Portland Ordinace No. ____.
Re: requiring AT&T/TCI to provide open cable access.
Date: December 10, 1998.
Source: David Olson, City of Portland.

ORDINANCE No.

*Change in control of TCI cable franchises (west Portland, Hayden Island) to AT&T Corporation (Ordinance)

The City of Portland ordains:

Section 1. RECITALS

The Council finds:

1. AT&T Corporation ("AT&T") has agreed to acquire Tele-Communications, Inc. ("TCI") pursuant to an Agreement and Plan of Merger, dated June 24, 1998.

2. TCI presently owns and controls cable franchises originally issued by the City of Portland ("City") to TCI Cablevision of Oregon, Inc. (Ord. No. 166469, as modified and extended by Ordinance No. 172543, passed by the Council on July 30, 1998) or transferred to TCI with the City’s consent (Ord. No. 169417, passed by the City Council on October 25, 1995), consenting to a change in control of the Hayden Island cable franchise to TCI of Southern Washington, Inc..

3. Section 15.1 and 15.2 of the TCI/Portland franchise (Ord. No. 166469), and Section 3.5 and 3.6 of the Hayden Island cable franchise prohibit a franchise transfer or change in control without the prior consent of the City of Portland expressed by ordinance. Section 15.1(B)(2) of the Portland franchise and Section 3.6 of the Hayden Island franchise provide that the City of Portland may condition a transfer upon such terms and conditions related to the technical, legal, and financial qualifications of the prospective transferee to perform according to the terms of the franchise as the City deems appropriate, including those conditions deemed necessary by the City to ensure the strict performance of the requirements of the franchise.

4. Transfers of cable franchises are subject to the requirements of the Cable Communications Policy Act of 1992, and regulations promulgated by the Federal Communications Commission ("FCC"). AT&T and TCI filed an FCC Form 394, which was received by the Mt. Hood Cable Regulatory Commission, (the "MHCRC") on September 2, 1998.

5. The MHCRC generally represents the City of Portland in cable regulatory matters. The MHCRC was created by an Intergovernmental Agreement (the "IGA") dated December 24, 1992 between and among the Multnomah County, and the Cities of Fairview, Gresham, Portland, Troutdale and Wood Village (the "Jurisdictions"). The IGA states that "(a)ny decision concerning a change of ownership or control of a cable communications system or a Grantee" is an area where the Jurisdictions have reserved full authority to act on their own behalf. IGA, § 4.B.2. However, each Jurisdiction has agreed "to take no action in these areas until the Commission has had a prior opportunity to consider the matter." IGA, § 4.B.

Thus, the Commission acts in an advisory capacity to the City in connection with TCI and AT&T’s proposed merger and transfer of system control.

6. After receiving the initial FCC Form 394 filing with exhibits on September 2, 1998, the MHCRC established a process for considering the proposed merger. MHCRC Respondent. No. 98-9 (Passed September 21, 1998). MHCRC staff, with the assistance of financial consultant KFA Services and the Commission’s legal counsel, requested additional information from AT&T and TCI. MHCRC staff letter to AT&T and TCI (September 30, 1998). AT&T submitted a partial reply to this request on October 12, 1998. The MHCRC conducted a public hearing on the transfer application on October 19, 1998. Following the hearing, the MHCRC sought certain additional information and responses. MHCRC staff letter to AT&T and TCI (October 30, 1998). The MHCRC received a further reply from AT&T on November 9, 1998. The MHCRC held a work session on November 16, 1998 to review this material and make a recommendation to the City.

7. Among other things, the information provided by TCI and AT&T showed that certain franchise fee and Public, Educational, and Governmental "(PEG") fee arrearages may exist, and that AT&T’s affiliate TCG may be utilizing TCI facilities in City rights of way without prior City authorization.

8. The MHCRC identified specific concerns regarding AT&T’s application for the change in control of the TCI franchises, including: (a) acceptance of all existing TCI franchise requirements; (b) AT&T’s and TCI’s corporate reorganization and financial conditions after the merger is completed; (c ) completion of the current TCI/Portland upgrade; (d) construction and completion of TCI’s institutional network commitments; (e) possible franchise and PEG fee arrearages arising from the exclusion of certain advertising revenue or programmer payments; (f) TCI’s proposed cable modem Internet platform and services and compliance with applicable cable requirements; (g) reimbursement of all direct, out-of-pocket costs of the MHCRC and the City incurred in analyzing and acting upon the change of control request; (h) the possible unauthorized use of City rights of way by AT&T’s affiliate TCG, resulting in potential TCI franchise violations in connection with any such unauthorized use of TCI facilities by TCG; and (i) compliance with all other applicable legal requirements, including carriage of broadcast digital and high definition television signals, and interconnection of the cable system with potential competitors for purposes of sharing cable PEG channels, to the extent required by the TCI/Portland and TCI/Hayden Island franchise agreements. The MHCRC’s recommendation to the City contained conditions intended to address these concerns.

9. AT&T’s application for the transfer of control of the TCI/Portland and TCI Hayden Island franchises to AT&T should be approved with conditions. If AT&T does not accept these conditions, the application should be denied.

NOW, THEREFORE, THE COUNCIL DIRECTS:

a. Subject to the conditions set out in the acceptance form attached as Exhibit A to this ordinance, the City of Portland approves AT&T’s request for a change of control in control of the following cable franchises:

• TCI Cablevision of Oregon, Inc. (Ord. No. 166469, as modified and extended by Ordinance No. 172543, passed by the Council July 30, 1998); and,

• TCI of Southern Washington, Inc. (Hayden Island) as transferred to TCI with the City’s consent (Ord. No. 169417, passed by the Council October 25, 1995)

(hereafter referred to collectively as the "TCI/Portland franchises").

b. Written acceptance.

(1) Within twelve days after passage of this ordinance by the City Council, AT&T shall file its written acceptance of this ordinance. The acceptance shall be in the form attached hereto as Exhibit A. AT&T shall file such written acceptance with the City’s Office of Cable Communications and Franchise Management.

(2) AT&T’s acceptance shall be contingent upon final closing of the merger transaction, as provided in Subsection d below. Such acceptance shall be otherwise be unqualified and shall be construed to be an acceptance of all the terms, conditions and restrictions contained in this ordinance.

(3) AT&T’s failure, refusal or neglect to file such written acceptance within such time shall constitute an abandonment and rejection of the rights and privileges conferred hereby.

c. Denial of transfer application. If for any reason AT&T fails, refuses or neglects to file the written acceptance as provided in Subsection b, the City of Portland denies AT&T’s request for a change in control of the TCI/Portland franchises.

d. Automatic nullification in event of failure to close or closure on materially different terms. In the event the transaction which is the subject of this ordinance is not consummated or does not reach final closure for any reason, or in the event such closure is reached on terms substantially and materially different to the terms described in the FCC Form 394 and subsequent information provided by the AT&T and relied upon by the MHCRC, then this ordinance, together with the written acceptance provided hereunder, shall be null and void. If the closure is upon terms which are substantially and materially different, AT&T shall resubmit its request for a change in control in order to be in compliance with the TCI/Portland franchises.

Section 2. The Council declares that an emergency exists because AT&T and TCI filed their Form 394 transfer application on September 2, 1998, and the City is legally constrained to respond to the application before December 31, 1998 in order to comply with federal and franchise timelines; therefore, this ordinance shall be in full force and effect from and after its passage by the Council.

City of Portland, Oregon
Office of Cable Communications and Franchise Management
Room 1180
1221 SW Fifth Avenue
Portland, OR 97204

This is to advise the City of Portland, Oregon that AT&T Corporation (the "Transferee") hereby unqualifiedly accepts Ordinance No. ________________, passed by the City Council on December ____, 1998, regarding the change in control to the Transferee of the following cable franchises under the following terms and conditions:

• TCI Cablevision of Oregon, Inc. ("Franchisee") (Ord. No. 166469, as modified and extended by Ordinance No. 172543, passed by the Council July 30, 1998); and,

• TCI of Southern Washington, Inc. ("Franchisee") (Hayden Island) as transferred to TCI with the City’s consent (Ord. No. 169417, passed by the Council October 25, 1995)

(hereafter referred to collectively as the "TCI/Portland franchises").

(1) Compliance with franchise. In all respects and without exception, Transferee shall cause the Franchisees to comply, and the Franchisees shall comply, with the requirements of the TCI/Portland franchises, including all applicable ordinances, orders, contracts, agreements, commitments, side letters, and regulatory actions taken pursuant thereto, including but not limited to system upgrade commitments, support for Public, Educational, and Governmental ("PEG") cable access, and institutional network construction and extension requirements.

(2) Organization and proxy statements. Transferee shall submit to the City (a) updated Transferee and TCI corporate organization charts identifying the roles, specifically, of AT&T Consumer Services and AT&T Business or Network Services; and (b) all publicly available proxy statements issued in connection with the merger. This information shall be submitted to the City within thirty (30) days of the earlier of either the closure of the merger transaction or the public release of the this information.

(3) Non-discriminatory access to cable modem platform. Transferee shall provide, and cause the Franchisees to provide, non-discriminatory access to the Franchisees’ cable modem platform for providers of Internet and on-line services, whether or not such providers are affiliated with Transferee or the Franchisees, unless otherwise required by applicable law. So long as cable modem services are deemed to be "cable services," as provided under Title VI of the Communications Act of 1934, as amended, Transferee and the Franchisees shall comply with all requirements regarding such services, including but not limited to, the inclusion of revenues from cable modem services and access within the gross revenues of the Franchisees’ cable franchises, and commercial leased access requirements.

(4) Reimbursement of costs. Upon invoice by the City or the MHCRC acting for the City, Transferee shall within 30 days of the invoice reimburse all direct, out-of-pocket costs of the MHCRC and the City incurred in analyzing and acting upon Transferee’s change of control request.

(5) Compliance with legal requirements.

(a) Transferee shall cause the Franchisees to comply, and the Franchisees shall comply, with each and every provision of the franchise agreements, including all applicable ordinances, orders, contracts, agreements, side letters, commitments, and regulatory actions taken pursuant thereto, as applicable, and without exception.

(b) Transferee shall cause the Franchisees to comply, and the Franchisees shall comply, with all other applicable requirements that are now or may hereafter apply to the TCI/Portland franchise operations, including, but not limited to, carriage of broadcast digital and high definition television signals, interconnection of cable system with potential franchised cable competitors for purposes of sharing cable PEG channels, and adherence to applicable federal and state emergency notification provisions.

(6) Transferee responsible for any non-compliance by franchisee. The Cable Communications Policy Act of 1992 contemplates that deficiencies in cable service, including non-compliance, should be addressed at the time of a franchise transfer. In its application and supplementary materials, Transferee has assured the City that the merger involved only a change in control at the parent level of TCI. Accordingly, Transferee agrees that the City does not waive and expressly reserves all legal rights and authority in regard to any and all non-compliance under the TCI/Portland franchises that may now exist or may later be discovered to have existed during the term of the franchise(s), even if prior to the closing of this transaction. Such non-compliance may include, but is not limited to, the following:

(a) Non-waiver of potential City actions against TCG and TCI. Transferee agrees that the City does not waive and expressly reserves all legal rights and authorities, including levying fines or instituting litigation for trespass and ejectment, against Transferee’s affiliate TCG in connection with any unauthorized use of City of Portland rights of way by TCG. Transferee also agrees that the City does not waive and expressly reserves all legal rights and authority including a finding of material franchise violations and the imposition of fines and other remedies, against TCI Cablevision of Oregon and TCI of Southern Washington, Inc. in connection with any unauthorized use of City of Portland rights of way by TCG utilizing TCI facilities in any manner.

(b) Cooperation in franchise fee review. Transferee shall cause the Franchisees to cooperate, and the Franchisees shall cooperate, with MHCRC staff, and the Franchisees will adhere to such deadlines as may be established by the MHCRC, for the submittal of information to enable the MHCRC to conclude a franchise compliance inquiry in connection with possible TCI franchise and PEG fee arrearages that may have arisen through exclusion of certain advertising revenue or programmer payments. Transferee agrees that by consenting to the change in control, the City does not waive and expressly reserves the right to enforce full compliance with applicable franchise and PEG fee requirements, whether or not any noncompliance that may be determined arose before or after the consummation of the Transferee/TCI merger.

(c) Transferee and the Franchisees specifically accept the City’s reservation of rights as set forth above.

(7) In the event the merger between Transferee and TCI which is the subject of this Acceptance is not consummated or does not reach final closure for any reason, or in the event such closure is reached on terms substantially and materially different to the terms described in the FCC Form 394 and subsequent information provided by the Transferee and relied upon by the MHCRC, then Transferee acknowledges that the City’s ordinance, together with the written acceptance provided hereunder, shall be automatically null and void without further action by either party. If the closure is upon terms which are substantially and materially different, Transferee shall resubmit its request for a change in control in order to be in compliance with the TCI/Portland franchises.

AT&T Corporation

BY:

NAME:

TITLE:

This Acceptance was acknowledged before me on the day of ______, 199__, by as , a duly authorized officer of AT&T Corporation.

Notary Public for ____________

My Commission Expires _________

TCI Cablevision of Oregon, Inc.

BY:

NAME:

TITLE:

This Acceptance was acknowledged before me on the day of , 199 , by as , a duly authorized officer of TCI Cablevision of Oregon, Inc.

Notary Public for _____________

My Commission Expires ___________

TCI of Southern Washington, Inc.

BY:

NAME:

TITLE:

This Acceptance was acknowledged before me on the day of , 199 , by as , a duly authorized officer of TCI of Southern Washington, Inc.

Notary Public for ______________

My Commission Expires __________

Approved as to form:

City Attorney