4.0.b. SWCSR 08-15-2019 COMMISSION LETTERHEAD
August , 2019
Patrick Haggerty
Senior Regional Director
Charter
16900 Cedar Avenue South
Rosemount, MN 55068
E-mail: Patrick.Haggerty(a,charter.com
Re: Lake Minnetonka Communications Commission (LMCC);
FCC 621 Order
Dear Mr. Haggerty:
As you know, the FCC recently adopted an order(the"621 Order") addressing the manner in
which cable franchise fees are calculated. Although the 621 Order is not yet effective, we want
to be sure there is no misunderstanding about the impact of the 621 Order on our relationship.
The 621 Order provides that certain in-kind contributions made pursuant to a franchise are
included in franchise fees subject to the statutory cap. The 621 Order indicates that the fair
market value of such contributions can be included in the cable operator's franchise fee payment
calculation. That is, the value of such contribution can be deducted or offset from the actual
franchise fee amount paid to the franchising authority.
Charter's franchise, however, requires payment of franchise fee calculated as 5% of the
company's "gross revenues," as defined. The franchise does not include a right to offset or
deduct the value of in-kind contributions. Accordingly, the franchise would need to be modified
to accommodate deductions from future franchise fee calculations and payments.
If Charter wishes to modify the franchise to provide for the deduction of the value of any
particular in-kind contributions from franchise fees, the company must do so in compliance with
the 621 Order. Specifically, paragraph 62 of the 621 Order states:
The franchise fee rulings we adopt in this Order are prospective.245 Thus, cable operators
may count only ongoing and future in-kind contributions toward the five percent
franchise fee cap after the Order is effective. ... To the extent a franchise agreement that
is currently in place conflicts with this Order, we encourage the parties to negotiate
franchise modifications within a reasonable time.247 If a franchising authority refuses to
modify any provision of a franchise agreement that is inconsistent with this Order, that
provision is subject to preemption under section 636(c).
Thus, a modification to the franchise to allow the value of in-kind contributions to be deducted
from future franchise fee calculations and payments would need to be negotiated. To do so,
Charter would need to specify any in-kind contributions that the company believes are deductible
and identify the fair market value of such contributions.
It might be useful to provide an example. The 621 Order contemplates that the fair market value
of complimentary cable service provided to public facilities pursuant to a franchise are included
in franchise fees. But Section 5.3(a) of the member cities' franchises provides that such
complimentary service and certain associated equipment must be provided "free of charge"to
certain public institutions and schools. Thus, a franchise modification would be necessary to
allow the value of complimentary services to be deducted from future franchise fee payments.
In order to initiate a discussion about any such modification, Charter would need to identify the
locations receiving complimentary service and associated equipment along with the company's
calculation of the fair market value of the services and equipment provided at each location.
Until that information is supplied and a franchise modification is agreed upon, no franchise fee
offset or deduction related to complimentary service is allowed. Absent modification(s), such an
offset or deduction would violate the franchises. Any other in-kind contributions that Charter
believes are deductible would need to be addressed in the same way.
Please contact us if you have any questions or need for clarification. We look forward to
communicating with the company about this matter.
Yours truly,
cc: Bob Vose, legal counsel