes similar to Minnesota's have been interpreted to require equivalent, but not identical, franchise terms. Based on the plain language of the Minnesota statute, and cases interpreting similar statutes in other states, we conclude that the City has discretion in establishing the boundaries of the service area required by a competitive franchise. Charter does not ' The Illinois' Ovcrbaild Act prohibits new franchises granted "under terms or cpaditions more favorable or less burdensome to the applicant than those required under the existing cable television franchise." 65 ILCS §5/11- 42 -11(e) (West 2001). The court stated. quodung in the langaagc) supports the conclusion that new and existing franchises must contain identical terns." The coup instead indicated that the terms and conditions of franchise must be "considered as a whole." 2 The Connecticut statute requires that any new franchise issued can "not contait1 more favorable terns or conditions than those imposed on the existing franchisee." Conn. Star § 16- 331(1) as quored in Cable Systems of Southern Connecticur, Ltd. v Connecrrcur Department of Public Uriliry Control, 1996 WL 661818, *2 (Conn. Super. 1996). The court held that if the franchising authority were required to achieve point -by -point equality in term and conditions, it woald be put in the position of imposing particular requirements on a new enrrant not because of any real need, but simply to match the situation that exi3ted at the time of the application of the existing enuant, without regard to new information, new technology, or other developments. The court rejected this interpretation. FJV- 302493 4 Rs220 -94 11-09 -01 08:42 From - KENNEDY & GRAVEN +6123379310 T -819 P -06/13 F -655 disagree with this interpretation. Exhibit B, p. 3. however, we also conclude that the service area required in a competitive vic must This issue is discussed ore fully ois be ` more fully burdensome" than Charter's requir ed sere area. below. B. More Information is Needed to APply the "Level Playing Field" Requirement. Based on the legal analysis submitted should focus ont he franchise-imposed rp cosst de� companies agree that the City determine whether franchises impose equivalent burdens. With respect to franchise area requirements, both companies seem to agree that the issue is the system construction costs imposed by the franchise's service area requirement; i.e. the cost of constructing a system that complies with the franchise. Specifically, Charter indicates that it is not assening that a "limited area" franchise would violate its property rights, negatively impact its economic ability to build out the remainder of Rosemount, or constitute redlining in violation of federal law. Rather, Charter contends that a franchise To serve Evermoor would be less burdensome because FTTH would "avoid incurring the expenses necessary to provide City-wide service." Exhibit B, p. 3; see also, Ex. B pps. 6, 7, and 11. The Charter franchise was renewed in 1999 and required _Charter (or its predecessor) to significantly upgrade the cable system. City of 1 osemount, Ordinance No. X1.21, Section 4 (adopted April 20, 1999). Cable franchises in Minnesota typically permit the delivery of service throughout a given municipality' The Charter franchise authorizes the construction and operation of a cable system, and delivery of service, throughout the City. Id Sections 2(3a.) and 2(8). However, the franchise generally did not require extension of the system "beyond its present System boi4ndaries unless there is a minimum of thirty (30) homes per cable mile." ]a., Section 2(8)." The franchise also requires system extension where there is insufficient home density if the persons requesting service agree to pay s om i letion of any required system extensions. Finally, for the franchise allows 12 months p Accordingly, the franchise required Charter (or its predecessor) to upgrade the system that was in place as of 1999 which had been constructed over the course of the prior 15 years. Charter is only required to extend or expand its cable system where: 1) there is sufficient home density, or; 2) customers agree to pay for a portion of the a The Council maybe interested to know that at least two "limited area" franchises have previously been granted in Minnesota. The City of M=eapolis granted Norrhern Cablcvision of Minneapolis, Inc. a franchise in 1979 covering a portion of the city In 1982, the city granted a franphisc to Minneapolis Cable Systems, Inc. for a different portion of the city. In 1983, the companies merged and since that time a single operator has held both of the franchises. Howcv er, until this year, the city continued to be served by two interconnected systems and each subscriber had two cable television wires into the home (called the A and B systems). Each of the wires earned a portion of the available channels. This type of density standard is typically measured from the closest point on the existing system to the location where the service is requested. PJV- 202493 4 PS220 -94 11 -09 -01 08:42 From - KENNEDY & GRAVEN +6123379310 T -819 P.07/13 F -655 extension. Cable operators frequently request this type of service area requirement, rather than a requirement that all homes in the franchise area be served, to ensure that there are a sufficient potential customers to justify investing in new plant. FTTH indicates that it is willing to agree to a service delivery obligation that is equivalent to that contained in the Charter franchise. Although FTTH. does not intend to serve the entire City, it will to agree to extend its system and offer service within Evermoor based on the density standard contained in Charter's franchise. FTTH argues that this is an equivalent requirement. A federal district court in Florida has considered the validity of this argument. Florida law contains a level playing field provision that is very similar to Minnesota's requirement. The Florida statute provides: No municipality or county shall grant any overlapping franchises for cable service within its jurisdiction on terms or conditions more favorable or less burdensome than those In any existing franchise within such municipality or county. Fla. Stat. §166.046(3). _ Accordingly, as with Minnesota law, Florida law seems to authorize the issuance of a second franchise which 'overlaps" with the territory of the first.' The Eleventh Circuit Court of Appeals reviewed this provision of Florida law. Southeast Florida Cable v. Martin County, 173 F.3d 1332 (1 lth Cir. 1999). Although the Eleventh Circuit did not actively interpret the provision, the Court did reference a prior unpublished district court decision, stating: Shortly after Comcast obtained the Surnmerfield service area, Adelphia filed suit ("the prior lawsuit ") in federal district court against Martin County alleging that the awarding of a franchise for a limited service area violated the Equal Protection Clause and Florida statutory law. Adelphia's claim was based on what it calls the "universal service" requirement in the County Cable Ordinance, which provides that a cable operator must be able to serve ninety percent of its service area or provide a plan for doing so within a two -year period. Specifically, the ordinance provides that in order to obtain a franchise license, a cable operator must "meet the approved timetable by providing service to the specified area with a capability of serving a minimum of Winery (90 %) percent County potential unserved § subscribers meeting the density standards In th e area 5.3(B). In that prior lawsuit, Adelphia argued that by permitting Comcast to serve only an affluent area, Comcast avoided the obligation placed upon Adelphia of having to Jay cable throughout the entire county in order to comply with the ninety percent 5 1he Minnesota provision appllrs 10 a second franchise "included tn" an cxisntig franchise arcs. It is not clear whether this provision authorizes issuance of a second franchise that merely "overlaps" an existing franchise but is not ennrcly included to that area. Pj v- 2024934 RS220 -94 11 -09 -D1 08:43 From- KENNEDY & GRAVEN +6123379310 T-819 P.08/13 F -655 rule and thereby avoided serving the low- income areas which are often more costly to operate. This, Adelphia claimed, violated its rights under both the Equal Protection Clause and Fla. Stal. § 166 (1987) ( "Florida Level Playing Field Statute"), under which a franchising authority cannot grant terms more favorable TO one franchise than another. Footnote omitted. The district court found that both Adelphia and Comcast had an obligation to maintain the capability of providing service to ninety percent of the service area's residents, albeit in different -sized areas. It therefore ruled that Martin County had not discriminated between franchise licenses and had not deprived Adelphia of any constitutional protection. Adelphia did not appeal. Southeast Florida Cable v. Martin County, 173 F.3d 1332, 1334 (1 lth Cir. 1999).° FTTH will accept a franchise requiring the extension of its network and the provision of cable service within Evermoor wherever there are 30 homes per mile. Of course, in actuality MIJ will agree to provide cable service to every home in Evermoor that requests such service regardless of the density because FTTFJ's network will pass every home in the development. Accordingly, FTTH argues that its service extension requirements would be based on identical density standards and that the only difference between the franchises would be in the underlying authorized service areas. FTTH also cites a scholarly study that apparently analyzes the economic considerations related to direct cable competition or "overbuilding." Ex. A, p. 14 (citing Thomas W. Hazlett, "Predation in Local Cable TV Markets" The Antitrust Bulletin, Fall 1995). FTTH reports that one of the conclusions of the study is that incumbent cable operators, whose systems are already constructed, enjoy distinct economic advantages over potential competitors. Most importantly, FTTH argues that it will be no less burdened by a requirement mandating construction of a network serving Evermoor than Charter was when it upgraded its cable system serving larger portions of the City. FTTH indicates that it is deploying very expensive and robust fiber -to -the -home technology with a construction cost ranging from $210043500 per subscriber. FTTH indicates that the cost per subscriber to construct Charter's fiber -to- the -node system ranges from $800 - $1500. Ex. A, p. 13. As such, FTTH argues that a franchise provision requiring service within Evermoor only would not be less expensive or less burdensome than complying with Charter's service area requirement given that Charter's system w?.s upgraded using less expensive technology. Ex. A, pps. 11 -13. 6 Shortly after the above- referenced litigation was resolved, Martin Counry granTed Comcast a county -wide service area that did not require Comcast to provide service to amcry percent of the residents Adelphia again filed suit arguing that the Counry had violated the Florida Level Playing Field Statute, an analogous section of the County Cable Ordinance, the Due Process and lrqual Protection Clauses, and 47 U.S.C. § 541 of the Cable Act which prohibits "redlining." The district court dismissed these claims fmding them barred by res audicata. The Eleventh Circuit reversed and remanded because the suit d ;d not present identical legal theories prcmised upon identical facts. We have been advised by the federal district court that the matter on remsnd was closed in April of 2001 without further appeal. 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Ex. B, p. 9. FTTH may also be willing to extend its system to a requesting parry outside of the Evermoor development if that party is willing to pay the extension cost using the same formula provided in the Charter franchise. if so, the only remaining distinction between the required service areas would be the requirement that Charter continue to serve areas that it was serving in 1999. Charter did not provide a map depicting this area. Charter also did not argue that the original construction costs incurred by its franchised predecessor(s), or the revenues generated during the prior 15 year franchise, are relevant to the City's consideration. These issues could be considered further if the franchising process is opened. MI Legislative in tent. FTTH and Charter provide competing interpretations of the Mande the legislature's intent in enacting the Minnesota Cable Act, Chapter 238, subsequently added level playing field provision. FTTH assens that the legislature primarily intended to encourage cable competition. Ex. A, 5 -6. FTTH also claims that the affect of level playing field requirement is an anti- competitive and that the provision was enacted at the cable industry's urging. Ex. A, 13 -14. On the other hand, Charter argues that although the legislature intended to provide for cable competition, the legislature sought to ensure "fair competition." Ex. B, p. 4 -5. Legislative intent is only necessary to interpret statutes that are ambiguous or difficult to interpret. In this case, while the companies' arguments suggest that legislative intent is unclear and potentially internally inconsistent, the statutory level playing field provision is not difficult to interpret. The plain language of the level playing field provision permits a second Franchise to be granted on terms ar}d conditions that are different from those contained in the incumbent's franchise as long as they are not 'more favorable or less burdensome." The parties agree that as applied to the service area, application of the statute is based on an evaluation of the expense of complying with the applicable franchise requirement. IV Contract Issues Chatter also suggests that its franchise contractually prphibits the City from issuing a "limited area" franchise to FTTH. Ex. B, p. 5. Charter acknowledges that its franchise is nonexclusive but also notes that the franchise states: Additional Cable Franchises granted by the City shall be granted the [sic] substantially similar substantive terms and conditions. City of Rosemount, Ordinance No. XI.21, Section 2(3). The same language appears in the City's franchising policies. Although Charter does not make its position clear, Charter apparently argues that this franchise language establishes a different and more restrictive standard than the statutory level playing field provision. RJV.202493v4 85220 -94 11 -09 -01 08:44 From- KENNEDY b GRAVEN +6123379310 T -819 P.11 /13 F -655 In one respect, it is clear that the franchise establishes a different standard. The franchise and franchising policy language do not only apply to the issues identified in the level playing field provision: 1) area served; 2) community programming requirements; or 3) franchise fees. Therefore, unlike the statute, this franchise provision requires general equivalency with respect to all terms and conditions. However, Charter's argument seems to go further. Charter apparently also argues that the franchise provision requiring "substantially similar" terms and conditions is more restrictive than the statutory prohibition against "more favorable or less burdensome" terms and conditions. Charter does not provide any supporting analysis for this proposition. Like the statutory standard, the franchise provision requiring that there be substantial similarity between terms plainly does not require identical terms. However, the "similarity" standard is somewhat vague and similar terms could, theoretically, impose different economic burdens. On the othcr hand, the parties agree that the statutory standard specifically mandates that a second franchise not include more economically beneficial terms. if the franchise language is ambiguous, Charter has identified no evidence that the City and Charter's predecessor intended to establish a higher substantive standard than contained in state law. Rather, we believe that the intent was simply to extend the statutory "lever playing field" standard to all of the franchise terms and conditions.' Therefore, we conclude that the franchise does not establish a contractual right to a higher level of uniformity between franchise provisions than is required by Chapter 238. V1 redlining Concerns As noted above, Charter indicates that its concerns with FTTH's request are based on the current franchise, state law, and the policy implications of the request. Charter indicates that it does not claim that FTTH's plans would constitute 'redlining" in violation of federal law. Ex. B, p. 7. However, Charter refers to FTTH's plans as an attempt to "cherry- pick" or "cream- skim" the best customers. Ex. B., p. 6. The federal Cable Act provides: In awarding a franchise or franchises, a franchising authority shall assure that access to cable service is not denied to any group of potential residential cable subscribers because of the income of the residents of the local area in which such group resides. 47 U.S.C. § 541(a)(3). FTTH notes that this provision has been interpreted to prohibit intentional discrimination against low income customers and neighborhoods but does not require "universal service." Ex. A, p. 10 -11 (citing American Civil Liberties Union v. a The writer of this memorandum parricipatcd in francluse negotiations with Charter's predecessor on behalf of the Cry. R)v•202493 PS220 -94 11 -09 -01 08:44 From - KENNEDY & GRAVEN +6123379310 T-919 P. 12/13 F -655 FCC, 823 F.2d 1554, 1579 (D.C. Cir. 1987) (holding that evidence of a discriminatory motive is required to show a violation of the Act)). FTTH was created by and its affiliated with the Evermoor developer, CPDC. It appears from the marketing materials and other information th4t FTTH intends to construct a network serving Evermoor is to enhance the value of the,development. FTTH apparently does not initially intend to provide communications services outside of Evermoor because FTTH has no affiliation with, or financial stake in, developments or neighborhoods outside of Evermoor. There is no evidence that FTTH seeks to discriminate on the basis of economic standing. Rather FTTH seeks to enhance the value of a residential development in which it has a financial interest. Absent some evidence of discriminatory.intent, FTTH's plans should not be construed as redlining in violation of federal law. ,yjl olicy Considerat ons FTTH and Charter disagree about whether cable competition in Evermoor will benefit the community. FTTH argues that its network will directly and significantly benefit residents of Evermoor and that cable service is an important element in its service plan. Ex. A, p. 2. FTTH further indicates that its Evermoor network will indirectly benefit the entire community by providing high speed connections to three schools near Evermoor, and by holding out the possibility of expansion of a very advanced communications network particularly to the Rosemount area business park. Charter responds that FTTH only promises to benefit Evermoor and that 411 of the other alleged benefits are speculative. Ex. B, pps. 6 -7. However, the companies clearly agree that it is appropriate for the City to consider the policy implications in making its decision regarding FTTH's request. Ex. A, pps. 5, 9 -10; Ex. B, pps. 6 -7. That is, the companies agree that the City can and should consider the impact to the community that granting FTTH's request would have. Finally, the companies disagree about whether the City already considered and decided the issues raised by FTTH's request when the City adopted a policy concerning competitive cable franchising. Policie and Procedues Governing Application Review and Recommendation e�arditt�'�ant of Competitive Cable Fra cn hises ( "Policy "), (May 1, 2000). In particular, FTTH notes that the Policy allows th City t o review an application for a competitive franchise based on: needs and interests of the community and institutions, as identified solely by the City, and information regarding industry trends, state of the art technologies, services and related information. Ex. A, p. 7 (citing Policy at 4 (Section 4, subd. 2). FTTH suggests that the Policy would support the City's grant of its request. F.1 v- 202493 �4 RS220 -94 11 -09 -01 08:45 From - KENNEDY & GRAVEN +61233T9310 T -819 P.13/13 F -655 We do not believe that the City has previously addressed The issue of "limited area" franchising raised by FTTH's request. When the City reaches a conclusion about FTTH's request and "limited area" franchising more generally, it would be appropriate to incorporate that conclusion into City policy. The City has not done so at this point. VIII. City Liability In the event the City's review of and action on FTTH's request was contested, FTTH notes that the City would not be liable for monetary damages. See 47 U.S.C. § 555a. Further, FTTH acknowledges that it must indemnify the City in the event a claim for damages could be successfully asserted. Although it is not mentioned in FTTH's memorandum, we also believe that the City should expect FTTH to agree cover the costs of any legal defense necessitated by the City's review of FTTH's franchise request. Finally, we believe that a court would only reverse any final City action conccrning this matter if such decision was arbitrary and capricious. See, In re Application of Dakota Telecommunications Group, 590 N.W.2d at 645, citing Honn v. Ciry of Coon Rapids, 313 N.W.2d 409, 414 -15 (Minn. 1981)); Dokomo v. Independent School District No. 11, 459 N.W.2d 671, 675 (Minn. 1990). Where a decision is supported by substantial evidence, such decision will not be arbitrary and capricious. In re Application of Dakota Telecommunications Group, 590 N.W.2d 644, 648 (Minn. App. 1999). Substantial evidence is defined as "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Cable Communications Board v. Nor -West Cable Communications Partnership, 356 N.W.2d 658,,669-9 (Minn. 1984), citing Reserve Mining Co. v. Herbst, 256 N.W.2d 52, 56 (Minn. 1982). Evidence and argument has been actively requested by the City and submitted by the interested parties. Additional submissions will be requested if the City moves forward. Although the evidence and argument may conflict in some respects, any decision by the City should be supported by substantial evidence. CONCLUSION Neither the level playing field provision in the Minnesota Cable Act, nor the Charter franchise categorically prohibits the City from issuing a "limited area" franchise. However, we believe. the City could lawfully make a policy determination to refuse to issue cable franchises for "limited areas." In the event the City elects to open the process for considering issuance of a franchise to FTTH, the City would need to request additional and more detailed information concerning the construction costs and financial implications associated with the planned service area before determining whether such franchise is permitted. The City should also consider the various policy implications of granting FTTH's request during review of any application submitted by FTTH. PJV. 20249304 KS220 -94