HomeMy WebLinkAbout17 WITHHOLD CONS AT&T 12-02-02AGENDA REPORT
NO. 17
12-02-02
MEETING DATE: DECEMBER 2, 2002
TO:
FROM:
SUBJECT:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
CITY ATTORNEY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN,
CALIFORNIA WITHHOLDING CONSENT TO THE MERGER OF AT&T
CORPORATION AND COMCAST CORPORATION TO FORM AT&T COMCAST
CORPORATION AS PARENT COMPANY OF THE CITY'S CABLE TELEVISION
SYSTEM FRANCHISEE, MEDIAONE OF LOS ANGELES, INC.
SUMMARY:
On November 18, 2002, AT&T Corporation and Comcast Corporation merged into
AT&T Comcast Corporation, which will be known simply as Comcast. AT&T was the
parent company of MediaOne of Los Angeles, Inc., which is doing business in the City
as AT&T Broadband, and is one of the City's cable television system franchisees.
Tustin City Code § 7418(d) requires the prior approval of the City Council expressed by
resolution prior to a change in control of the cable television system franchisee such as
the one resulting from the AT&T-Comcast merger. However, in this case, neither the
parent companies nor the franchisee sought City Council approval prior to the merger.
It is the franchisee's opinion, and the City disagrees, that the City has no authority to
consent to this transaction.
RECOMMENDATION:
Adopt a resolution of the City Council of the City of Tustin, California withholding consent
to the AT&T-Comcast merger.
FISCAL IMPACT:
None.
BACKGROUND:
Tustin City Code § 7418(d) requires that the City Council, by resolution, approve an
actual change in control or acquisition of more than 50% of the voting stock of a Cable
Television System Franchisee.
On March 4, 2002, AT&T Corporation, the parent company of the City's Cable
Television System Franchisee, MediaOne of Los Angeles, Inc., doing business as AT&T
Broadband, notified the City that it would merge with Comcast Corporation to form a
new parent company named AT&T Comcast Corporation. The new corporation may be
known simply as "Comcast." AT&T indicated in its notice that, "Our records indicate that
our franchise with your community is one where consent is not required for this
transaction." Consequently, neither AT&T Corporation, nor Comcast Corporation, nor
the Franchisee sought City Council consent prior to the merger, notwithstanding Tustin
City Code § 7418(d) and the City's letter disputing AT&T's assertion that consent was
not required. MediaOne representatives allege that the franchise does not require the
City Council's consent because MediaOne of Los Angeles, Inc. will continue to hold the
franchise (the franchisee itself will not change) and the franchise does not contain the
"change of control" language of the Tustin City Code. In our opinion, MediaOne and
AT&T have simply chosen to disregard the provisions of the Tustin City Code even
though Section 2 of the Franchise (Ordinance No. 1002) specifically incorporated the
provisions of the Tustin City Code and made them a part of the franchise.
On June 4, 2002, the City Manager notified MediaOne representatives that the Tustin
City Code required the consent of the City Council prior to the merger, and directed
MediaOne to initiate the consent process. MediaOne representatives acknowledged
the City Manager's notice by letter dated June 21, 2002, where they disagreed with the
Code's consent requirement. On July 12, 2002, the City Manager again wrote to
MediaOne representatives and notified them that the franchisee will be in violation of
the franchise agreement and the Tustin City Code should AT&T Corporation merge with
Comcast Corporation without the City's consent, and once again directed the franchisee
to initiate the consent process.
MediaOne, AT&T, and Comcast failed to seek City Council consent for the merger and
announced the completion of the merger on November 18, 2002.
Tustin City Code § 7418(d) provides that any acquisition occurring without prior
approval of the City Council in violation of that section shall constitute a failure to
comply with a provision of Chapter 4, Title 7 of the Tustin City Code, within the meaning
of Tustin City Code § 7414. In turn, Tustin City Code § 7414(b) provides that the City
may terminate any franchise granted pursuant to the provisions of Chapter 4, Title 7 of
the Tustin City Code in the event of the willful failure, refusal or neglect by the
franchisee to do or comply with any material requirement or limitation contained in
Chapter 4, Title 7 of the Tustin City Code, or any material rule or regulation of the
Council or City Administrator validly adopted pursuant to Chapter 4, Title 7 of the Tustin
City Code. Additionally, Tustin City Code § 7414(c) authorizes the City Manager to
make a request to the City Council for termination of the franchise thirty days after a
demand has been made to the Franchisee to comply with the requirements of the Tustin
City Code or the franchise.
Furthermore, as the Council is aware, recent audits of MediaOne's performance
indicate that it is not meeting various customer service standards adopted by the City
and the Federal Communications Commission (FCC). The audit of MediaOne's
physical plant also indicates that MediaOne installations are not in compliance with local
and state electrical code standards. In view of the recent system upgrade by
MediaOne, such code violations indicate poor workmanship by untrained or
unsupervised personnel, and a failure to commit sufficient resources or personnel.
Additionally, AT&T Corporation and Comcast Corporation have announced that as the
corporations merge their operations they will cut jobs, indicating a reduction of their
combined labor force while they become the country's largest cable television system
provider and their combined customer base increases substantially. Such employment
cuts will further diminish the possibilities that the new corporation will allocate sufficient
resources to correct the franchise and safety codes non-compliance of MediaOne.
For the foregoing reasons, it is recommended that the Council adopt the attached
resolution withholding consent to the AT&T-Comcast merger, and confirming the City
Manager's discretion to commence the franchise termination process.
ATTACHMENT:
Resolution
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RESOLUTION NO. 02-115
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUSTIN, CALIFORNIA, WITHHOLDING CONSENT TO THE
MERGER OF AT&T CORPORATION AND COMCAST
CORPORATION TO FORM AT&T COMCAST CORPORATIONS
AS PARENT COMPANY OF THE CITY'S CABLE TELEVISION
SYSTEM FRANCHISEE, MEDIAONE OF LOS ANGELES, INC.
WHEREAS, Tustin City Code § 7418(d) requires prior approval of the City Council
expressed by resolution, where there is an actual change in control or'where ownership of
more than 50% of the voting stock of a Cable Television System Franchisee is acquired by a
person or group of persons acting in concert, none of whom already own 50% or more of the
voting stock, singly or collectively; and
WHEREAS, AT&T Corporation, the parent company of the City's Cable Television
System Franchisee, MediaOne of Los Angeles, Inc., doing business as AT&T Broadband,
has announced the merger with Comcast Corporation and formation of a new parent
company named AT&T Comcast Corporation (or "Comcast Corporation"); and
WHEREAS, the Franchisee has notified the City that neither AT&T Corporation, nor
Comcast Corporation, nor the Franchisee will seek City Council consent prior to the merger
with Comcast Corporation, notwithstanding Tustin City Code § 7418(d), because they allege
that MediaOne of Los Angeles, Inc. will continue to hold the franchise and that the franchise
does not require consent; and
WHEREAS, the City Manager has notified the Franchisee that the Tustin City Code
requires the consent of the City Council prior to the merger, and directed the Franchisee to
initiate the consent process on June 4, 2002; and
WHEREAS, the Franchisee acknowledged the City Manager's June 4, 2002 notice
and stated its disagreement with the Tustin City Code consent requirement on June 21,
2002; and
WHEREAS, the City Manager notified the Franchisee on July 12, 2002 that it will be in
violation of the franchise agreement and the Tustin City Code should AT&T Corporation
merge with Comcast Corporation without the City's consent, and once again directed the
Franchisee to initiate the consent process; and.
WHEREAS, the Franchisee, AT&T Corporation, and Comcast Corporation refuse to
acknowledge that the Tustin City Code requires City Council consent prior to their merger;
and
WHEREAS, on November 18, 2002 AT&T Corporation and Comcast Corporation
announced the completion of their merger; and
WHEREAS, Tustin City Code § 7418(d) provides that any acquisition occurring
without prior approval of the City Council in violation of that section shall constitute a failure
to comply with a provision of Chapter 4, Title 7 of the Tustin City Code, within the meaning of
Tustin City Code § 7414; and
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WHEREAS, Tustin City Code § 7414(b) provides that the City may terminate any
franchise granted pursuant to the provisions of Chapter 4, Title 7 of the Tustin City Code in
the event of the willful failure, refusal or neglect by the Franchisee to do or comply with any
material requirement or limitation contained in Chapter 4, Title 7 of the Tustin City Code, or
any material rule or regulation of the Council or City Administrator validly adopted pursuant to
Chapter 4, Title 7 of the Tustin City Code; and
WHEREAS, Tustin City Code § 7414(c) authorizes the City Manager to request City
Council termination of the franchise thirty days following a demand that the Franchisee
comply with the requirements of the Tustin City Code or the franchise; and
WHEREAS, a recent audit of the Franchisee's customer service standards indicates
that the Franchisee is not meeting various customer service standards adopted by the City
and the Federal Communications Commission (FCC); and
WHEREAS, a recent audit of Franchisee's physical plant indicates that the Franchisee
is not meeting local and state electrical code standards; and
WHEREAS, AT&T Corporation and Comcast Corporation have announced that as the
corporations merge their operations they will cut AT&T Corporation jobs, indicating a
reduction of their combined labor force while they become the country's largest cable
television system provider and their combined customer base increases substantially,
diminishing the possibilities that the new corporation will allocate sufficient resources to
correct non-compliance with local franchise obligations and safety codes; and
WHEREAS, the City Council is committed to protect the public safety and welfare of
the City's residents.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA,
finds, determines and orders as follows:
SECTION 1. Based on the foregoing facts and findings, all of which are
incorporated in this Section 1 by this reference, the City Council withholds consent to the
merger between AT&T Corporation and Comcast Corporation.
SECTION 2. Pursuant to Tustin City Code §§ 7418(d) and 7414(b), the failure
to obtain City Council consent to the merger. November 18, 2002 merger between AT&T
Corporation and Comcast Corporation constitutes a willful failure to comply with a material
requirement of Chapter 4, Title 7 of the Tustin City Code.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin
on the 2nd day of December, 2002.
MAYOR
ATTEST:
CITY CLERK
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STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF TUSTIN )
RESOLUTION NO. 02-115
I, PAMELA STOKER, City Clerk and ex-officio Clerk of the City Council of the City of Tustin,
California, does hereby certify that the whole number of the members of the City Council of
the City of Tustin is five; that the above and foregoing Resolution No. 02-115 was passed
and adopted at a regular meeting of the City Council held on the 2nd day of December, 2002,
by the following vote:
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
City Clerk
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