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.
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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
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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
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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
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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.
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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.
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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.
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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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fewer than 30 dwelling units per mile. 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.
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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.
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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.
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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.
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