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MEMORANDUM DATE: December 14, 2018 TO: Sherburne -Wright Counties Cable Commission FROM: Bob Vose RE: Franchise Renewal By letters to the member cities in May, 2017, Charter requested renewal of its franchises. The franchises were last renewed in 2004 and expire in early 2020. The Commission discussed Charter's renewal request in June, 2017. At that time, I reported that cable operators were beginning to seek to reduce the availability of PEG channels, limit the availability of high definition (HD) for PEG (because it uses valuable capacity), and reduce PEG funding in franchise renewals. Based on this feedback, the Commission directed me to seek to preserve the current arrangement to the extent possible. The Commission emphasized a desire to protect the current community programming arrangement and its two PEG channels, provide for the future delivery of PEG in HD, and preserve franchise fee and PEG fee funding. Our negotiations with Charter have been productive. However, as I recently advised, many cable operators have changed their bargaining positions in renewals due to a recent proposed FCC rulemaking. The FCC has proposed rules that would allow cable operators to offset the "value" of a variety of in-kind commitments from franchise fees. By proposing to allow cable operators to reduce their franchise fee payments by the "value" of certain other franchise commitments, the FCC has given cable operators added leverage in pending negotiations. Notwithstanding, we have achieved the Commission's primary goals. In turn, we have compromised regarding the provision of "free" cable services and converters to city and institutional sites, and regarding the addition of language to address the future potential for competition. I am comfortable having the Commission recommend approval and adoption of the negotiated renewal to its member cities. A summary of the most significant changes to the franchise and regulatory ordinance follows. • The Franchise(s) will be renewed again for 15 years even though the cable industry generally is seeking shorter (often 10 year) renewals. We view this as beneficial. RJV-254155v1 1 SH255-1 Offices in 470 U.S. Bank Plaza �nnedY 200 South Sixth Street Minneapolis Minneapolis MN 55402 Saint Paul (612) 337-9300 telephone p rave (612) 337-9310 fax St. Cloud www.kennedy-graven.com C H A R T E R E D rvo se kkennedy- graven. corn AtImnative Action Equal Opportunity Employer MEMORANDUM DATE: December 14, 2018 TO: Sherburne -Wright Counties Cable Commission FROM: Bob Vose RE: Franchise Renewal By letters to the member cities in May, 2017, Charter requested renewal of its franchises. The franchises were last renewed in 2004 and expire in early 2020. The Commission discussed Charter's renewal request in June, 2017. At that time, I reported that cable operators were beginning to seek to reduce the availability of PEG channels, limit the availability of high definition (HD) for PEG (because it uses valuable capacity), and reduce PEG funding in franchise renewals. Based on this feedback, the Commission directed me to seek to preserve the current arrangement to the extent possible. The Commission emphasized a desire to protect the current community programming arrangement and its two PEG channels, provide for the future delivery of PEG in HD, and preserve franchise fee and PEG fee funding. Our negotiations with Charter have been productive. However, as I recently advised, many cable operators have changed their bargaining positions in renewals due to a recent proposed FCC rulemaking. The FCC has proposed rules that would allow cable operators to offset the "value" of a variety of in-kind commitments from franchise fees. By proposing to allow cable operators to reduce their franchise fee payments by the "value" of certain other franchise commitments, the FCC has given cable operators added leverage in pending negotiations. Notwithstanding, we have achieved the Commission's primary goals. In turn, we have compromised regarding the provision of "free" cable services and converters to city and institutional sites, and regarding the addition of language to address the future potential for competition. I am comfortable having the Commission recommend approval and adoption of the negotiated renewal to its member cities. A summary of the most significant changes to the franchise and regulatory ordinance follows. • The Franchise(s) will be renewed again for 15 years even though the cable industry generally is seeking shorter (often 10 year) renewals. We view this as beneficial. RJV-254155v1 1 SH255-1