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HomeMy WebLinkAboutMINUTES - 08062002 - SD7 (2) CONTRA COSTA TO: BOARD OF SUPERVISORS COUNTY FROM: John Sweeten, County``Administrator DATE: July 10, 2002 SUBJIECT: Deny the Transfer of Control of AT&T Systems to AT&T Comcast Corporation SPECIFIC REQUEST{S}OR RECOMMENDATION{S}'& BACKGROUND ANIS JUSTIFICATION RECO► BNQATI N : HOLD a',public gearing to consider the application for transfer of control of TCI Cablevision of California, Inc., Televents Of East County, Inc., Televents, Inc., Tele Vue Systems, Inc., AT&T Broadband. HC of Delaware, LLC, TCI of East San Fernando Valley, L.P., UACC Midwest, Inc., Contra Costa Cable Company and Crockett Cable Systems, Inc.indirect subsidiaries of AT&T' Corp. CAT&r) to AT&T Comcast Corporation; At the conclusion of the gearing, ADOPT the resolution to deny the transfer of control of AT&T to AT&T Comcast Corporation. FINANCIAL. IMPACT: NONE, BAC GRQUNQ/R_gASONA1 FOR I~ECOIlt M NDATION S : On or about March 2,2002, AT&T Corp the parent of TCI Cablevision of California, Inc., Televents Of East County, Inc., Televents, Inc., Tele-Vue Systems, Inc.,-AT&T Broadband HC of Delaware, LLC, TCI of East San Fernando Valley, LP., UACC Midwest, Inc., Contra Costa Cable Company and Crockett Cable Systems, 'Inc. filed with the County an FCC 394 requesting that the County consent to the transfer of control of the licenses from the above systems to AT&T Comcast Corporation. ("Transferee") CONTINUED ON ATTACHMENT: ,_.,,,.,,YES SIGNATURE: _ RECOMMENDATION OF COUNTY ADMINISTRATOR,,,,_RECOMMENDATION OF BOARD COMMITTEE —APPROVE —OTHER SIGNATURE($): ACTION OF BOARD ON APPROVED AS RECOMMENDED,_OTHER CLOSM thepublic hearing to'considerLtbe application for transfer of control ofindirect subsidiaries of AT&T Corp ('TCI Cablevision of California, Televents of East County, Inc.,Televents, Inc., Tele Vue Systems, Inc., AT&T Broadband HC of Delaware, ZLC, ',Tci of Fist San Fernando Valley, L.P., UACC Midwest, Inc., Contra Costa Cable Coxnpsny and Crockettcable Systems, Inc.) to AT&T Gast Corporation, ADOPM) Resolution No.20021500 to deny the transfer control of AT&T to"AT&T Comcast Corporation; and DT1ULM) the County A&Anistratoor's Office to return to the Hoard in September with a status report of progress in negotiations with AT&T. VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS(ABSENT J TRITE AND CORRECT COPY OF AN; AYES: NOES: ACTION TAKEN AND ENTERED' ABSENT: ABSTAIN: ON MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. ATTESTED 4 e JOIN SWEETEN,C tkK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR cc:Cable TV klminlstralor AT&T s , Section 58-4.028 of the County Ordinance Code,(Ordinance No. 93.55) requires that all proposed transfers of control of licenses,be submitted to the County for review and decision by the Board of Supervisors. Pursuant to Section 817 of the federal Cable Act (47 U.S.C. Section 537), the County has 120 days to act upon any request for approval of a transfer. Following receipt of the FCC Form 394, staff working with the Cities of Berkeley and richmond hired William Marticorena of Rutan & Tucker, LLP to review the legal, technical and financial qualifications of the buyer. In order to obtain the necessary information to evaluate AT&T's petition, Mr. NMrticorena has tendered several information requests to AT&T, Comcast, and AT&T Comcast. As will be described here, those entities have been substantially unresponsive in providing any clarifying and justifying information, By letter dated March 18;, 2002, Mr. Marticorena requested certain information relating to, among other things, the legal documents relating to the Merger; the impact of the Merger upon management stability; the potential impact of the consolidation of the operations of AT&T and Comcast into AT&T Comcast upon subscriber services; questions'` relating to potential labor problems created by the Merger; and questions relating to the impact of the Merger upon rates and services. ( See Exhibit 25) By letter dated March '29, 2002, F. bent Leacock, Vice President Government Affairs and Franchising, Bay Area Markets, responded to said questionnaire. In terms of providing exhibits and schedules to the essential Merger documents, none of this information is provided based upon AT&T's allegation that "none; of the exhibits or schedules that have been omitted is necessary to understand the terms of the agreements." Questions relating to management stability were ignored. Likewise, questions relating to how AT&T and Comcast intend to achieve operating synergies by increasing AT&T's margins without negatively affecting subscriber rates or services were not addressed, (See Exhibit 26) AT&T's March 29, 2002 and subsequent responses did not relieve the concerns about the merged companies financial capacity to assume control of the Franchise or the impact upon rates and services. (See Salient Features of the AT&T Comcast'`Merger and Exhibits thereto.) Although dialogue between the parties continues, AT&T has yet to allow open and adequate inspection of its documents. (See Exhibits 27-32) (Historical background Exhibits''mentioned above are available for review in the Clerk o the Soard's Office) Mr. Mrticorena and staff are currently working with AT&T on a transfer agreement that will address concerns about rate increases, reduction in services and reimbursement of costs related to the transfer and material' breaches :of telephone answering times, technical quality of the Richmond system and CCTV signal quality: Thus far the response from AT&T has been inadequate for staff to determine whether the transferee has the requisite legal, technical and financial qualifications to approve the transfer request. Because of the numerous issues of concern discussed in this report, unless AT&T agrees to an extension in writing, staff recommends that the Board deny the transfer of control from AT&T to AT&T Comcast Corporation until all outstanding issues are addressed in a transfer agreement. CON it LACES Of NEGA'TNE ACT10N If the Board does not take the action recommended above, the application for consent to transfer of control would be deemed automatically granted.. This could'possibly increase rates, result in a reduction of service and reduce the County's ability to resolve customer service, technical quality and CCTV signal problems " 2 THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Adopted this Order one AlIGIST 6,2002 by the 'following vote: AYES: SUPERVISORS UILKEMA; GERBER, DeSAULNIER, GLOVER AND GIOIA NOES: NONE ABSENT: NONE, ABSTAIN:NONE SUBJECT: DENIAL OF CONSENT TO THE Resolution No. 2002/500 TRANSFER OF CONTROL OF THE FRANCHISE AGREEMENT GRANTED T4 AN INDIRECT SUBSIDIARY OF AT&T CORP. TO AT&T COMCAST CORPORATION WHEREAS,an indirect subsidiary(the"Franchisee")of AT&T Corp.{'AT&T")is duly authorized to operate and maintain a cable communications system in Contra Costa County(the"System) by Contra Costa County ("FranchiseAuthority")pursuant to a franchise(the"Franchise") granted by the Franchise Authority;:and WHEREAS, pursuant to the Agreement and Plan of Merger among AT&T, AT&T Broadband, Comcast Corporation,and certain of their respective affiliates,dated December 19,2001 (the'"APM"),and',a Separation and Distribution Agreement between AT&T and AT&T Broadband Corp., dated December 19,200 AT&T intends to merge its subsidiary AT&T Broadband Corp. with Comcast Corporation to create a new company to be known as AT&T Comcast Corporation(the"Transferee"); and WHEREAS,Franchisee:will continue to hold the Franchise after consummation of the merger of cable systems into the Transferee(the"Merger");and WHEREAS,a Federal Communications Commission Form 394 will respect to the Merger has been filed with the.Franchise Authority(the"Application"); WHEREAS,the parties to the application have requested consent by the Franchise Authority to the Merger; and WHEREAS, the,actions set forth herein are based upon evidence:.set forth in the Staff Report and other evidence presented prior to or at the hearing on this matter NOW,THEREFORE,BE IT RESOLVED AS FOLLOWS: SECTION 1. Based upon the evidence contained in the Staff'Report, and other evidence presented at the hearing on this matter,'the.Franchise Authority hereby denies its consent to the Merger for the following reasons: (A) The parties to the Application have failed to demonstrate that the Transferee will possess the financial capacity to assume control of the Franchise and that the Merger will not impose a significant negative impact upon rates and services. (B) The Transferee has not demonstrated that it possess the financial capacity to assume control of the Franchise or that the Merger will not impose a significant negative impact upon rates and services;and (C) The parties to the Merger have failed to provide relevant additional information requested by the County. (D) The Franchisee has committed material breaches of the Franchise and applicable law. (E) The parties to the Application have failed to execute a Transfer Agreement which cures or mitigates the above described issues, RESOLUTION NO. 20021 500 • SECTION 3. The Board of Supervisors further orders: 1. The County Administrator's Office is hereby authorized and directed to send notification of the County's denial ofthe Application to Kent Leacock,Vice President Government Affairs, P.O. Box 5147, San Ramon,CA 94583onbehalf'ofA.T&T Broadband Corporation,and to Walter W.Hansell, Esq., Cooper, White&Couper LLP, 01 California Street, Seventeenth Floor, San Francisco,CA 94111 on behalf of Comast Corporation,and to such other person or persons as the County Administrator's Office and the County Counsel shall deem necessary or reasonable. The County Administrator's Office, the County Counsel and Special Counsel are hereby authorized and directed to prepare, execute, and deliver any agreements, certificates,or other documents necessary or convenient to the implementation of this Resolution. 2, The County Administrator's Office shall provide AT&T Broadband with written notice of the Franchise violations,by certified mail to the general manager of AT&T Broadband and an opportunity to cure the violation within a reasonable period of time. SECTION 4. This Resolution shall become effective immediately upon adoption. RESOLUTION NO 2002/50G County of Contra Costa OFFICE OF THE COUNTY ADMINISTRATOR MEMORANDUM DATE: August 6,2002 To: Board of Supervisors FROM: Patricia Burk%bleTV Administrator SUBJECT; Additional Material for Item SD. 7'AT&T Transfer of Control Attached is additional material that documents the material breaches that are referred to in the denial Board order which you received several weeks ago. Lillian Fujii of County Counsel and myself have been working with AT&T to come to agreement and because we thought we would reach the agreement by today or have an additional extension,this information was not provided sooner. Although we are close to agreement,AT&T has refused to extend until September I oth and we have no choice but to deny and continue to negotiate. Therefore,I request that you accept the attachments as part of today's agenda item. Thank you. Cc:John Sweeten Sara Hoffinan July 16, 2002 Patricia Burke Contra Costa County 651 Pine Street,:11 th Floor Martinez, CA 94533 Dear Ms. Burke: In light of my firm's recent comprehensive inspection of AT&T Broadband's Richmond plant, and in light of my experiences over the past 18 years inspecting cable systems in over 25 states, you've asked me to offer an opinion regarding AT&T'scable system in Contra Costa County,' As you know, I have not conducted any inspection of AT&T's system in the County, save for the incorporated City of Richmond. My comments will, therefore, be general and based my past observations of many cable operators. KR.AMER.FIR INCORPORATED Many cable operators, especially the largest multiple system cable TELEcOMMUNICAmNs operators ("MSOs"), consolidate their operations across multiple TECHNOLoGYCOUNSEL government franchise areas into single management areas called FOR GDVEmMENT AGENCIES AND PRIVATE I NSTITUTIONS "clusters." This clustering is done to achieve anticipated, expected, or SINCE 1984 perceived economies of scale. WWW.KRAMERFIRM.COM Each cluster is typically managed and operated in a uniform manner. KRAMER@XRAMERFIRM:COM IoEPICE. Therefore, the observations of a system in one particular portion of a TEL+1(310)473 9900 cluster (for example, a single franchise area within an MSO's cluster):,is FAx+1(310)473 5900 usually an indicator of the operations in another franchise areas of the Surm 306 2001 S.BARRINGTON AVENUE same cluster. This indicator is even more reliable the longer the cluster LosANGELEs,CALIFORNIA of franchise areas has existed under a unified management scheme. 90025-5379 NO.CAIJFORNtAOFFICE: Based solely on the indicators from my comprehensive ity of Richmond. STEW@CABLETV.CoM inspection, and presuming that the same cluster manage I ment and staff TEL+i(530)622 2856 FAx+1(530)622 2899 team operates the cable plant within the County area adjacent to the City 3361 SuNDANCETRAIL of Richmond, I would expect that the disturbing findings in Richmond PLACERVILLE,CALIFORNIA would be mirrored in the County. Y "KRAMER.FiRM°AND THE KF LOGO DEVICE ARE REGISTERED. WITH THE USPTO.. Patricia Burke July 16,,'2002' Page 9 of 2 pages If the indicators and my expectations are correct, then AT&T has a significant amount of work to perform in the County, as they do in the City Y of Richmond, to make the system safe and safety code compNant. ` Respectfully submitted, J nathan Kramer Principal Technologist JK/me W07/16/2002 10:30 5106206713 PAGE 01102 PHYSICAL PLANT INSPECTION OF AT&T BROADBAND IN THE CITY OF RICHMOND, CALIFORNIA Physical Plant Inspection of AT&T Broadband ' in The City of Richmond, California A. Introduction and Executive Overview At the direction of the City of Richmond, California,Kramer.Firro,Inc.has conducted an inspection of the cable television physical plant system in the City operated by AT&T Broadband("AT&T"). Three members of the professional staff of K AUEF-Flz m ("KF') conducted the entire inspection of AT&T's City of Richmond system on May 1, 2 & 3, 2002. Jonathan Kramer, KF's principal, established the test plan and has reviewed, annotated and approved this report. The purpose of this inspection is to permit us to opine on whether AT&T's outside plant system complieswith CPUC General Order 95,CPUC General Order 1.28,and the City's' Municipal Code adopting the National Electrical Code. The inspection data and site photographs may be found in Attachment Al of this report. The qualifications of KF to conduct this inspection and report on its findings are provided as Attachment A2 of this report; For the reasons set out in the following sections, and documented"at Attachment Al,we conclude that AT&T's system grossly failsto meet the requirements of the City's .Municipal Code, and also fails' to meet the safety code' requirements of the CPUC General Order 95 and 129 requirements. We conservatively estimate the number of individual safety code violations to exceed 15,000.1 The City should direct AT&T to address the causes,'provide a comprehensive corrective action plan, and correct the cable 'It is not unusual for a single address to have several safety code violations. + PAGE Al 07/16/2002 10:30 5106206713 PACE 02/02 PHYSICAL PLAINT INSPECTION OF AT&T BROADBAND IN THE CITY 6F RicHMO ND, CALIFORNIA tel.evi,,sion system safety codeviolations on a City wide basis.' lay correcting these and all ether cable violations that exist in the City of Richmond, AT&T's outside plant will comply with the required CP UC a�d City l anicipal Cbde safety cede requirements, and upgrade the public safety of its plant to the minimum acceptable level. We believe that the code violtitions can be identified and correcteii by AT&T within eighteen to twenty-four (24) months. Given the magnitude of the number'of code violations, and the clearly historical context which has permitted thcs�violation to either go undetected or detected by riot cured,we believe that AT&T cannot identify and cure the code violations solely using its own local staff A note about the inspection photographs attached to this report... The inspection photographs included with this report reptdsent only a fraction of the hundreds of photographs taken during our inspection of this systetn. The additional photographs not included here simply provide none-abut not' necessarily more meaningful--documentation of the safety faults of this system.. All iof the photographs will be provided to the City o11 multiple COROM disks via a separate transmittal. I <BALANCE OF PAGE TN ENTXONALLY LEFT 13LANK> z Of course,in correcting they code violations on a'City wide basis,the specific repreilentative locations cited here should also be corrected. PAoE A2 Albany, Berkeley, Richmond- Technical ichmondTechnical Systems Comparative Information Albany** Berkeley Richmond*** 550 MHz 750 MHz 450 MH MHZ (500 MHz for Analog) (550 MHz for Analog) (400 MHz for Analog Total Analog Capacity* 74 76 69 Total:Digital Channels* 88 206 72 Monitored Mlles* 111 176 351 Nodes* 4 46 18 Average Homes I Node* 4,990 1,042 2,400 Total Homes fussed* 19,960 45,677 52,228 Total Analog EBU's* 11,077 18,863 ;28,114 Total Digital EBU's* 2,215 5,588 8,068 Total HS©'* 0 6,098 3,881' Total Telephony* 0 3,957 d Date of Last Proof of Performance" Test* 2/1/02 2/15/02 2/15/02 Date of last Form 320* 4/26/02 4/17/02 4/17/02 Number of Leaks* 0 0 11 Total Trouble Calls(current mo.)* 233 818 1,120 Total Trouble Calls (ytd)* 985 3,062 5,535 Trouble Cat Is per Analog EBU 0.08892 0.16233 0.19688 Kate of Basic a o 71,1102 $13.31 $12.20 $13.73' Total revenues 201 (all IlRes o business)" $ 1,492,329.17 $ t12,947,320.20 $ 13,369,491.62 average revenue per su scr er 464.47 686.39 631.71 ao ran. ise ees aii' $ 74,616.45 7,366.02 668,474.58 ' * 'Period. April 2002 **Includes San Pablo and portions of Contra Costa County ***includes portions of Contra Costa County " Related to this system only. John d\Aocountsk02GO31RptNT'echnieal Systems Comparisons Richmond Berkeley Aibany.xis 8/6/02 7:00 AM County Administrator Contra Board ofsupetvisors ''" J4i7t114t.Gtola. County Administration Suifdin Costa 1 st District 651 Pine Street, 11th Floor f'1 Gayle B.Uffkema Martinez, California 94553-1229 J- y 2nd ountDonna G District Geerber (925) '335-1 0Sb r FAX: (325)335-10983rd District "" _" Mark t)eSauinler Jahn;,Sweetest 4th District County Administrator Federal D.Glover- at n 5th District August 16,2001 Philip Arndt Government Affairs Manager ! i AT&T Broadband 2500 Bates Ave. AUG Concord, CA94520 COUNTY Dear Mr. Arndt: MARTINEZ, CA L I P" Over the last couple of months we have had several conversations about the on-hold time for callers trying to call your customer service billing and repair lines. Several cities and the County have received numerous calls from frustrated subscribers who have been on hold for as long as 25 minutes. This is a compliance issue. The County has Customer Service Standards as do many of the Consortium cities. County Ordinance 93-55, Section 58-14.016 (3) states that under normal operating conditions, "telephone answer time by a customer service representative, including wait time, and the time=required to transfer the call, shall not exceed thirty seconds." These standards are required to be met 80%of the time measured quarterly. If we continue to receive complaints and AT&T can not demonstrate that these standards are being met, the County and other Consortium cities may take additional action .as authorized in their respective Franchise documents. Please provide telephone reports that demonstrate AT&T is meeting the above standards by September 20, 2401. If these reports are not available on a franchise-by-franchise basis,please provide them on whatever basis is available: Finally, a few customers have been confused by the message on the repair side that says "If you are having' a problem with your @Home 'service, please hang up and dial.....". Some customers do not know that @Home is an Internet Service and are hanging up because the problem with their service is AT Home. Would it be possible to reword that - 1 - message and say something like, "If you are having a problem with your @ Home Internet service,...". Maybe that would eliminate some of the confusion. Let me know if this is possible. Sincerely, )t 1&4 Patricia Burke Cable TV Administrator Cc: Mathew Ames Lillian Fujii -2- County Administrator Contra Costa John M.Giloia Boars otst Districtola rvisors County Administration Building �'`� �`1 651 Pane Street, 11th door /"�►County 1 Gayle B,Uttkema Martinez,California 94553-1229 (,�..+► t 2nd District (925) 335-1080 Donna Gerber FAX:(925) 335-1098 3rd District Mark DeSauthter John Sweeten „ 4th District County Administrator " ' .,, � Federal D.Glover o: 5th District August 1 fi,20€I1' Linda:Craytcn Government Affairs Manager AT&T Broadband 2900 Technology Court Richmond, CA 94806 Dear Ms. Crayton: Over the last couple of months we have had several conversations about the on-hold time for callers trying to call your customer service billing and repair lines. Several cities and the County have received numerous calls from frustrated subscribers who have been on hold for as long as 25 .minutes. This is a compliance issue. The County has Customer Service Standards as do many of the Consortium cities. County Ordinance 93-55, Section 58-14.016 (3) states that under normal operating conditions, "telephone answer time by a customer service representative, including wait time, and the time required to transfer the call, shall not exceed thirty seconds." These standards are required to be met 80% of the time measured quarterly. If we continue to receivecomplaints and AT&T can not demonstrate that these standards are being met, the County and other Consortium cities may take additional action as authorized in their respective Franchise documents. Please provide telephone reports that demonstrate AT&T is meeting the above standards by September 20, 2001. If these reports are not available on a franchise-by-franchise basis,please provide them on whatever basis is available.' Finally, a few customers have been confused by the message on the repair side that says "If you are having'.a problem with your a@Home service, please hang up and dial.....". Some customers do not know that @Home is an Internet Service and are hanging up because the problem with their service is AT Home. Would it be possible to reword that message and say something like, "If you are having a problem with your @ Home Internet service,...". Maybe that would eliminate some of the confusion: Let me know if this is possible.' Sincerely, Patricia Burke Cable TV Administrator Cc:Mathew Ames Lillian Fujii AUG 2 [ COUNTY Go -2- CL z y m CS 3 03 3S3 h = F o m o 3 tyo coy' a0 s> ? 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