telecommunications commissioners minutes

8/2/2019 Telecommunications Commissioners Minutes

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mNVENED

AGENDA

!TEl1 I

ITEMS I I &I I I

DRAFT

MINUTESBoard of Telecommunications CommissionersJuly 25, 1986

The Board of Te"1-eccmm.mications Ccmnissioners of the City of LosAngeles convened a t 10:20 a.m. in Room 238 of City Hall onFriday, July 25, 1986.The following Commissioners were in attendance:

Charles N. Wirmer, PresidentLance E. Drumrond, Vice PresidentNina M. FrazierTracy A. Westen

Commissioner Ira T. Distenfield was not present.* * *

Items II and I I I were canbined and IteIffi V and VI were heard inreverse order.* * *

The draft minutes of th e July 11, 1986 meeting were approved withone correction to the spelling of the word lICorm:rl.ssioners".* * *

Report on Group WTransfer to the "Consortium"and Update on Group WTransfer to CenturyMs. Susan Herman, General Manager reported that by let ters datedJuly 23, 1986 to both the C o r ~ o r t i u m and Century CommunicationsCorporation ("Century"), the Deparonent had requested additionalinfonnation. The Department is diligently working to obtaininfonnation needed to present to th e Board for i ts consideration.The Department requested this matter be referred to the August 1,1986 rreeting. Mr. Winner then stated that i f Century and/or theConsortium provides a ll the necessary infonnation to the Depart-ment, this matter will be heard on August 1, 1986. Ms. Hermanthen requested that the information be sent in a timely manner inorder for the Department to review and make i t s recommendation tothe Board; also, to allow prior review of reports by the Boardmembers.


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Page 2Board of Teleccmm.mications CorrmissionersMinutes of the Meeting -

Mr. Westen asked why there was "a rush". Mr. William Rosendahl,appearing for Group W, responded that there had been no rush andgave a brief chronology of dates. Mr. Rosendahl also said thathe had shared information with the Department concerning theimpending transfer as soon as he received i t , beginning as farback as August, 1985. He further stated that by le t ter datedFebruary 27, 1986, Group W requested assistance from the Citywith the transfer of stock to the Consortium. hopefully canpleting the transfer and a ll approvals by th e end of Jtme 1986. Mr.Winner noted that the City had asked Group Wwhether i t wished toproceed with a two step transfer or a direct transfer to Century.I t 'Was Group WI s own decision to seek the more time cons1..1l1ringprocess of the two-step transfer request. Furthenrore. Group Wdid not properly request the transfer and in fact a breach hadoccurred because an authorized transfer of control took placewithout prior City approval. Discussion ensued. Mr. Winner alsostated that there was an additional question before the City,that is . to whom may a renewal be granted -- to Group WWestinghouse, th e legal franchisee, the Consortium or Century? Mr.Westen stated reluctance to base an important decision with anopporttmity of only tw-o or three days to review complexmaterials. Mr. Rosendahl parenthetically noted that Group Wwanted to submit renewal documents by September 9, 1986.Mr. \


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Page 3Board of Telecornrnunications CommissionersMinutes of the }1".eeting -

Ms. Herman stated that the Depart:Irent wished to clarify that whenthe original le t ter , requesting assistance with the transfer w"asreceived, i t was not accompanied by any agreements or documentsnormally associated with a transfer. Furthenrore, the Departrr.1tdid not immediately act upon the request unt i l i t had receivednecessary opinions from the City Attorney regarding the appro-priate steps for the City and the franchisee in the transferprocess. The appropriate requests were finally received onlyaf ter the Depart::n:ent cited the Company in breach of i ts fran-chise.Futher discussion ensued. Mr. Witmer reminded Yrr. Rosendahl thatthe Board, on several occasions, had suggested that Group Wreview i ts original request in order to pursue a less cumbersomeand complex process. In addition, the Department made similarsuggestions to Group W concerning the process as well as advisedthem of the potential violations of their franchise should theyproceed without prior City approval. Group W chose not to acceptthose suggestions and is now in a "rushed" trode. Mr. Drunm:mdeJqJressed his concern as to the seriousness of this issue andstressed that the Board must trove expeditiously yet diligently.He further suggested that i f this issue cannot be resolved by th efollowing regular meeting on Friday, August 1, 1986, that aspecial meeting be called. After a discussion, a tentativespecial meeting date was also set for Monday, August 4, 1986.Mr. Westen then asked th e Depart:Irent for the cri ter ia to beexamined. Ms. Herman stated as follows:

1) The financial capability of the Consortium and ofCentury to perfonn through January 7, 1987;2) The legal capability, both structurally and managerial-ly, of both carnpanies to perfonn;3) Their technical abil i ty to perfonn; as well as4) The abi l i ty to meet the needs and interests of thecom:m.mities.

She added that the Department wil l review th e performance ofCentury, in particular, in other markets; and require bonds andguarantees. The criteria is similar to that required in theRequest for Renewal Proposals. The Department wishes to insurethat the transfer entity can fully carry out the obligations ofthe franchise of the predecessor. Mr. Westen questioned v..ihetherthe Board wil l be asked to make a comparative judgement ofCentury, in l ight of th e current level of performance by Group W,or wil l Century be judged soley on i ts performance in othermarkets and abil i ty to perfonn here.


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Page 4Board of Telecommunications CommissionersHinutes of the Ivf..eeting

ITEl1 IV

MS. Herman responded that the Department wil l review thefranchise obligations of Group W and assess whether Century'spast and present performance dem::mstrates adequate abi l i ty toasS1.ll:re and carry out those obligations to th e "ful l let ter" ofthe franchise. Mr. Winner objected to a str ict canparativeevaluation. He believes the failure or success of Group W toadhere to i ts franchise and for Century to replicate that level,is not as important and Century's abi l i ty to ?erlorm tmder theLos Angeles franchise provisions.Mr. Drtm:m::md stated that comparisons betwee- :-:-ajor ci t ies andsm:aller cit ies were not always reliable. He s - : he believed theissue would appear to be whether Century is p ~ e p a r e d to meet therequireIIEIlts of the City and to operate the three (3) franchises.The consensus of th e Board was that the decision should be basedupon the cri ter ia as set forth by Mr. Dnm:m::md. J:.1s. Hermanstated that she fel t the cr i ter ia the Department is using isconsistent with the statements made by the Cormrl.ssioners. Sheadded that the DepartJrent wil l review the transfer request todetermine whether Century demonstrates th e abil i ty to assume theobligations of the Group W franchise.

* * *Report on United Cable TV of L.A., Inc.MS. Herman requested the order of th e three items concern:ingUni ted be reversed. The Board agreed to the change.Proposed Amendment to the Franchise:MS. Herman reported that the Finance Ccmnittee of the Board,chaired by Mr. Winner and vice chaired by Mr. Dnnrmond, met onJuly 18, 1986 to discuss the appropriate source of appeal on theliquidated damages assessed to United. The Committee andDepartment tman:lmously agreed to recomnend to th e Comnission andCotmcil that the franchise for United Cable Television of EastSan Fernando Valley, Ltd. (I fUnited") be amended as tmderlinedbelow:

"Article II . Section 4. 2(G) :No'tl:1vlithstanding th e above, th e Board may af ter a hear:ingand a show:ing of good cause, waive, modify or extend theapplicable provisions of this Section. All actions taken bythe Board ;gu;-suant to this Section may be appealed to theCity Council. r


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Page 5Board of Telecommunications CommissionersHinutes of the Meeting -

I t was the desire of the Depart:lIent and the Finance Comnitteethat an appeai- review by the Cotmcil be explicit in thefranchise, as was intended when the provision was drafted. Mr.Wirm.er IOOtioned to forward the Department's recomnendations tothe Mayor and Council. Ms. Frazier seconded the IOOtion and i twas tmanimously passed. Mr. Wirmer also requested the Departmentto inrnediately notify Cotmcilwcman Joan Milke Flores, chair ofthe Industry and Economic Development Ccmnittee of the actiontaken on this matter.Report on Proposed Uses for the $100,000.00Liquidated Damages Assessed to United:Ms. Herman reported that liquidated damages in the arrotmt of$186,200.00 had been assessed to United for damages accruedthrough. January 31, 1986. As part of i ts action, the Boardrequired $86,200.00 of the total assessment be paid inrnediatelyand the remaining $100,000. 00 be held in the TelecommunicationsFtmd: Liquidated Damages accotmt to be used for cable relatedpurposes to be reccmnended by the Depart:lIent. In a previousmeeting the Department recon:mended use of the $100,000.00, forachieving goals such as interconnection, which would not onlybenefit the community served by the United, but would also sharethe programning of that dist r ic t with other communitiesthroughout the City. She further stated that based uponconversations with Mr. William Cullen, President of United,additional uses of the $100,000 may be for studios or businessand institutional applications of cable as well as enhancing theequipment provided for access. However, solely dedicating the$100,000.00 into the Telecommunications accotmt forinterconnection may be premature and other uses, IOOre beneficialmay be determined over ti.rre. Therefore, the Departmentrecorrmends setting aside the $100,000 into the accotmt a t thist ine, indicating a desire to use the ftmds for the aforeJ:IEn.tionedpurposes which "l.vould benefit the dist r ic t and the City.Discussion ensued. Ms. Joan Kradin, Deputy for Cotmcilman HowardFirm, stated that a let ter had been sent to the Conmission onbehalf of Mr. Firm's constituents requesting that the $100,000.00be spent in the Valley as compensation to the community forhaving to wait longer for cable services. She further statedthat Mr. Firm thought that was the purpose of the assessment tobenefit the franchise area. :torr. Wirmer suggested i f theCotmcilman or his staff have additional suggestions for usesbeyond those stated, to please inform. th e Department of thosespecific suggestions.
http:///reader/full/100,000.00http:///reader/full/186,200.00http:///reader/full/86,200.00http:///reader/full/100,000.00http:///reader/full/100,000.00http:///reader/full/100,000.00http:///reader/full/100,000.00http:///reader/full/186,200.00http:///reader/full/86,200.00http:///reader/full/100,000.00http:///reader/full/100,000.00http:///reader/full/100,000.00


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Page 6Board of Telecommunications CommissionersMirrutes of th e Meeting -

Cmmcilman Ernani Bernardi appeared to speak to the issue of theUnited assessmettt. Mr. Bernardi stated that he had been advisedby the City Attorney that currently th e Board had ful l authorirfover th e liquidated damages assessments and that the Council hadno jurisdiction in the matter. Mr. ';.Jirmer explained theamendment recommended by th e Finance Committee and Department toprovide for an appeal process before the Cmmcil.Mr. Drurrrnond then asked Mr. Berr.ardi for the Cmmcil's Dositionon the damages assessed to United. } t r . Bernardi repl iec .ha t theCmmcil was surprised a t several i s s u e s ~ including: The Councilhad no jurisdiction over th e liquidated damages assessments, andeach franchise has different provisions on the matter. He saidhe was most disturbed about a rurror that th e fines imposed onUnited were planned for use elsewhere. He stated that hebelieved fines imposed in one jurisdiction should be kept thereto foster improvements in cable service. He asked i f the$186,200.00 assessment had been imposed and i f i t was subject toappeal. }tr . Winner rei terated the recoornendations of the FinanceCommittee and stated that the reason for the amendment regardingappeal to the Council was due to the Board and Department sbelief that liquidated should be appealable to th e Council. Mr.Winner further explained the chronology of damages accrued byUnited. :t


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Page 7Board of Telecomm.mications CorrmissionersMinutes of the Meeting -

*

adequate services and systems so that such uses would beduplicative or tInnecessary and a waste of fimds. The Board thenaccepted the recomrendation of the Depart::rrent, emphasizing adesire to use fimds to benefit the franchise area as well as theentire city.Report on Liquidated Damages:~ J . S . Hennan stated that a t a previous n:eeting, the Board deferredpayment of $106,200.00 in liquidated damages assessed to Unitedfor missed activation milestones from. February 1, 1986 t h r o u g . . ~ March 31, 1986, unt i l th e June 30 milestone marie. The Boardstated, a t that milestone mark, payment of those damages lOy notbe required if United were to meet i ts cable activation mi estoneof 187 miles as established in the revised construction scheduleadopted by the Board on April 4, 1986 and by the Council on June25, 1986*In addition, United currently owes the City $41,500.00 forliquidated damages for failing to provide a Local OriginationCanplex/Access Studio by December 31, 1985. By le t ter dated June26, 1986, United indicated that a public access studio was openedand made available to th e public on June 23, 1986. Therefore,the $41,500.00 figure was calculated based on on liquidateddamages of $500.00 per day for 83 days in the rronths of April,May and June.In view of the above, the Depart:mmt recorrmends that those nvoamounts ($106,200.00 and $41,500.00 = $147, 700.00) be combinedand held in abeyance (deferred) unt i l the next milestone and ifappropriate, deferred to each successive milestone thereafterunt i l construction is completed. Should United contirrue onschedule, the Department believes that the a:rrount should continueto be deferred. Should United miss a milestone, the issue ofwhat portion or a ll of the deferred amount should be levied,should be reviewed. Discussion ensued.One June 30, 1986, the Department made an on-site inspection ofth e United system and found that approximately 208 miles of cableplant had been activated, thereby making United not only incompliance, but ahead of i ts construction schedule.
http:///reader/full/106,200.00http:///reader/full/41,500.00http:///reader/full/41,500.00http:///reader/full/106,200.00http:///reader/full/41,500.00http:///reader/full/106,200.00http:///reader/full/41,500.00http:///reader/full/41,500.00http:///reader/full/106,200.00http:///reader/full/41,500.00


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Page 8Board of Telecommunications Commissioners:t-'linutes of the ~ ~ e t i n g

ITEM VI

Mr. Winner asked for an approximate total of fines assessed toUnited sinC"e the replacement franchise was granted, and how JlIl.lchhad been paid. Mr. Winner recalled th e history of theassesSIIEnts and reminded United that several discussions hadtaken place with the Board, I & ED and th e Ccnmcil with regard tosetting guidelines and milestones; that United had been given thefull opportunity to set those milestones and had agreed to theassesSIIEnts if the milestones were not met. United alsowillingly agreed to a l l the conditions in their franchise andfurthetm::lre stated to the Board that they had decided not toclose on their financing on December 31, 1986. This decision wasmade by United alone, and preS'lUnSbly United tmderstood how thatdecision negatively impacted their abi l i ty to meet th e Decembermilestone.

Ms. Herman responded that approximately $393,335.00 had beenassessed and to date; nothing had been paid by United towardsthat am:::n.m.t .After further discussion, Mr. Drurmxm.d moved,Frazier, to accept the reconmendation bymotion was unan.im:rusly passed. th e

secondedDepart::rnent.by Ms.The

* * *Mr. Terr; Soley, Development Director for American Cablesysterns,Inc., asked to speak to th e issue of fines and liquidated datnages'Which he believes are ccnmter-productive. He stated as therenewal process unfolds, he hoped discussions regardingliquidated damages would occur. He also stated that he believedperformance bonds should be enough incentive and enforcement toensure good faith compliance with construction schedules. Nocompany can afford to forfe i t htmdreds of thousands of dollars infines. He closed by stating that using the Ccmnission fOrtml tohave extended conversations on the diminishrrent or waiver ofliquidated damages creates adverse relations between the Citycable companies.Report on Change of Ownership Request for Valley Cable andProposed Franchise AmendmentMs. Herman stated the Depart:n:ent reconmends that Section 1 ofOrdinance No 159,707 be amended to provide that where up to 35%of the limited partnership interest is transferred to an existingsubsidiary of Hollinger, Inc. , prior City approval is notrequired. The Depart:lrent also recaIIre!1ds that where 5% or lessof the limited partnership interest is tranferred to an entity,prior City approval is not required. For both of the foregoing
http:///reader/full/393,335.00http:///reader/full/393,335.00


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Page 9Board of Teleconm.mications CorrrnissionersMinutes of the Ivr..eeting -

situations the Depart::Irent recOJ.1'lreIlds that prior notice be givento the Departl11.a1.t within 10 working days of th e transfer date.The Depart::rrent further reccmnends that where up to 35% of thelimited partnership interest is transferred to a person or 3D.entity which is not a subsidiary of Hollinger t Inc. prior Cityapproval be required. However t in these situations th e C i t ~ isrequired to make a determination within 15 working days afte:-date of receipt of the transfer request or th e trar.2=::!" isautomatically deen:ed approved t tmless a second r e a [ : : ' : ~ required by COtmcil. In the case of a second reading, th:::taken a t the second reading will be considered final.Discuss ion ensued. Ms Bani Fine, General Manager for ValleyCable TV t Ltd (,'Valley") stated that after several conversationswith the DepartIr.ent Valley would not contest the Department'srecam::nendations. Valley's original preference was that thetransfer be approved as requested; however, their immediate goalis to have the ownership change approved and secondly, toestablish a good faith business relationship with the City. Ms.Fine asked about the procedures to be followed if Valley proposedto sel l up to 30% of i t s limited partnership to a company outsideof Hollinger, Inc. Ivr.s. Herman clarif ied that the City may followi ts usual procedures; however, if the City fai ls to act within 15days of the notice, approval is automatically granted, subject tothe second reading of the Cotmcil as provided for in the proposedordinance amendment.Ms. Fine further asked what happens to the ownership changerequest if the Board approves i t and I & ED does not? Ms. Hermanresponded that, as she tmderstands i t , th e Board action isforwarded to th e t


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Page 10Board of Teleccmnunications Corn:nissionersMinutes of the l!:'I.iberson l ine by that ti.nE. Providing these c ~ j : ! ; r . . J 2 e::::-e lltle"t" theremaining ~ - t h i r d s may be payable after:r2t:e:';nt oil a f r ~ - a : n c l r l . s erene'Wal, e.xclusive of liquidated damages, fee'$ ,a.w lostfranchise fees.
http:///reader/full/500.000.00http:///reader/full/243,500.00http:///reader/full/Deceml!.erhttp:///reader/full/c~j:!;%E3%B2%AE.J2http:///reader/full/fr~-a:nclrl.sehttp:///reader/full/500.000.00http:///reader/full/243,500.00http:///reader/full/Deceml!.erhttp:///reader/full/c~j:!;%E3%B2%AE.J2http:///reader/full/fr~-a:nclrl.se


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Page 11Board of Teleconnn.mications CorrmissionersMinutes of the Meeting -

Buenavision requested more explicit language as to the payrrentschedule on the"'Lemaining two-thirds assessment. Therefore, theDepartment reccmne:nded a modification in Article I I to read asfollows: ''The two-thirds balance remaining is to be paid byDecember 31, 1986 i f Buenavision fai ls to have 450 activesubscribers and 20 miles of activated cable plant constructed.Should Buenavision comply with the December 31, 1986 activationmilestone, then the t:\.x)-thirds payment may not be due unt i l af tera renewal franchise is granted to Buenavision. 1I Discussion ensued. Mr. Esparza stated that he was prepared toaccept the dOC1JIIEIlt as presented however, he wishes to voiceadditional objections. Mr. Esparza then stated his severalobjections. Mr. Winner reiterated that the Finance Corrmittee haddiscussed a l l of the issues contained in the proposed aJ:IlEmdedordinance a t the Finance COIIIllittee meeting and a t length with Mr.Wilkins. The language changes were mutually agreed upon.Mr. DrurrmJnd stated that the Board had been lenient with thecompany and the company had benefitted by special consideration.However, Mr. Esparza 1 s cOlIIIEnts appeared cr i t ical of a ll that theBoard l'.as done on Buenavision' s behalf. Mr. Winner supported Mr.Drum:r:ond's staterrents and said the Board would go back to theoriginal language, i f necessary. }Ax. Esparza stated that he '\1aSadvised by Counsel to state his objections to th e language in theordinance, however, he was willing to accept and abide by thelanguage proposed. Mr. Winner stated that Mr. Esparza I s ca::::m:mtswere so noted. After brief discussion, Mr. Drurrmond IIDved,seconded by Mr. Westen, to accept the reccmne:ndations of theDepartment.The motion passed u r ~ u s 1 y .

Ms. Frazier stated that the Board needs to establish cri ter iaupon which to base decisions for waivers, deferments or petitionsfor special consideration from franchisees. :M.s. Herman statedthat th e Department is presently working to develop cri ter ia , asrecOIIIrended by Ms. Frazier and r-lr.Westen.
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Page 12Board of T e l e c o m r n u n i c a t i o r ~ CommissionersHirrutes of the VJeeting

ITEM VII

ITEM VIII

ADJOURNMENT

Old BusinessMs. Herman annO'lmced that the tronthly report was completed andavailable.New Business

Future meeting dates: Regular Board Vlting - Friday, August 1, 1986 Tentative Special rv1eeting - Nonday August 4, 1986 Statement from Randall Mitchell:~ t r . ~ l i t c h e l l asked to be excused from today's meeting butwill be present a t the August I , 1986 rr.eeting to make astatement. The Department noted that i t has not completedi ts investigation of Corrm.mi.Com which was instigated byallegations made by Ivtr. l"dtchell.Hr . Dn:n::rm:m.d IOOtioned for adjourrn:rent. I t was l.ID.aIlim:ru.slyseconded and the meeting was adjourned a t 12:25 p.m.
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