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03-1071Council File #�� Green Sheet # 200994 u01� - �1�17f.Y�Yr1 Presented By l / `_� :/ � Refened To Committee: Date 1 WHEREAS, Comcast of St. Paul, Ina ("ComcasY') holds a nonexclusive cable system franchise with the City of 2 St. Paul (`City") which was issued on May 27, 1998 and effective July 31, 1998, (the "Franchise"), which 3 Franchise further provides that it is subject to and incorporates Chapter 430 of the St. Paul Legislative Code 4 ("Ordinance"); and 5 WHEREAS, the City and Comcast have discussed settlement of certain issues related to obligations of Comcast 6 under that Franchise; 7 WHEREAS, one such issue involves the obligation to provide certain public access facilities under Section 304(c) of 8 the Franchise; and 9 WHEREAS, a separate issue involves payments which the City contends that Comcast is required to make to it under 10 Section 109(e) of the Franchise, and which are the subject of a pending proceeding before the City Council; and while 11 the City and Comcast continue to strenuously disagree as to their rights under applicable law also agree that such 12 disputes may be effectively settled in the context of arrangements for cooperation in the production of programming; 13 and 14 WHEREAS, the City and Comcast desire to resolve these and other issues, and the resolution ageed to for any issue 15 does not depend on the resolution of the others; and 16 WHEREAS, the City and Comcast have reduced the terms and conditions for resolving these issues to writing in the 17 form of a settlement agreement attached hereto as Attachment 1. 18 19 NOW, THEREFORE, BE TT RESOLVED, that the City Council hereby authorizes the Mayor and the Directar of 20 Technology and Management Services to execute the settlement agreement attached as Attachment 1 and that staff be 21 and hereby is directed to draft the appropriate ordinance and Franchise amendments for submission for Council 22 consideration. Adoption Certified by Council Secretary � Approv� � Requested by Department of Technology & Management Services: By: �l�'����z Form Approved by City Attorney Adopted by Council: Date i / IC ..I ..' . ✓ DepartrnenUofficelcounci�: Date Initiated Green Sheet No . 200994 v � Office of Cable Communications 11/25/03 � Conpct Person & Phone: Initiaudate Inihaudate Holly Hansen p 1 Department Dir.� 4 City Council -� Must Be on Council Agenda by (Date) ��9� ? City Attomey City Cledc Number Financial Secv Dit Firiancial Serv/a � Fof 3 Mayor (Or Asst) _ Civil Service Commission December 3 2003 Routing � Order ., � Total # of Signature Pages 1 (Clip NI Locatio� for Signature) acrion Reyuested: Approve resolution and settlement agreement with Comcast regazding cable modem and other franchise issues. Recommendations: Approve (A) or Reject (R) Personal Service CoMracts Must Answer the Pollowing Questions: 1. Has this personffirm ever worked under a contrect for this department? , Planning Commission Yes No - CIB Committee 2. Has this perso�rtn ever been a city employee? Civil Service Commission � Yes No � 3. Does this person/firm possess a skill not normally possessed by any current city � employee? Yes No Erzplain all yes answers on separate sheet and attach to green sheet '. Initiasng Problem, Issue, opporwnity (Who, What, When, Where, wt�y�: The CiTy Council has before it Resolution # 03-883 finding Comcast of St. Paul, Inc. in violation of its franchise. City staff has reached a settlement agreement regazding this issue and other franchise issues, and recommends that the City Council approve execution of the , settlement agreement. ��� � aavanayes ir nppro�ed: This, issue will be resolved without the need for legal action and the City will receive benefits under the agreement. Disadvantages If Approved NOriO , � ,' oisadvantayes it Not appro�ea The City would not receive the agreed-upon benefits contained in the agreement and �� would face legal challenges. � �� Total Amount of Transaction: n/a CosURevenue Budgeted: n/a . � Funding Source: n/a Activity Number. n/a Financial Infortnation: (Explain) n/a C�DOC�menls and Settings\dmbv�U,ocai Smngs\iemp\cable modem setUemem agm[ res wpd 03-�011 as"tt�r r�r:rr�. � AAAA Memorandum CITY OF SAINT PAUL Mayor Kelly Council President Bostrom Councilmember Benanav Councilmember Harris Councilmember Helgen Councilmember Lantry Councilmember-elect Montgomery Councilmember-elect Thune FROM: Holly Hansen, Cabie Communicafions Offic���� DATE: December 30, 2003 SUBJECT: Overview of Comcast Cabie Modem Issue TO: Following is a brief summary of actions the City has taken to date on the cable modem issue. This issue will be on the January 7, 2004 City Council agenda as laid over from the December 3, 2003 City Council meeting. This memo was prepared for the new Councilmember to help provide a context of the issue for them, but may also serve as a quick refresher to those who have been involved in this issue since the beginning. A one page suuunary of the highlights of the agreement and an analysis of the advantages and disadvantages of the agreement are also attached. BACKGROUND The cable company, currently Comcast, provides cable modem (Internet) service and telephone service in addirion to cable television service. Telephone service is regulated by the Public Utilities Cominission (PUC) and the City cannot franchise or collect franchise fees from a telecommunications provider based on state law. The City can franchise cable service and receives a 5% franchise fee on cable service, which inciuded cable modem service untii March 2002. The cable company (AT&T at that time) stopped paying franchise fees on cable modem service in Mazch 2002 based on a declaratory ruling and Notice of Proposed Rulemaking (NPRlvn issued by the Federal Communications Commission (FCC) March 15, 2002 that stated cable modem service was not a"cable service" but an"interstate information service." The City and AT&T disagreed over whether francluse fees should be paid to the City on cable modem service. The City proposed that the company continue to pay franchise fees on the service and that these fees be placed in an escrow account unril the matter was finally resolved by a wurt or agency of competent jurisdiction over tlus franchise. The company disagreed with this approach and has not paid franchise fees on cable modem service since its quarterly franchise fee payment of May 2002. In May 2002, the company alsa increased cable modem rates by as much as$7.00 per month to cable Intemet subscribers who owned their cable modems rather than leasing them through the company. Initially, the City toak no acYion regarding finding the company in non compliance with the franchise over tlhis issue as at aQgeared that this issue would be settled on a narional level and that would detemiine whether ciries could collect a franchise fee on cable 03-�0�1 modem service. It now appeazs that this couid take years to settle and that the City shouid take action to resolve this issue with respect to the specific language and requirements of the St. Paul cable franchise. The St. Paul cable franchise has specific language regarding this issue compared to many other franchises and states in Article I Secrion 109 (e) that "The parties agree that Internet service sha11 be treated as a cable service for purposes of this franchise and a franchise fee paid on all revenues therefrom until such time as court or ager:cy of competent jurisdiction over this franchise rules that the service is not cable service and a11 appeals from the decision have been exhausted. " The City had not collected significant amounts of franchise fees from cable modem service prior to 2002 because the subscriber network upgrade had not been completed and two-way cable modem service was not available in St. Paul unril approximately the 4`" quarter of 2001. Based on numbers of current cable modem subscribers and an estimate of the various rates paid by those subscribers, the City should have received approximately $184,000 in franchise fees from cable modem service in 2002 and an estunated $320,000 or more in 2003, as subscribers to cable modem service continue to increase. If the City pursues the course of finding Comcast in violation of the franchise, it will likely lead to a legal challenge by Comcast. Since the City iniriated the violation process in June, the legal landscape has changed and the City's prospects of prevailing in a lawsuit do not appear as favorable as they were last smnmer. There have been three cases involving cases where cities attempted to collect franchise fees on cable modem service and have lost: Jefferson Parrish, LA; Chicago, II, and Rochester, N.Y. The Ninth Circuit, where the FCC decision was appealed, issued its decision and did not find cable modem service to be a cable service; this decision is now under appeal in the Ninth Circuit en banc. In addition, the North Suburban Cable Commission (serving a number of St. Paul's northern suburUs) recently settled a lawsuit with Comcast regarding franchise fees on cable modem service. They received no financial benefit, other than avoiding continued legal expenses. At this point, the City has basically three oprions: 1) approve the proposed settlement agreement, 2) do not approve the settlement agreement and proceed with the violation, or 3) do no approve the agreement as proposed and direct staff to re-negotiate the agreement. These options aze more fully discussed in the "Comcast Settlement Agreement Analysis" document prepazed by staff: CITY ACTIONS TO DATE • The City's Cable Communications Officer issued a`Tlotice of Violafion" to Comcast regazding their non compliance with Article I Section 109 (e) of the cable franchise. • The City Council held a public hearing on the issue on August 27, and continued the hearing to October 1. • Pubiic comments were received at the August 27 hearing, and the public 03-�0�1 also had an opportunity to submit comments via letter or e-mail through September 12, 2003. Comments were received from six organizations and citizens and copies of the comments were provided to the City Council and Mayor. • A public hearing was heid at the October 1 City Council meeting and acrion on the Notice of Violation was laid over until the October 8 City Council meeting. • Comcast approached the City and expressed an interest in negotiating a settiement agreement rather than being found in violaflon of the franchise. The City negotiating team was comprised of cable officer Holiy Hansen; assistant city attomey Lisa Veith, and retired council research director Gerry Strathman. • At the October 8 meeting, City staff recommended a layover of the item to November 19 to allow more time for negotiations. • A layover to December 3 was requested by City staff at the Novembez 19 meeting, as negoriations were proceeding, but an agreement had not yet been reached. • An agreement was presented by City staff at the December 3 meeting in addition to the Notice of Violation that remained on the agenda. • Council voted 5-2 to layover both the Agreement and the Notice of Violation to January 7, 2004 to allow more time for Council review and input. Attachments (2) cc: Greg Blees, Council Reseazch Director Manual Cervantes, City Attomey Dennis Flaherty, Deputy Mayor Karen Johnson, TMS Director Lisa Veith, Assistant City Attorney 03-��,� HIGHLIGHTS - SETTLEMENT AGREEMENT WITH COMCAST Decenzber 3, 2003 Council Meeting Agenda Preseftted by Holly Hansen, Cable Communications Officer Staff recommends approval of the settlement agreement Settlement Agreement resolves the foliowing major issues: • Cable modem dispute • Facilities for SPNN . • Telephone response rime for third quarter Resolution of Cable Modem Dispute • Tlus settlement is for the period of March 15, 2002 - 7uly 31, 2006. • Settlement package is valued at approximately $820,000 • Cooperative venture to develop and enhance local programming. Create studio at CHCH for use by City cable staff and Comcast staff • Grant of $500,000 (2/15/04) in 2004 to develop and support studio •$250,000 in capital grants to support I-Net, or PEG use of the subscriber network (two $125,000 gants are payable 6/30 2005 and 2006) •$70,000 in ongoing operations and maintenance support for CHCH studio ($10,000 (6/30) per yeaz in 2003 dollars, beginning in 2007) • ComcasYs use of studio shall be secondary to the City's use Resolution of facilities for SPNN • SPNN is currently located in the Union Depot and the Concourse (concourse is where access facilities are located and this is owned by the Post Office) • There have been issues regarding these facilities, including adequate temperatures in the Concourse part of the facility • Comcast proposes to move SPNN faciliAes to a new space at 375 Jackson, or other substitute space acceptable to the City • Relocation to comply with Section 304 of the franchise, and will be completed no later than December 31, 2004 Resolution of Telephone Response Time • Comcast did not meet telephone standards for the third quarter • They will pay liquidated damages of $22,000 (1/15/04) in accordance with standazds and procedures outlined in a January 2000 agreement with the City Other Highlights • Franchise extended from 2008 to 2013. Current franchise was to 2008, with a five year extension, at City's option. Extending franchise to 2013 will lock in franchise benefits for City and enable company to amortize costs of agreement over longer period Summary of Benefits • Resolves three outstanding issues: cable modem, SPNN facilities, and Telephone Response •$820,000 package for cable modem settlement: CHCH studio, capital grants, O&M support •$22,000 in settlement of telephone response time issue for third quarter 2003 • New updated facilities for the community and Designated Access Entity, SPNN 03 to�1 COMCAST SETTLEMENT AGREEMENT ANALYSIS Issue: Cable Modem Settlement Seitlement Provision Advantages Disadvantages City will not find that • City obtains immediate cash • If City were willing to litigate company is in violarion benefits described in the and prevailed, it might obtain of its obligation to pay next four boxes without the more cash useabie for any franchise fees on cable need for litigating whether purpose. modem service, and the company can be required agrees that company will to pay a cable modem fee • Restriction on use of funds. not be obligated to pay a (or seeking altemative fee on cabie modem compensation under Section service before August 202); forecloses the 2006. possibility that City could be required to refund past cable modem fees collected. • Litigarion route would delay resolution potenrially for years, and involve substantial expense. • City could revisit issue in light of legal developments in 2006 $500,000 grant to • The City gets a new studio • The money cannot be used develop and support a and will avoid the expense for general fund purposes, studio at City Hall. of replacing equipment in but is restricted to being its current studio. Current used for studio and video equipment is 10-15 years equipment. old. • The City will own the equipment. Comcast has use of the • ComcasYs use is • The City would have to studio, up to 15 hours per secondary to the City's use share the studio. week. of the studio. • Potentially results in production of more local prograuuning. ., 03- �o, I COMCAST SETTLEMENT AGREEMENT ANALYSIS lssue: Union De ot Settlement Setflement Provision Advantages Disadvantages Provides studio and • There is no direct benefit • There is no direct benefit to facilities for public to the City, but there is a the City. access, managed by benefit to the community. SPNN, at 375 7ackson. • SPNN will have to continue • SPNN would like a new, to park its production van updated, space. off site. • The community and SPNN will have a new facility that is centrally located and accessible to all St. Paulites and downtown amenities. SPNN wiil not haue any increasesin costs compared to its costs at the Union Depot. • Comcast will pay for all of the moving costs and network connection costs so SPNN can play back its programs on the cable system. Discussion: If the Union Depot is "commerciaily habitable" (which it may be if the new owner can successfully repair the heat problem), Comcast would not have a franchise obligation to provide new facilities to the Designated Access Enfity (SPNI�. While, from our point of view, the access facilities issue is a separate issue from the cable modem issue, if the proposed agreement is not entered into by the City, it is uncleaz how long it will take to resolve the Union Depot issues and if SPNN would ever get a new facility. ��, 0�- l0'11 Discussion: • Some doubts have been expressed that we do not know what technology will exist in five or ten years, so we should not extend the franchise because of these unknowns. Aowever, the I-Net now has fiber rumiing directly to many government buildings, and its capabilities can be expanded by changing out end user equipment; by and large the capabilities are not dependent on future cable company upgrades. It is possible that the City could require the company Yo upgrade the network used to serve subscribers at the time the franchise is scheduled to expire in 2008 but (a) it is possible that the company will upgrade the system in any case; (b) we will not be able to dictate the technology that the company uses; and (c) the support for PEG and for the I-Net will be at risk in the renewal process. The current subscriber network was upgraded in 2001. If we do not extead the franchise now and keep the franchise as a ten year franchise, Comcast would likely begin the franchise renewal process with us in 2005, as this is a 36 month process under federal law. Unless the City and the operator can agree on a renewal process by negoriation, the City would need to fund an ascertainxnent and a review of the operator's past performance and issue an RFRP (Request For Renewal Proposai). Before it could deny renewal, it would need to conduct an administrative proceeding, similar to a trial and with sirnilar levels of expense. Assuming the operator follows federal requirements, renewai can only be denied if the City finds against the operator on at teast one of four questions: (a) whether has substantialiy compiied with its existing franchise or applicable law; (b) whether the operator has provided adequate service; (c) whether the operator has the iinancial, technical and legal qualifications to perform as promised; and (d) whether the operator has submitted a renewal proposal reasonable to meet cable-related needs and interests in light of the cost of ineeting those needs and interests. In othar words, the renewal process is complicated and potentially very expensive. We believe Comcast (based on its actions in other communities) is likely to propose substantial PEG and I-Net support payments cutbacks. It is also likely to refuse to continue to contract with SPNN for access services. SPNN obtains operating dollars through this contract, and it is not cleaz that the City could require the cable operator to provide operating support in addition to the franchise fee paid to the City. It could be difficult for the City to negotiate as favorable a franchise as it has now. There has been discussion that we should see if Time Warner or some other company wouid want our cable franchise. The Ciry could issue a franchise to another operator, but there is little reason to suppose an altemative provider would or could enter the market successfully. Such competitive "overbuilds" are extremely raze, and often limited in cases where a major provider like Time Warner has overbuilt another major provider like Comcast. The City is not in a position to simply refuse to renew and issue a franchise to another operator. Assuming the operator activates the federal renewal processes, a franchise renewai request can only be denied after the City goes through the process outlined above. 5 03 � �0�1 Three Courses of Action for Council to Consider: Option Advantages Disadvantages Option 1. Approve • Several issues are settied: • Use of the monies provided Settlement Agreement as Cable modem interim under the agreement are proposed. settlement, Facilities for restricted to cable-related SPNN, and telephone uses. response performance. • The City is playing its • $842,000 in benefits to franchise extension cazd now City (studio and PEG rather than later. grants, telephone settlementJ • The City avoids litigation costs in pursuing the cable modem violation issue. 7 : o��io�l Option 3. Do not Council can provide • Comcast may be unwilling approve Agreement as specific guidance to staff to renegotiate the agreement proposed and direct staff on what they would and may take the current to re-negotiate consider acceptable in an offer off the table. CiTy may Agreement agreement. be forced into finding Comcast in violation. Issue of new access facilities for SPNN would be unresolved. • Staffhasalreadynegotiated extensively and has tried to convince Comcast to provide money only and no City Hall studio, without success. • If staff re-enters negotiations, staffmaynot be able to provide an agreement to Council that meets their specifications and an agreement with Comcast may not be reached.. 0 p3- ioZl CABLE MODEM SETTLEMENT AGREEMENT AND ACCESS FACILITIES SETTLEMENT AGREEMENT DATED DECEMBER 3, 2003 WHEREAS, Comcast of St. Paul, Inc. ("Grantee") holds a nonexclusive ten-yeaz cable system franchise which was issued on May 27, 1998 and effective July 31, 1998, (the "Franchise"), which Franchise fixrther provides that it is subject to and incorporates Chapter 430 of the St. Paul Legislative Code ("Ordinance"); and WFIEREAS, the parties have discussed settiement of certain issues related to obligations of Grantee under that Franchise; WHEREAS, one such issue involves the obligation to provide certain public access facilities under Section 304(c) of the Franchise; and WHEREAS, a sepazate issue involves payments which the City contends that the company is required to make to it under Section 109(e) of the Franchise, and which aze the subject of a pending proceeding before the City Council; and while the parties continue to strenuously disagree as to their rights under applicable law they also agree that such disputes may be effectively settled in the context of arrangements for cooperation in the production of prograinming; and WHEREAS, the parties desire to resolve these and other issues, and the resolution agreed to for any issue does not depend on the resolution of the others. NOW, THEREFORE, FOR GOOD AND ADEQUATE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES HEREBY AGREE AS FOLLOWS: SECTION ONE. DEFINITIONS. l.l Generallv. The terms used in this Agreement (except where e�ressly provided otherwise) are defined and shall be interpreted as provided in Section 101 and Section 300 of Grantee's Franchise. 1.2 CPI. The Consumer Price Index for All Urban Consumers for the Minneapolis - St. Paul region, or if that index is no longer published, the closest comparable index published by the Bureau of Labor Statistics. SECTION TWO. RESOLUTION ISSUE REGARDING SPACE AT UNION DEPOT. 2.1 Public Access Studio Grantee shall relocate PEG facilities from the Union Depot to a completed space acceptable to the City, which complies with this � Agreement and Section 304 as soon as practicable, and no later than �sex�e�-3-f, �`e���� �- �.'�994. Grantee has proposed relocating the PEG facilities from Union Depot to 375 -`��� Jackson Street, St. Paul, Minnesota 55101 (the "Jackson Space"). The City agrees that the Jackson Space is acceptable as a substitute for the Union Depot space, 03- �cn� subject to the contingencies set forth below. Until the access facilities aze relocated Grantee retains all its obligations under Section 304 with respect to the Union Depot space, including but not limited to the obligation to ensure that the space remains commercially habitable. This includes, but is not limited to the obligation to ensure that all parts of the space have adequate heating and cooling. 2.2 Contineencies. 2.2.1 The City's acceptance of the Jackson Space is subject to development of a design, layout and leasehold improvements, detail as to how access will be provided to the space, and a move plan acceptable to the City, with specific deadlines for action and the satisfaction of those deadlines. The City will not unreasonably withhold its approval of the foregoing. Approval of the Jackson Space by the City does not limit Grantee's obligation to ensure that the Jackson Space is built out appropriately. 2.2.2 Grantee must enter into a lease satisfactory to the City that ensures that the space will satisfy the requirements of Section 304 and this agreement. The City will not unreasonably withhold its approval of the lease. 2.2.3 The Jackson Space, and any and all ixnprovements thereto, will be subject to inspection by the City for compliance with applicable laws, including but not limited to the City's fire codes and the Americans with Disabilities Act, in light of the purposes to which the space may be put. 2.2.4 The Jackson Space must include at least 9,190 square feet of useable interior space dedicated solely for use of the designated entity; and in addition rooftop space for satellite dishes used by the designated entity; and in addition adequate pazking for the public using designated entity facilities and equipment. 2.2.5 Without luniting its obligations under Section 304, Grantee, at its expense, must ensure that: 2.2.5.1 The Jackson Space supports lighting grids and live audiences at least equivalent to those accommodated at the Union Depot location. 2.2.5.2 There is adequate signage at the Jackson Space publicizing the location of the access center, and points of ingress to and egress from the Jackson Space. 2.2.5.3 Subject to reasonable security and safety rules, the designated entity has 24x7 access to the rooftop of the Jackson Space for purposes of repair and maintenance of the designated entity's satellite dish and associated equipment. 2 �31oZ1 2.2.5.4 Studio, trauiing and editing space at the Jackson Space aze fully soundproofed, and HVAC and other systems modified consistent with requirements for high-quality productions in such spaces. 2.2.5.5 Any member of the public will be able to gain access to the Jackson Space and public spaces (such as restrooms) supporting that space at times when the access facility is open without the need for any action by the staff of the designated entity. 2.2.5.6 HVAC and other systems will be configured and operated consistent with the hours of operation of the access center, and in order to maintain equipment and facilities at appropriate temperatures at all tixnes. 2.2.5.'7 The designated entity's e�enses for the Jackson Space (including but not limited to rents, utilities, building maintenance, insurance and other expenses which the designated entity may be required to bear under the Franchise Section 304(c)-(f�) will be determined according to the forxnulas, and subject to the caps set forth in Section 304. Operating expenses will be no higher than the expenses for such matters chazged to the designated entity in connection with its occupancy of the Union Depot for 2003, adjusted annually begimiing in 2005 for the change in the annual average CPI, with 2003 as the reference year. 2.3 Contineencies Not Satisfied. If, for any reason the Jackson Space does not satisfy Section 304; or the contingencies of Section 2.2 of this agreement are not satisfied; or if Grantee is unable to negotiate appropriate arrangements with the owners of the Jackson Space, then Grantee must provide an alternate location that meets each of the requirements of Section 304 of the Franchise and the requirements of this agreement that would have applied with respect to the Jackson Space. 2.4 Continuin� Oblieation to Frovide Space. All obligations that would apply to Grantee with respect to the Union Depot Space apply with respect to the Jackson Space. This includes all obligations arising under Section 304(d). For purposes of applying the franchise obligations, the City will designate 73% of the Jackson Space provided as the "designated space" and 27% as the "expansion space." 2.5 Costs of Move. Grantee recognizes that under Section 304, it is obligated to bear all reasonable costs arising from the relocation to the Jackson Space, which shall include but not be 1'united to the moving and reinstallation of equipment, providing internal wiruzg for all systems and devices (and providing for the necessary connections to the entities that provide communications services to the designated entity) and providing for connections to and from the Jackson Space that the company provided or was required to provide to the Union Depot Space (e.g. the HFC and fiber connections to the I-Net and the fiber connection to the headend). The connections (�'� lb`11 must be in place and fully operational by the time the designated entity relocates to the Jackson Space. SECTION THREE. RESOLUTION OF CABLE MODEM DISPUTE; PROGRAM PRODUCTION COOPERATION 3.1 Coonerative Studio Venture. In order to help further promote the production of higher quality goveniment programm;ng by the City, and local progra rr, r,,;r,g by Grantee, both parties agree to work together to establish a new production studio in City Hall. To this end: 3.1.1 No later than February 15, 2004, Grantee will provide a capital grant to the City of St. Paul in the amount of $500,000 to develop and support a new programm;ng studio at City Hall and associated facilities and equipment (the "CHCH Studio"). The City will own the studio, facilities and equipment. 3.1.2 In addition to the capital grant required under Section 3.1.1 Grantee shall provide an additional capital grant of $125,000 no later than June 30, 2005 and another capital grant of $125,000 no later than June 30, 2006. The capital grant may be used for and in support of the I-Net or public, educational and government use of the Subscriber Network. 3.1.3 The City agrees that, at the same time it begins producing programining in the CHCH Studio, it will provide Grantee access to that studio, its cameras, sound equipment, studio recording equipment, lighting and studio control room for the terxn of the Franchise in accordance with this Agreement, provided, however, that such access will only be at times when providing access will not interfere with the City's use of the same. To the extent that the CHCH Studio includes storage and waiting/preparation space, the parties will work cooperatively to share that space. Grantee will not have access to any other equipment, including but not limited to editing equipment, playback equipment, routers, or servers. Grantee may not attach its own equipment to the CHCH Studio equipment without the permission of the City, which pernussion will not be unreasonably denied. Grantee understands that the City does not have and does not intend to supply closed captioning/secondary audio/audio description or similar equipment. 3.1.4 Grantee agrees to share in the costs of operating and maintaining the CHCH Studio by maldng an annual ongoing payment on June 30 of each year, commencing in 2007 and continuing for the term of the Franchise in the amount of $10,000 (adjusted annually for any increase in the annual average CPI, with 2003 as the reference year). This payment is owed without regard to whether Grantee actually makes use of the CHCH Studio. 3.1.5 Grantee's use of the CHCH Studio shall be secondary to the City's use of that studio. 0 o-�-�o,� 3.1.6 Unless otherwise agreed between the City and Grantee, the following conditions will apply to Grantee's use of the facilities: 3.1.6.1 Grantee will have such access only when City Hall is open to the general public. 3.1.6.2 Grantee will follow rules for use of the facilities that are established by the City after consultation with Grantee. ff the Grantee fails to follow such rules the City may teravnate its right to use the facilities. 3.1.6.3 Scheduling of facilities will be done in a cooperative manner, but ultimate responsibility will be with the City. In that regard, Grantee will schedule use of the facilities with the City at least 5 days but not more than 30 days in advance, unless otherwise agreed by the Office of Cable Communications. Grantee will provide to the City information relaYed to the proposed production for which it intends to use the facilities at the same time as it seeks to schedule use of the facilities, including number of people involved in the production, any audience proposed, total studio time required (including set-up and tear- down time required), and any props and scenery, if any, that the Grantee intends to use. It is Grantee's responsibility to plan its production so that all elements of the production comply with applicable law, including safety codes, and do not interfere with City operations. 3.1.6.4 Grantee is limited to 15 hours per week of CHCH Studio use, except as the parties agree otherwise. 3.1.7 Grantee agrees to indemnify and hold the City harinless against any loss, claim, damage, liability or e�ense (including, without limitation, reasonable attorneys' fees) incurred by City while Grantee is in the City Hall in conjunction with the utilization of the CHCH Studio, and against any loss, claim, damage or liability Grantee causes while using the City's facilities in conjunction with the utilization of the CHCH Studio. 3.2 Advertisin� Avails. 3.2.1 The timeframe for City utilization of 30-second spot advertising "avails" and production assistance and development of such spots provided for in the July 24, 2002 letter from Dave Seykora to Holly Hansen is extended from December 31, 2003 to June 30, 2004. 3.2.2 The City, at its sole discretion, may elect to receive the $10,000 value of production assistance and development of spots as advertising "avails" instead of production. 3.3 The City agrees that, in consideration of the value to it provided for in this Section 3, it will release all claims it may have related to the alleged failure of the 5 03 ��Z1 Grantee to pay franchise fees on cable modem service revenues for the period from March 15, 2002 through and inclucling July 31, 2006, and will likewise release any claim it may have for an altemative payment under Section 202 of the Franchise for that same period. 3.4 Grantee's a�eement to tYus settlement is not a concession that it owed or will owe any money to the City under either Section 109(e) or 202, and Grantee instead agrees that the potential benefits associated with the cooperative programming venture contemplated herein would justify the payments made hereunder. In return for these benefits and the release obtained herein, Grantee releases the City from any claim it may have for return of franchise fees paid on cable modem revenues. SECTION FOUR. MISCELLANEOUS 4.1 Franchise E�ctension. The Franchise, which was scheduled to expire on July 31, 2008, is extended from the scheduled escpiration date until July 31, 2013 (the "e�ctension period"), and this extension shall be in lieu of the extension provided for under Section 106(b) of the Franchise. However, if Grantee fails to comply with its obligations under this Agreement, including satisfying deadlines in this Agreement, such extension period may, at the City's discretion, be reduced by a time period of no more than five yeazs. A failure to comply with deadlines in Section 'I�vo caused by the designated entity will not be treated as the Grantee's failure to comply for purposes of the condition on the extension. /� !' e�✓'�ttrn 4.2 Telenhone Response Time Settlement. No later tkian d�15�2004, Grantee shall pay the City $22,000, which payment will satisfy any liquidated damages that may be owed under the Franchise and Section'It�o of the Agreement dated January 12, 2000 between City and Grantee with respect to Comcast's Third Quarter, 2003 compliance with the telephone response reporting and standards set forth in the January 12, 2000 Agreement. 4.3 Grantee's Warranties. The Grantee hereby represents and warrants that: (a) the execution and delivery of this Agreement does not contravene, result in a breach of, or constitute a default under, any contract or agreement to which it is a pazty or by which it or any of its properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both), and does not violate or contravene any law, order, decree, rule, regulation or restriction to which it is subject; (b) it is duly organized, legally e�isting and in good standing under the laws of the state of its organization; (c) the terms of this Agreement which apply to it constitute legal, valid and binding obligations of it, enforceable in accordance with such terms; and (d} the execution and delivexy of, and perforxnance by Grantee under this Agreement is within its power and authority without the joinder or consent of any other party and have been duly aixthorized by all requisite action and are not in contravention of its charter, bylaws, or other organizational documents, or of any indenture, agreement or undertaking to which it is a pazty or by which its is bound. d3 �0`�1 4.4 Advice of Counsel. The parties have cazefully read and understand the effect of this Agreement; each of the parties has had the assistance of separate counsel, or has had the opportunity to have the assistance of separate counsel, in carefully reviewing, discussing and considering all terms of tkus Agreement; and counsel for each of the parties, if any, has read and considered this Agreement and advised such party to execute the same. 4.5 Guarantor. As a condition precedent to the obligations of the City under this Agreexnent, the Franchise Guarantor must submit a letter, in a form acceptable to the City Attomey agreeing that its guazantee extends to the provisions of this Agreement, and for the extension of the franchise provided for herein. 4.6 Cable Modem Revenue Renortin�. Grantee agrees to include revenues received for the provision of cable modem service in the appropriate section of the report provided pursuant to Section 404(fl(3)(B). 4.7 Representations and Warranties Material. Any representations and warranties made in this Agreement aze material. It is a material breach of this Agreement if any representation or warranty proves to be untrue, inaccurate or incomplete in any material respect. 4.8 Oblieations Not Franchise Fees. City and Grantee agree that none of the costs Grantee must incur, or payments that Grantee must make under this Agreement constitute franchise fees, and instead fall within one or more of the exceptions set out in 47 U.S.C. § 542(g), and each further a�ees it will not raise any claim or defense to the contrary, in any forum. Without limiting the materiality of any other provision, it is agreed that the City would not have released its clauns without this provision. The parties further agree that, given the benefits received by Grantee, no more than 50% of any payments made under Section 3.1.1 may be included in any line itemization. Except as othercvise provided in this paragraph, Grantee and City otherwise reserve all rights with respect to the treatment of costs and expenses associated with this Agreement £or purposes of rate setting and line itemization. 4.9 Bindine Aereement. This Agreement shall bind and benefit the parties hereto and their respective heirs, beneficiaries, adininistrators, executor, receivers, trustees, successors and assigns; the representations and warranties contained herein survive the effective date hereof unless otherwise teinunated or superseded by agreement of the parties. 4.10 Governine Law. This Agreement shall be governed in all respects by the law of the State of Minnesota. 4.11 Tune of the Essence. In determining whether a party has complied witYt this Agreement, the parties agree that time is of the essence, except where the Agreement provides otherwise. 4.12 Countemarts. This document may be executed in multiple counterparts, and by the parties hereto on sepazate counterparts, and each counterpart, when 7 p �01� executed and delivered, shall constitute an original agreement enforceable against all who signed it without production of, or accounting for, any other counterpart, and all separate counterparts shall constitute the same agreement. 4.13 Cavtions. The captions and headings of this Agreement are for convenience and reference purposes only, and shall not affect in any way the me�iing and interpretation of any provisions of this Agreement. 4.14 Cooperation. City and Grantee agree to work cooperatively to effectuate any Franchise amendments necessary in conjunction with this Agreement. SECTION FIVE. EFFECT OF FAILURE TO COMPLY WITH THE AGREEMENT. In addition to the City obtaining such damages or equitable relief as may be appropriate, in the event of a breach of this Agreement, the City may apply the remedies under the Franchise. Without limiting the foregoing, if Grantee fails to comply with any material requirement of this Agreement, the Grantee shall be deemed to have substantially and materially violated the Franchise and the Franchise may be revoked. The provisions of the Franchise shall govern any revocation proceeding. However, no opportunity to cure needs to be given prior to revocation if a warranty or representation is false, misleading or incomplete in any material respect. Director, Technology and Management Services Comcast of St. Paul City of Saint Paul Date , City of St. Paul APPROVED AS TO FORM Date Assistant City Attorney