4.0.b. SWCSR 09-08-2016 Charter
( ommuNicAT , c, „, s
September 6, 2016
Mayor Graunke &Members of the Delano City Council
City of Delano
234 2nd Street North
P.O. Box 108
Delano, MN 55328
Re: Frontier Communications - Cable Application
Dear Mayor Graunke & Members of the City Council:
Thank you for giving Charter Communications ("Charter")the opportunity to comment on the
application("Application") submitted by Frontier Communications ("Frontier")to provide cable
television service in the City of Delano ("City"). We respectfully submit these comments for
your consideration at the September 6 public hearing and look forward to reviewing and
commenting on the proposed franchise ordinance once that is available.
• Charter respectfully recommends that the Council find the Application legally
deficient and invite Frontier to resubmit an application that complies with
applicable law. Frontier's Application fails to provide the information required by
Minnesota law to demonstrate its legal, financial and technical qualifications.
• The City must honor the competitive equity provisions in Minnesota law and the
Franchise agreement between Charter and the City ("Charter Franchise"). As
summarized herein, Frontier also has put the City in an untenable position by requesting
approval of franchise terms which violate the competitive equity provisions in Minnesota
law and the Charter Franchise. Specifically, Frontier's Application asks the City to
violate state law and Charter's Franchise by granting a franchise to Frontier that is more
favorable and less burdensome than Charter's Franchise. In doing so,the Frontier
Application also invites the City to undermine any real opportunity for competition by
sanctioning cherry-picking and undercutting its stated public policy of equality. The City
should decline this invitation.
Charter does not object to the City issuing a franchise to another competitor in the market and
acknowledges that franchises in Minnesota and Delano must be non-exclusive. We compete
with Frontier and other wireline video providers in Minnesota and across the country. Charter's
only concern is that municipalities granting competitive franchises do so on level terms.
Potential competitors seeking a franchise from the City must comply with Minnesota law. And
the City must honor the competitive equity requirements of the current Charter Franchise and
Minnesota law. If the City were to grant Frontier a franchise based on the Application, it would
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violate Charter's Franchise and Minnesota law. The City also would confer unwarranted
preferential treatment on Frontier at the expense of City residents who have come to expect fair
and universal access to services in the City.
A. The Application is Deficient Because It Fails to Show the Applicant's Legal,
Technical and Financial Qualifications.
Minnesota law requires specific information regarding the legal, financial and technical
qualifications of the applicant.' Among other information, a franchising proposal must contain
(i) a schedule for construction of the entire system; (ii) a schedule for activating the cable system
and two-way capacity; (iii) the terms and conditions for service to governmental and educational
entities;(iv) a schedule of proposed rates; and (v)plans for financing the system.
For instance, Frontier's Application provides almost none of the critical information required by
the Minnesota Cable Act:
(i) A time schedule for construction of the entire system with the time sequence
for wiring various parts of the area requested to be served.2
Frontier's Application states:
"Frontier is still finalizing its schedule for deployment of cable services throughout the
City of Delano service area. [Emphasis added]
Frontier uses the next five (5) pages of its abbreviated Application to argue why it shouldn't have
to provide service in compliance with Minnesota law. Frontier's response dodges the question
and ignores the statutory mandate to provide service throughout Frontier's telephone service
area,3 which encompasses the vast majority of the City. As such, the City has no legal authority
to act on Frontier's invitation to disregard state law.
(ii) The schedule for activating cable and two-way capacity!
Frontier's Application states:
"While an exact launch date has yet to be determined, Frontier is working diligently to
complete all necessary work and required testing and operational readiness review to
offer service to customers upon successful execution of a Franchise Agreement."
[Emphasis added]
1 Minn. Stat. 238.081, Subd. 4.
2 Id. at(a)(6).
3 Minn. Stat. 238.08 Subd. 1(c).
4 Minn. Stat. 238.081 Subd. 4(a)(3)(ii).
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Again, Frontier's response indicates it is unable to provide the information needed for a complete
application at this time--- information that is critical for the City to makes it determination under
Minnesota law. As such, the Application is materially deficient without this information.
(iii) Terms and conditions under which particular service is to be provided to
governmental and education entities.5
Frontier's Application states:
"Frontier will provide at no charge expanded basic service to all government buildings,
schools, and public libraries located within its service footprint so long as those locations
are capable of receiving service from Frontier and no other cable provider is providing
service at such locations."
Because Charter already provides service to most public buildings, this "commitment" is entirely
hollow.
(iv) A schedule of proposed rates in relation to the services to be provided and a
proposed policy regarding unusual or difficult connection of service.6
Frontier's Application states: "Final rates have yet to be determined..."
The statute clearly requires proposed rates, not final rates. Again, Frontier is either unwilling or
unprepared to provide the statutorily required information necessary to move forward at this
time. Frontier also failed to provide any policy for unusual connections.
(v) Plans for financing the proposed system,which must indicate every
significant anticipated source of capital and significant limitations or
conditions with respect to the availability of the indicated sources of capital.
Frontier's Application states: The Application refers the City to SEC filings by the ultimate
parent company.
Again, this response is wholly inadequate under the statute, as it fails to provide the detailed
information required by Minnesota law.
B. The City Must Honor the Competitive Equity Provisions In State Law and
Charter's Franchise.
5 Id. at (a)(4).
6 Id. at (a)(5).
7 Id. at(a)(9).
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State law does not allow the City to grant an additional franchise "on terms and conditions more
favorable or less burdensome than those in the existing franchise pertaining to three (3) key
areas: "(1)the area served; (2) public, educational, or governmental access requirements; or(3)
franchise fees."8
For telephone companies like Frontier, state law specifically requires that"[amn area for an
additional cable franchise is not more favorable or less burdensome if. . . the area of the franchise
is no less than the area within the municipality in which the telephone company offers local
exchange telephone service."9
Similarly, Section 2.1 (c) of Charter's Franchise states that the City"will not grant an additional
Franchise on terms and conditions more favorable or less burdensome than those in this
Franchise. The City may impose additional terms and conditions in any additional Franchise."
Any franchise granted by the City to a competitive provider must abide by this mandate. The
Frontier Application, however, is bereft of important commitments on substantive terms and
conditions that must parallel those in the Charter Franchise. For example:
• Service Availability& Build Out. The Charter Franchise requires service throughout
the City to all areas with at least nine (9)homes per quarter cable mile, as the City chose
to assure service availability to as many residents as possible. The Frontier Application
includes no such commitments.
• PEG. The Charter Franchise: i)requires two (2) PEG channels, one of which must be
narrowcast to only Delano residents; ii) includes a PEG Fee of up to eighty-five cents
($.85)per subscriber per month for PEG capital support; iii)requires Charter and the City
to jointly fund a subscriber survey during the 5th and 10th year of the franchise to assess
subscriber satisfaction with PEG programming and appropriate support levels; and iv)
requires Charter to pay the cost of the first one-hundred and fifty(150) feet of any new
system construction necessary to permit live origination at up to five(5) locations. The
Frontier Application makes no such commitments to fund or support PEG.
• Free Service. The Charter Franchise requires complimentary service to numerous public
buildings. The Frontier Application proposes only that it will provide service to those
public buildings that are within its (yet undefined) service area and only if the building
isn't currently served by Charter.
• Performance and Construction Bonds. The Charter Franchise requires a$50,000
performance bond throughout the term of the franchise and when construction costs are
expected to exceed $50,000, Charter must obtain a construction bond in"an amount
mutually agreed upon". Frontier's Application contains no such commitments.
8 Minn. Stat. 238.08, Subd. 1(b).
9 Id. Subd. 1(c).
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The competitive equity requirements of Minnesota law and Charter's Franchise are clear: any
franchise granted by the City to Frontier must contain substantially similar substantive terms and
conditions as the Charter Franchise.
C. There Are Substantial Pubic Policy Reasons for Competitive Equity.
Beyond the legal and contractual mandates the City must follow, sound public policy reasons
exist for competitive equity among cable service providers. Charter and other providers
currently operate in a very competitive environment. DirecTV (now owned by AT&T) is a
significant competitor, as well as other direct-to-home satellite program distributors like Dish
that transmit video programming, data and other information by satellite to customers receiving
dishes. Other companies currently prvidea wide varietyof services that compete with cable—
Netflix, Amazon, Roku and Apple TV to name a few. Charter expects that it will likely face
additional competition in the future from other competitors using additional spectrum the FCC
has made available for wireless services.
If the City were to hold Frontier to a different standard than Charter or other franchised
competitors, it would confer unwarranted preferential treatment on Frontier in violation of
Charter's Franchise and state law, and at the expense of City residents. This not only would
create "have" and"have-not" classes among City residents, but would sanction an unfair and
anticompetitive situation in contravention of federal, state, and local policies.
Moreover, if Frontier were allowed to "cherry-pick" only the areas of the City it chooses to
serve, it is highly unlikely that other facilities-based providers would consider competing in
Delano. Capital intensive projects like cable systems work economically when they are balanced
across an entire City. If Frontier can ignore the less economically attractive parts of the City and
serve only what it chooses, that makes the market less attractive to the next potential provider.
Given these governing laws and policies, the City should reject the invitation to create a
privileged cable provider unfettered by the significant public accountability and broad service
requirements applicable to its competitors.
If Frontier were to cure these deficiencies in its Application and the City proposed an additional
franchise for Frontier, Charter expects an opportunity to review and comment on whether that
franchise complies with state law and is granted on substantially similar substantive terms and
conditions as Charter's Franchise.
We would be happy to respond to any questions or comments that the City might have.
Sincerely,
Gary Underwood, VP, State Gov't Affairs
cc: City Administrator
Chair, Sherburne/Wright Counties Cable Communications Commission
Robert Vose, Esq.
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