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HomeMy WebLinkAbout3.a. Evermoor Fiber OpticsCITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR DISCUSSION COMMITTEE OF THE WHOLE SEPTEMBER 13, 2000 AGENDA ITEM: EVERMOOR FIBER OPTICS AGENDA NO. UPDATES- PREPARED BY: THOMAS D. BURT, CITY ADMINISTRATOR 3. A. ATTACHMENTS: UTILITY COMMISSION STAFF REPORT J This information was presented to the Utility Commission on Monday, September 11'. The developer has requested the City consider allowing him to install a total fiber network within his development to provide the residents of Evermoor a complete telephone system. This means a resident of Evermoor could subscribe with one vendor for video, audio and data service which is far beyond what is being offered by other vendors. [ENDED ACTION NOTES: CITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION UTILITIES COMMISSION MEETING DATE: September 11, 2000 AGENDA ITEM: Fiberoptics in Evermoor AGENDA SECTION: New Business. PREPARED BY: Tom Burt, City Administrator AGENDA NO: 6b. ATTACHMENTS: Letter from WOW & Confidential memo from APPROVED BY: Attorne The City advertised for interested parties to overbuild the cable system in the City and unfortunately we did not receive any responses. The attached letter from Wide -Open West explains that due to our small population they are not interested at this time. Homer Tompkins of Contractor Property Development Inc. (Evermoor) has indicated an interest in building a total fiber telephony system for his development. This would include a total fiber backbone that would provide residents of Evermoor a single provider for video, data and audio service. This does not preclude Frontier and Charter from installing their own lines and offering service but it does allow the residents of the Evermoor development more options for service. If the Commission is interested in allowing this type of service in the development our attorney has identified at least three ways it could happen. The Developer could build the system and give, it to the City, the City could be co -owner of the system or the City franchises this development. Staff is still reviewing the best alternative. If the Commission would like to proceed with the Developer to install the improved system, Staff will continue to work on the item and return at a future meeting with a recommended resolution. RECOMMENDED ACTION: Discussion. 4 WldeOpenWest P August 30, 2000 City of Rosemount 2875 —145` Street West, Rosemount, MN 55068 Attention: Mr. Tom Burt Dear Mr. Burt, Recently, the City of Rosemount advertised its Intent to Franchise. WideOpenWest seriously considered submitting a franchise application but upon analysis could not substantiate an application based on the housing density in Rosemount, including overtures from the developer of Evermoor. This is purely an economic decision since Rosemount has all the demographic attributes that WideOpenWest seeks in communities. As WideOpenWest expands in the Twin Cities area and our density threshold decreases, Rosemount will be a prime candidate for future expansion. If you have any questions regarding our decision, I would be very pleased to respond. Sir ce ly, c Wid nWest Minnesota LLC _ Chris Julian Vice President, Market Development Cc George Duffy Julia McGrath Tom Creighton lWo Carlson Parkway Suite 350 Plym0uth. AN 55447 t 622.249.2580 f 622.249.2305 www wideopenwesuom 470 Pillsbury Center 200 South Sixth Street Minneapolis MN 55402 (612) 337 -9300 telephone . (612) 337 -9316 fax C H A R T E R E D http-J/wwwl=ncdy-gmven.com - Robert L V. Vose Attomey at Law Direct Dial (612) 337 -9275 Email: rvose@lennedyjp July 25, 2000 Mr. Tom Burt Attorney -Client Privileged City of Rosemount 2875 145' St. W. Rosemount, NIN 55068 RE Evermoor Development; Installation of Fiber Communications Network Dear Tom: Based on our meeting last month with representatives from Contractor Property Developers Company, we have prepared a fairly detailed research memorandum which is enclosed After your review, we can discuss how to relay this information to the developer. in short, we have concluded that there are several scenarios in which the City could permit installation and operation of a telecommunications network as proposed for the Evermoor Development. Alternatively, the City could require that the developer obtain a cable franchise that mandates service City -wide. This would effectively prevent construction of the network as planned. The Council will need to make a policy decision to determine how to proceed Please feel free to call if you have any questions. Very truly yours, 1i 1� Robert J. V. Vose RJV/'rg REC��VEC Enclosures cc: Charlie LeFevere JUL 2 6 2000 CITY OF ROSEMOUNT RN- 183613v1 RS220 -47 MEMORANDUM CONFIDENTIAL /ATTORNEY•CLIENT TO: Charlie LeFevere; Tom Burt, City of Rosemount FROM: Bob Vose Y DATE: July 19, 2000 RE: RS220 -47 Background On Friday, June 30, 2000, I met with the City Administrator, Tom Burt, and representatives from Contractor Property Developers Company ( "Developer). The Developer's representatives included Homer Tompkins, President; Craig Rapp, Vice President; Milda Hedblom, attorney with Lockridge, Grindal Nauen; and Wendy Chretien, network consultant with Elert & Associates. The Developer is working on the Evermoor Development in the City and Apple Valley. The Developer's representatives _ indicated that as part of this "high. end" development, the Developer plans to install fiber optic cable to each home in the Evermoor development. The Developer plans to contract with a provider (the leading candidate is Viacom) to provide video, data and telephony services. The service capability would include 10 megabytes downstream and 2 megabytes upstream (very fast service). The service would be modeled after high capacity services provided in similar "planned communities" around the country. The Developer indicated that this model allows for a greater sense of a small community, a high level of work from home, reduced traffic, and other community benefits. The Developer also indicated that its plans may discourage other communications providers from installing facilities in the development because of the quality of this comprehensive "package" of - services. The Developer indicated that this package of services would be superior to other communications providers' products. The Developer plans to begin providing services via this network by next February or March. The Developer's representatives suggested that all Evermoor homeowners may be required to purchase services/pay fees through an association dues structure. I suggested that this arrangement may be unlawful under the 1996 Telecommunications Act but that this was not a regulatory issue for which the City is responsible. The Developer's representatives acknowledged the issue and indicated plans to research the matter further. Even if not paid in association dues, customers would receive a single bill. The City indicated that the Developer would llxely need to obtain a cable franchise. The Developer was concerned with this for two reasons: (1) the length of time that obtaining a RN- 1326930 1 RS220-47 franchise would take; (2) a perceived requirement that a franchised cable operator serve the entire City. The Developer suggested that it would meet all of the City's cable franchise needs through a contract "in -lieu" of a franchise. The Developer wondered what the City's primary concerns were. The City indicated that the primary franchise concerns were with PEG programming, PEG funding, franchise fees,, overall control over the service, and other typical forms of consideration granted in a cable.franchise. The Developer's representatives suggested that the City could view Evermoor as exempt from franchising because: (1) Evermoor would be a single :campus -like setting; (2) the Developer would not provide the programming but would rather contract for the provision of such programming; (3) there is a provision in the existing City franchise that allows the City to "otherwise provide" services. The Developer asked that the City consider alternatives to requiring a franchise. The City agreed to consider the Developer's concerns and prepare a response. ISSUES 1. Is a Franchise required? 2. If a Franchise is required, could services including cable service be provided to less than the whole City i.e. only to the Evermoor Development? ANALYSIS Cable television services are regulated under federal, state and local law.' Unlike most states Minnesota has adopted a comprehensive state statutory scheme governing cable operations. Telecommunications services such as telephone service, on the other hand, are primarily regulated by federal and state law with little local governmental oversight 2 For example, a local government may not exercise control over a cable operator's provision of telecommunications services using cable franchising authority. Some background concerning cable regulation is necessary. Cable television systems appeared in the 1950's as "Community Antenna Television," or "CATV." In 1960, the FCC asserted 1 47 U.S.C. § 521 et seq.; Minn. Stat. § 238.01 et seq. z See Minn. Stat. § 237.163, Subd. 7. 3 47 U.S.C. § 541(b)(3). Fundamentally federal law provides that if a cable operator or an affiliate provides "telecommunications services," the operator. (1) shall not be required to obtain a cable franchise for the provision of such services and the Cable Act will not apply to the services; (2) the local franchising authority may not impose any franchise requirement that prohibits, limits, restricts, or conditions the provision of the telecommunications service; (3) the local authority may not order the operator to discontinue the provision of a telecommunications service; and (4) the local authority not require the operator to provide any telecommunications service or facilities as a cable franchise requirement or condition. ` Telecommunications " is defined as `the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received." 47 U.S.C. § 153(43). It is unclear what services provided by a cable operator will be treated as "telecommunications" although one court recently held that "cable modem" service is a telecommunications service rather than cable service. AT&T v City of Portland. _ F.3d _ (9th Cir. 2000) [No. 99- 35609, June 22, 2000]: RN- 192693v3 2 RS220-47 L"ZZSN £ £A£69Z8I (s)zzs § •�'s'n cv 6 'Z •pang `ZO'8£Z § : Ms aql u[cpitn tuals�(s suoppotunuxazoa ajgea � SatRal �0 8ur�puutu `8upesado `8utuo�luoo `Sulunno uosiad Cap„ se paugap s ,_Aupduioa suopr3gm moo alqua„ y (parlddns srspgdw) £0 § 'IMS •uucy�l s - A&olaq passnastp suoMl3xa Ajoirums aUoads On aiagI. '£ 'PgnS `ZO 8£Z § IMS ^�IL1I u 2:)IA s aql of ogwsgns oqm suosiod of `pasuol io poumo an suuaui aql iaglac , A `sMtu iaglo io anEM Jolm `alqua `anm Lq saiuiFord asogl 8urlrtgl�lsip pup • sarprSoid �u. 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"1 Finally, the term "cable service" means "the one -way transmission to subscribers of (i) video programming, or (ii) other programming service, and subscriber interaction, if any," which is required for the selection or use of such video programming or, other programming service. " The 7` Circuit Court of Appeals recently addressed application of these complex and interrelated definitions with respect to local franchising. The Court upheld a ruling by the FCC that a company providing video services, ECI, was not a "cable operator" of a "cable system" as defined in federal law. Accordingly, the Court deferred to the FCC's conclusion that ECI was not required to obtain a franchise from the affected local government. The facts in the ECI case are important to understand. ECI had about 1,600 subscribers in 12 large apartment buildings of at least 100 residents each. ECI initially provided service using a satellite master antenna system with a " headend" on top of each building it served. It was uncontested that no local franchise was necessary, in part because the signal was not sent over the public right -of -way. In 1996, ECI altered its method of operation by interconnecting a single "headend" to provide service to its customers both in the building on which the antenna was located as well as in other buildings. The signal was transmitted to the other buildings by fiber optic and coaxial cables owned by Ameritech and located in the public right-of-way. ECI subscribed to Ameritech's Supertrunking Video Service, for which it paid a monthly tariff. The affected city claimed that ECI was required to obtain a franchise after the change in the manner of operations in 1996. In a ruling "expressly limited to the facts before the Commission as presented by ECI," the FCC determined that ECI was not a cable operator because it did not provide service to its subscribers through a cable system. The 7th Circuit affirmed focusing on the factors that the FCC had relied upon: (i) there is absolute separation of ownership between ECI and Ameritech, the owner of the facilities in the right -of -way; i.e. purely a carrier -user relationship; (ii) ECI placed facilities solely on private property; (iii) Ameritech provides service to ECI as a tariffed common carrier service; (iv) Ameritech lacks editorial control over the content of ECI's programming; (v) the facilities used by Ameritech to provide service to ECI were not constructed at ECI's request;. (vi) capacity is available to serve several other programming providers; and (vii) ECI committed to make its drops available to other programming providers. Accordingly, the Court found that those portions of the network owned' or controlled by ECI did not constitute a cable system subject to franchising. 10 47 U.S.C. § 522(7). u 47 U.S.C. § 522(6); there is no state statutory analog. 13 City of Chicago v. FCC, 199 Rid 424 (7th Cir.1999) (sustaining In re Entertainment Connections, Inc - Motion for Declaratory Ruling, FCC 98- 111,13 FCC Rcd.14277 (1998) (JA 418 -61)). RN- 1926930 4 RS220-47 The Court also examined the "private cable" exemption. The federal definition of "cable system" previously contained an exception which exempted facilities that serve "only subscribers in 1 or more multiple unit dwellings under common ownership, control, or management, unless such facility or facilities uses any public right,of- way. " In 1996, Congress enacted the Telecommunications Act of 1996 which, among other things, removed the requirement that a system serve "multiple unit dwellings under common ownership, control, or management" in order to benefit from the "private cable" exemption. The term "cable system" now more broadly excludes "a facility that serves subscribers without gkng any public right -of- way. " The state statutory definition of "cable communications system" contains an exception parallel to the federal "private cable" exemption. 15 The state definition exempts "a specialized closed- circuit system which does not use the public rights -of -way for the construction of its physical plant.""' Similarly, the state statute exempts "master antenna television systems" and translator systems that receive and rebroadcast only over -the -air signals." In the ECI case, Ameritech owned and controlled the facilities in the right -of -way. The lines were not constructed at SCI's request and other programmers could lease capacity from Ameritech. Further, as a telecommunications provider, Ameritech was required to obtain access to the public right -of -way and receive tariff approvals from the appropriate state regulatory body. Under those circumstances, the Court found reasonable the FCC's determination that ECI was not "using" the public right -of -way and therefore fell into the "private cable" exception. In short, the ECI Court agreed with the FCC that franchising is not required where a cable system is not run by a cable operator. To be a cable operator, a person must in some way own the system or control or be responsible for the management and operation of the system. The Court found that it was not unreasonable to conclude that if the components of the operation are completely under separate ownership and control, there is no entity which owns a significant interest in the system or who controls, manages, or operates the system as a whole. In addition, the Court found that the portions of the system owned and controlled by ECI were not located in the public right -of -way and therefore fell into the "private cable" exemption. Other courts have examined ownership and control of the constituent parts of a cable network in exempting a provider from local franchising." There is a reported case applying Minnesota law that suggests that this type of analysis is appropriate in applying Chapter 238." 13 47 U.S.C. § 522(6)(B)(1988). 14 47 U.S.C. § 522(7)(B) (emphasis supplied). 15 Stat. § 238.02, Subd. 3(c). 16 Id. 17 Stat. § 238.02, Subd. 3(b) and (d). A `master antenna television system" is defined as "any system which serves only the residents of one or more apartment dwellings under common ownership, control or management and any commercial establishment located on the premises of such apartment house and which transmits only signals broadcast over the air by stations which may be normally Nzewed or heard locally without objectionable interference, and which does not provide any additional service over its facilities other than closed - circuit security viewing services." Minn. Stat. § 238.02, Subd. 7. '$ City of Austin v Southwestern Bell Video Services. Inc- No. 98- 50874, (5th Cir. 1999) (holding that while SB VS, a wholly -owned first -tier subsidiary of SBC Commmications, Inc., provided "cable service" to multi - dwelling units over a "cable system', it is not required to obtain a cable franchise because it is not a "cable RJV- 182693v3 5 RS220.47 1. Is a Franchise Required for the Developer's Planned Network? A. City -Owned System Approach Based on the information provided, it is possible that the City and Developer could establish a relationship that would meet one of the narrow exceptions to franchising as delineated in ECI and similar cases. For example, the City could install and/or ultimately own the fiber and lease capacity to the Developer as part of a city -wide project. In this scenario, the City could contract with various other providers, in addition to the Developer, to serve various areas /developments in the City. The City is currently installing conduit in a new downtown development and such a fiber project could be an extension of that effort. This relationship could be formed to correspond with some of the factors relied upon in the ECI case: (i) there could be absolute separation of ownership between the City and the Developer; i.e. purely a carrier -user relationship; (ii) the Developer's equipment such as the headend and related electronics could be placed solely on private property and not in right -of -way; (iii) the City could provide capacity to the Developer in a manner equivalent to a tariffed common carrier; (iv) the City would lack editorial control over the content of the programming and other services; (vi) the overall city -wide capacity would be available to serve several other programming providers. However, several elements would also be lacking. Unlike in the ECI case, the facilities serving the Evermoor development would be constructed at least in part; at the Developer's request. 20 Further, it seems unlikely that the Developer would make its drops available to other providers. The ECI case and other cases suggesting that this type of system need not be franchised have not indicated that any spec factors are necessary and seem to indicate that the totality of the circumstances should be evaluated. Accordingly, it is impossible to evaluate with certainty what effect these distinctions would have. An additional significant difficulty with this approach is that the Minnesota equivalent of the "private cable" exemption is narrower than under federal law in exempting only "specialized closed- circuit systems" that do not use public rights -of -way. This exemption would not apply to operator:' SBVS's signals are routed via SWBT, another wholly -owned first -tier subsidiary of SBC. Because SBVS "owns" and "controls" only some components of a "cable system" which collectively do not amount to a "significant interest" therein, SBVS is not a "cable operator" as defined at 47 U.S.C. § 522(5): Although owned by the same entity, SBVS and SWBT operate independently and share no officers or employees; SBVS pays SWBT for the video supertrunking service and leases the space located on SWBTs property that serves as the demarcation point for the transfer of signals; and SWBT alone decides how it will transmit the signals through its wire network The Court expressly avoided the issue of whether SWBT could be required to obtain a cable franchise. ) 19 Carlson T.V. v. City of Marble. 612 F.Supp. 669, 673 (D.C. Minn. 1985) (a person that merely installs but does not "own, control, operate, manage, or lease the system, it also does not fall under the coverage of [Chapter 238]." 20 The ECI Court noted that another type of system known as "channel service" must be franchised. Channel service is the provision of video transport services by a local telephone company exclusively to a cable operator holding a local cable franchise. A channel service facility is typically built at the request of the cable company. Under this arrangement the cable company would obtain a franchise but the common carries would not. RN- 192693v3 6 RS22a47 the Developer's system even if the fiber in the right -of -way were owned by the City because the network would not be a closed circuit. The network would need to be interconnected with the public switched phone network and would likely receive cable programming via an interconnection arrangement. Finally, in the ECI case, the Court seemed to conclude that because ECI did not control or have a significant interest in a unified cable system (ownership of the system was separated) it did not meet the federal definition of a "cable operator." However, the equivalent state definitions of both "cable communications company" and "cable communications system" expressly include leasing or similar contractual arrangements. Accordingly, ownership or control of the system by a single person may be irrelevant under state law. The Developer would apparently be a cable company under the state law definition which includes a person "owning, controlling, -operating, managing or leasing a cable communications system within the state." We suggest that the City consider and discuss this alternative with the Developer. Given the risks associated with exempting the Developer from franchising in this fashion, the Developer would need to fully indemnify the City from potential claims by other providers. The City may also wish to prepare a more detailed proposal including cost estimates for constructing fiber in the Evermoor development and City -wide. B. Statutory Exemption Approach Even if the network proposed by the Developer falls within the definition of a "cable communications system, " state law allows a municipality to exempt certain cable systems from the definition and therefore from the scope of Chapter 238 and franchising. In particular, the definition excludes: a system which serves fewer than 50 subscribers or a system which serves more than 50 but fewer than 1000 subscribers if the governing bodies of all political subdivisions served by the system, vote, by resolution, to remove the system from the provisions of this chanter. No part of a system. nor any area within the municipality served by the system may be removed from the provisions of this chanter if more than 1,000 subscribers are served by the system Any system which serves more than 50 but fewer than 1,000 subscribers that has been removed from the provisions of this chapter shall be returned to the provisions of this chapter if the governing bodies of 50 percent or more of the political subdivisions served by the system vote, by resolution in favor of the return.' Assuming the planned community network will serve fewer than 1,000 households in the Evermoor development, the City could elect to exempt the network from Chapter 238. In the event the Evermoor development includes Apple Valley or other municipalities, it would be necessary to obtain such municipality's agreement to this approach. u Minn. Stat. § 238.02, Subd. 2(a); See also, Carlson T.V. v. City of Marble. 612 F.Supp. 669,673 (D.C. Mum 1985) (confirming a city's authority to elect not to apply Chapter 238 to a system that serves between 50 and 1000 subscribers). RN- 1826933 7 RS220 -47 The Developer has indicated willingness to enter into an agreement in lieu of a franchise to meet all of the City's needs and concerns. Such an agreement in lieu would provide for payment of consideration equivalent to a franchise fee, provision of community programming channels, equipment and support equivalent to that which the incumbent cable operator provides, and other requirements equivalent to those in the existing franchise. In the event the City determines that there are valid policy reasons to exempt the Developer from franchising, the City should expect. to receive an agreement in lieu of franchising that compensates and protects the City in a manner equivalent to franchising. It is important to note that at the suggestion of the Cable Commission in which the City participates, the City has adopted Policies and Procedures Governing, Competitive Franchising dated May 1, 2000 ("Competitive Franchising Policies" ). The Competitive Franchising: -Policies, Section 3, provides that the City shall require a franchise of any cable company or cable system providing cable service within the city, "in accordance with state and federal law." The Competitive Franchising Policies defines a "cable company" generally in accordance with state law but defines "cable system and "cable service" generally in accordance with federal law. We are unclear as to why these terms are defined in this way. However, we conclude that the Competitive Franchising Policies should be interpreted to permit the City to elect not to franchise the Developer's network "in accordance with" and as provided in state law, Minnesota Statutes, Section 238.02, Subd. 2(a). 2. If a Franchise is Required, Must the Franchise Require. Service City - wide? The City will determine whether the Developer's network must be franchised under applicable law, or whether an exemption discussed above may apply. In the event the City determines that a franchise is required, any cable franchise issued by the City will include a defined service area. The Developer has proposed providing service only within the Evermoor Development and does not plan to serve the entire City. The Developer is concerned that if a franchise is required, the franchise will require service City - wide. Federal law confirms that the City may award one or more franchises within its jurisdiction However, the City may not grant an exclusive franchise and may not unreasonably refuse to award "an additional competitive franchise." " In granting cable franchises the City must "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 ""' On its face, federal law does not require the City to issue franchises with equivalent franchise areas and does not require that cable operators receive identical or even non - discriminatory n 47 U.S.C. § 541(aXl). 23 Id. Za 47 U.S.C. § 541(a)(3). Ina practice known as "redlining," cable operators have commonly attempted to extend facilities and offer service only to high income areas where there may be a higher percentage of cable customers. RJV- 192693v3 8 RS220 -47 treatment u Rather, federal law prohibits the City from granting franchises that allow low income residents to go unserved. The City does not allow residents to go unserved based on income. The City requires the incumbent cable operator to provide service based on the density of households and not household income. Granting the Developer a franchise that serves less than the whole City should not, therefore, run afoul of federal law. Minnesota state law, however, contains what is commonly known as a "level playing field" requirement concerning regulation of cable service. State law provides that: 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. ' There is an unambiguous 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 actually being served by any existing cable communications company holding a franchise for the area.`n' Although we have not researched legislative history concerning this requirement, it appears that the exception is intended to permit issuance of a separate franchise for service to new developments. Notably, this exception to the "level playing field" requirement will only apply to the extent that the incumbent is not "serving the Evermoor development. The incumbent could attempt to claim that the development is being served as soon as the incumbent installs facilities in the development. Ultimately, the Council would need to determine as a matter of policy whether to use this exception to permit the Developer to serve only the Evermoor development. Typically, cable franchises in Minnesota define the service area as all areas within municipal boundaries. A separate franchise provision requires the extension and provision of service within the municipality where the density of households or dwelling units exceeds a given threshold. For example, many franchises require service throughout the municipality to any area where there are 30 or more households per cable mile However, many municipalities have issued franchises covering only portions of the municipality. Typically, this is to divide large municipalities into individual service territories that may be served by different companies. For example, Minneapolis originally granted two franchises covering different parts of the City (although within a few years one company was acquired by zs Section 253 of Telecommunications Act of 1996 (47 U.S.C. § 253) provides that state and local regulation may not prohibit any entity from providing "telecommunications service" but also preserves state and local authority to manage the public rights -of -way and require fair and reasonable compensation from "telecommunications providers" on a "competitively neutral and nondiscriminatory basis. " Accordingly, while the 1996 Act confirms and to some extent limits state and local authority concerning "telecommunications service" and `Providers ", the 1996 did not impose any new non- discrimination requirements concerning "cable service " "Minn. Stat. § 238.K Subd.1(b) r ' id. RN- 192693v3 9 RS220 -47 the other). New York, Chicago, Los Angeles and other cites continue to operate under this model. It would not be unreasonable for the City to mandate, as a policy matter, that all cable franchises require service to parallel service areas; i.e. the entire City. It is very unlikely that the_ Developer could pursue a claim against the City for unreasonably refusing to grant a competitive franchise if the Developer refused to serve the same area as the incumbent. However, the state statutory "level playing field" requirement would not mandate that the City refuse the Developer's application for a franchise covering only the Evermoor Development. Of course, the incumbent cable operator could seek to sue the City in the event the Developer were permitted to serve less than the whole City. In order to protect against such we recommend obtaining clear indemnification from the Developer. CONCLUSION There are several approaches that would permit the Developer to legally provide "cable service" within the Evermoor development only. The Developer may present policy arguments that would support a City decision to allow the provision of service by the Developer only within the development Similarly, the incumbent cable operator may present policy arguments against such a decision. The City must determine as a matter of policy whether introduction of the Developer's services would serve the interests of the City and community. Staff can proceed with development of appropriate plans/proposals after such decision. 28 The Minnesota Court of Appeals has held that the incumbent cable operator will not have standing to pursue a suit for improper grant of a competitive franchise because the state cable laws are intended to promote competition and mere potential economic injury is insufficient. However, the Court indicated that an allegation that a City has violated the "level playing field" requirements may be sufficient to confer standing. % Re DTG. 590 N.W2d 644, 647 -8 (Mn.CtApp.1999). RN- 192693v3 10 RS220 -47 Relevant Statutory Provisions 47 U.S.C. § 541. General franchise requirements (a) Authority to award franchises; public rights -of -way and easements; equal access to service; time for provision of service; assurances , (1) A franchising authority may award, in accordance with the provisions of this subchapter, 1 or more franchises within its jurisdiction; except that a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise. Any applicant whose application for a second franchise has been denied by a final decision of the franchising authority may appeal such final decision pursuant to the provisions of section 555 of this title for failure to comply with this subsection.. (2) Any franchise shall be construed to authorize the construction of a cable system over public rights -of -way, and through easements, which is within the area to be served by the cable system and which have been dedicated for compatible uses, except that in using such easements the cable operator shall ensure - (A) that the safety, functioning, and appearance of the property and the convenience and safety of other persons not be adversely affected by the installation or construction of facilities necessary for a cable system; (B) that the cost of the installation,. construction, operation, or removal of such facilities be borne by the cable operator or subscriber, or a combination of both; and (c) that the owner of the property be justly compensated by the cable operator for any damages caused by the installation, construction, operation, or removal of such facilities by the cable operator. (3) 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. (4) In awarding a franchise, the franchising authority - (A) shall allow the applicant's cable system a reasonable period of time to become capable of providing cable service to all households in the franchise area; (B) may require adequate assurance that the cable operator will provide adequate public, educational, and governmental access channel capacity, facilities, or financial support; and (c) may require adequate assurance that the cable operator has the financial, technical, or legal qualifications to provide cable service. (b) No cable service without franchise; exception under prior law RJV- 182693v3 11 RS220 -47 (1) Except to the extent provided in paragraph (2) and subsection (f) of this section, a cable operator may not provide cable service without a franchise. (2) Paragraph (1) shall not require any person lawfully providing cable service without a franchise on July 1, 1984, to obtain a franchise unless the franchising authority so requires. (3) (A) If a cable operator or - affiliate thereof is engaged in the provision of telecommunications services - (i) such cable operator or affiliate shall not be required to obtain a franchise under this subchapter for the provision of telecommunications services; and (ii) the provisions of this subchapter shall not apply to such cable-operator or affiliate for the provision of telecommunications services. (B) A franchising authority may not impose any requirement under this subchapter that has the purpose or effect of prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator or an affiliate thereof. (C) A franchising authority may not order a cable operator or affiliate thereof - (i) to discontinue the provision of a telecommunications service, or (ii) to discontinue the operation of a cable system, to the extent such cable system is used for the provision of a telecommunications service, by reason of the failure of such cable operator or affiliate thereof to obtain a franchise or franchise renewal under this subchapter with respect to the provision of such telecommunications service. (D) Except as otherwise permitted by sections 531 and 532 of this title, a franchising authority may not require a cable operator to provide any telecommunications service or facilities, other than institutional networks, as a condition of the initial grant of a franchise, a franchise renewal, or a transfer of a franchise. (c) Status of cable system as common carrier or utility. Any cable system shall not be subject to regulation as a common carrier or utility by reason of providing any cable service. (d) Informational tariffs; regulation by States; "State" defined. (1) A State or the Commission may require the filing of informational tariffs for any intrastate communications service provided by a cable system, other than cable service, that would be subject to regulation by the Commission or any State if offered by a common carrier subject, in whole or in part, to subchapter H of this chapter. Such informational tariffs shall specify the rates, terms, and conditions for the provision of such service, including whether it is made available to all subscribers generally, and shall take effect on the date specified therein. RN- 18269M 12 RS220-47 (2) Nothing in this subchapter shall be construed to affect the authority of any State to regulate any cable operator to the extent that such operator provides any communication service other than cable service, whether offered on a common carrier or private contract basis. (3) For purposes of this subsection, the term "State" has the meaning, given it in section 153 of this title. (f) Local or municipal authority as multichannel video programming distributor. No provision of this chapter shall be construed to - (1) prohibit a local or municipal authority that is also, or is affiliated with, a franchising authority from operating as a multichannel video programming distributor in the franchise area, notwithstanding the granting of one or more franchises by such franchising authority; or (2) require such Iocal or municipal authority to secure a franchise to operate as a multichannel video programming distributor. 47 U.S.C. § 253 (Section 253 of Telecommunications Act of 1996) (a) IN GENERAL- No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. (c) STATE AND LOCAL GOVERNMENT AUTHORITY- Nothing in this section affects the authority of a State or local government to manage the public rights -of -way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights -of -way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government. Minn. Stat. § 238.08 Subd. 1. Franchise; conditions. (a) A municipality shall require a franchise or extension permit of any cable communications system providing service within the municipality. (b) No municipality shall grant an additional franchise for cable service for an area included in an existing franchise on terms and conditions more favorable or less burdensome than those in the existing franchise pertaining to:(I) the area served; (2) RN- 182693v3 13 RS220 -47 ' r v public, educational, or governmental access requirements; or (3) franchise fees. The provisions of this paragraph shall not apply when the area in which the additional franchise is ' being sought is not actually being served by any existing cable communications company holding a franchise for the area. Nothing in this paragraph. prevents a municipality from_ imposing additional terms and conditions on any additional franchises. Subd. 2. Other requirements. Nothing in this chapter shall be construed to prevent franchise requirements in excess of those prescribed unless such requirement is inconsistent with this chapter. Subd. 3. Municipal operation. Nothing in this chapter shall be construed to limit any municipality from the right to construct, purchase, and operate a cable communications system. Any municipal system shall be subject to this chapter to the same extent as would any nonpublic cable communications system. Subd. 4. Fee, tax, or charge. Nothing in this chapter shall be construed to limit the power of any municipality to impose upon any cable communications company a fee, tax or charge. RJV 182693v3 14 RS220 -47